Byron Gilliam

Nathaniel Whittemore

The Breakdown

Today’s episode breaks down one of the most contentious FOMC meetings in nearly a decade. A deeply divided Fed delivered a rate cut that may also mark the end of the cutting cycle, with multiple dissents on both the dovish and hawkish sides and an unusually fractured dot plot. The conversation explores what the dissents reveal about competing inflation and labor-market risks, why Powell says the Fed is effectively flying blind without fresh BLS data, and how alternative data is shaping the debate. It also examines the quiet but significant shift in balance-sheet policy, as the Fed ends QT and begins reserve management purchases that many see as “QE that isn’t QE,” and what this hawkish cut, baby QE, and a broken consensus mean for markets heading into an increasingly uncertain 2026 outlook.

The Fed Is Fracturing

Today’s episode breaks down the rough NYSE debut of 21 Capital, whose immediate drop suggests markets are no longer willing to award premiums to companies whose only model is selling shares to buy more Bitcoin. The discussion examines why treasury firms are being valued at 1x, what 21’s attempt to build real Bitcoin-based businesses signals about the future of the category, and how shifting analyst frameworks—from Standard Chartered’s recalibration to institutional-flow–driven models—reflect a maturing market that now demands execution, not narrative.
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Bitcoin Treasury Honeymoon Ends

Today’s episode examines Washington’s increasingly public admission that the market-structure bill is stuck, with key senators signaling that negotiations have become frustrating and unlikely to resolve this year. From there the focus turns to MicroStrategy’s return to large-scale Bitcoin purchases, the funding mechanics behind it, and the growing debate over whether the company is executing long-term strategy or edging into risk.
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MicroStrategy’s Big Buy Raises New Questions

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“By 2026, Google’s main product will not be search but AI.”



— Kevin Kelly, 2016
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When Kevin Kelly met Larry Page at a party in 2002, he asked why anyone would invest in a company that offers its product for free: “I still don’t get it. There are so many search companies. Web search, for free? Where does that get you?”



Page’s response was both memorable and prophetic: “Oh, we’re really making an AI.”



That was two years before Facebook, three years before YouTube, five years before the iPhone and 20 years before ChatGPT.



For Kelly, it was an &#8220;aha&#8221; moment.



“Rather than use AI to make its search better,” he <a href="https://www.amazon.com/Inevitable-Understanding-Technological-Forces-Future-ebook/dp/B016JPTOUG/ref=tmm_kin_swatch_0?_encoding=UTF8&amp;dib_tag=se&amp;dib=eyJ2IjoiMSJ9.X73Zxh6EG6ZxXXRXYGrGPVI7xazRLJ2ncHB4DdyMBAW0kI4awqHgRbbhUZhFJ7Ug_j1nZHXCVsWRsiAH1AMOIEwWv7KB5egRyTON_kFeshv5fnK6C7weu8Epwm_I9D6Sm0SyI3TVepKzzuiogfjqiZgios3xxICdh4XthN3B9XBt2UHw4H9-f78GYORxLf0rqqvvtBWWxZ1wZgG_VsQLruPw7i9u18tSGmV5RJWBufk.SHrSP8fM-i9UEORTlGCtt34CVamxjGXTVyx792s2-uE&amp;qid=1765547592&amp;sr=8-1">wrote</a> in 2016, “Google is using search to make its AI better. Every time you type a query, click on a search-generated link, or create a link on the web, you are training the Google AI.”&nbsp;



Kelly was right about search engines — training AI would prove far more consequential than serving ads.&nbsp;



But from the perspective of 2025, we can make an even bigger claim: The true purpose of the entire internet was to train AI.



That, at least, is the view of Alex Tabarrok, who recently told Tyler Cowen that history will remember the internet primarily as the “agar culture for the growth of the AI” — i.e., the nutrient-rich petri dish whence it sprang.



“That’s why the internet’s important,” Cowen agreed. “We’re just beginning to realize this, right?”



“When we look back,” Tabarrok added, “we’ll think about… &#8216;What was the internet?&#8217; Putting everything online was for the AI. It wasn’t for us. I don’t think anyone thought about that.”



Except Larry Page!



And maybe Page’s dad, a pioneer in AI research.



And also Page’s co-founder, Sergey Brin, the machine-learning expert so well-versed in AI that he’s contributed code to Google’s large language model, Gemini.



None of those three made the cover of <a href="https://time.com/7339685/person-of-the-year-2025-ai-architects/">Time Magazine</a> as an &#8220;architect of AI” this week.



But they probably should have, because Google’s search engine did exactly what they intended it to.



“The ultimate search engine would understand everything on the web,” Page <a href="https://youtu.be/tldZ3lhsXEE?si=bLHftU0Um1UCXnqA&amp;t=224">explained</a> way back in 2000. “It would understand exactly what you wanted and give you the right thing and that’s obviously artificial intelligence; to be able to answer any question, because almost everything’s on the web.”



Who put it there? You did, of course.



“When you type ‘Easter Bunny’ into the image search bar,” Kelly wrote in 2016, “and then click on the most Easter Bunny-looking image, you are teaching the AI what an Easter Bunny looks like. Each of the three billion queries that Google conducts each day tutors the deep learning AI over and over again.”



We’re now up to 16 billion Google queries per day!



So, really you should be on the cover of Time Magazine this week — for the many years of important Googling you’ve done.



Thank you for your service.



Let’s check the charts.



More power, please:



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="830" height="656" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-96.png" alt="" class="wp-image-110438" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-96.png?w=830 830w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-96.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-96.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-96.png?w=325 325w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-96.png?w=330 330w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-96.png?w=277 277w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-96.png?w=80 80w" sizes="auto, (max-width: 830px) 100vw, 830px" /></figure>



<a href="https://www.a16z.news/p/charts-of-the-week-if-you-cant-join">Per a16z</a>, forecasts for data center power consumption have risen by 36% since just April. AI-related stocks were down today in part because they can’t get enough power to run all the data centers they need (or think they need).



Power to the people:



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1230" height="689" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-94.png?w=1024&amp;h=1024" alt="" class="wp-image-110437" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-94.png?w=1230 1230w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-94.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-94.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-94.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-94.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-94.png?w=466 466w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-94.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-94.png?w=80 80w" sizes="auto, (max-width: 1230px) 100vw, 1230px" /></figure>



China’s big advantage in the race to AGI is that soon, it will be generating 3x as much power than the US is.



Investing role reversal:



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="893" height="509" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-99.png" alt="" class="wp-image-110440" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-99.png?w=893 893w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-99.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-99.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-99.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-99.png?w=458 458w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-99.png?w=384 384w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-99.png?w=80 80w" sizes="auto, (max-width: 893px) 100vw, 893px" /></figure>



Paul Kedrosky notes that as a percentage of sales, Microsoft (a traditionally asset-light business) is now spending more than double on capex compared to what Exxon (a traditionally asset-heavy business) does.



Not investing advice:



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1376" height="642" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-100.png?w=1024&amp;h=1024" alt="" class="wp-image-110443" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-100.png?w=1376 1376w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-100.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-100.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-100.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-100.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-100.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-100.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-100.png?w=80 80w" sizes="auto, (max-width: 1376px) 100vw, 1376px" /></figure>



A Finra survey finds that 61% of investors under the age of 35 use YouTube for investing advice. To me, this suggests that Australia got it the wrong way around when it banned under-16s from social media this week. They should have banned over-30s instead.



The non-crisis of grocery prices:



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="824" height="590" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-97.png" alt="" class="wp-image-110441" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-97.png?w=824 824w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-97.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-97.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-97.png?w=359 359w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-97.png?w=365 365w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-97.png?w=306 306w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-97.png?w=80 80w" sizes="auto, (max-width: 824px) 100vw, 824px" /></figure>



Contrary to what social media would have you believe, there is no crisis of grocery store prices: As a percentage of disposable income, food at home (in blue) has gotten cheaper. In total (red), our food budget has remained unchanged, but only because we’re getting lazier (yellow).



The stock market isn’t only about AI:



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1600" height="1059" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-95.png?w=1024&amp;h=1024" alt="" class="wp-image-110442" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-95.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-95.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-95.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-95.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-95.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-95.png?w=388 388w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-95.png?w=394 394w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-95.png?w=331 331w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-95.png?w=80 80w" sizes="auto, (max-width: 1600px) 100vw, 1600px" /></figure>



The equal-weight S&amp;P 500 hit an all-time high this week.



A demographic time bomb:



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1154" height="882" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-101.png?w=1024&amp;h=1024" alt="" class="wp-image-110444" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-101.png?w=1154 1154w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-101.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-101.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-101.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-101.png?w=336 336w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-101.png?w=341 341w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-101.png?w=287 287w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-101.png?w=80 80w" sizes="auto, (max-width: 1154px) 100vw, 1154px" /></figure>



Sam Bowman <a href="https://x.com/s8mb/status/1998775841459708175?s=20">shares</a> an incredible stat: “Every 100 South Koreans today will have only 6 great-grandchildren between them.” Not six each — six in total. Thankfully, AI should be doing most of the jobs by then.



All the persons of the year:



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="790" height="564" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-98.png" alt="" class="wp-image-110439" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-98.png?w=790 790w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-98.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-98.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-98.png?w=360 360w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-98.png?w=366 366w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-98.png?w=307 307w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-98.png?w=80 80w" sizes="auto, (max-width: 790px) 100vw, 790px" /></figure>



Note that The Computer was Time Magazine’s&nbsp; “person” of the year in 1982. Not labelled in the above is the 2006 winner: you. The 2006 award recognized the individual content creators populating the w<a href="https://en.wikipedia.org/wiki/World_Wide_Web">orld wide web</a> with YouTube videos, blog posts, Instagram photos and Reddit comments.&nbsp;



This year, “you” should rightfully have joined nine US presidents as a repeat winner, because if we hadn’t populated the web with our content, the &#8220;architects of AI” would’ve had nothing to work with.



Your training session is now complete. Please proceed outdoors.



Have a great weekend, readers of the year.



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Friday charts: The many, many architects of AI

This is a segment from The Breakdown newsletter. To read full editions, <a href="https://blockworks.co/brand/the-breakdown" target="_blank" rel="noreferrer noopener">subscribe</a>.



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&nbsp;“Productivity isn’t everything, but in the long run it is almost everything.”



— Paul Krugman
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“Total factor productivity” (TFP) is how economists measure the contribution of technological innovation to economic growth — the sustained ability of an economy to produce more output with the same amount of inputs.



As such, it’s arguably economists’ most important measurement, because the continual process of producing more with less is how life gets better.



“A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker,” Paul Krugman explains.&nbsp;



Technology is what makes that happen and TFP is how it’s measured.



To get a more tangible sense of how important technology-generated productivity is, consider this: A <a href="https://www.nber.org/system/files/chapters/c15154/c15154.pdf">recent paper</a> from the National Bureau of Economic Research (NBER) estimates that an additional 0.5% of annual TFP growth would stabilize the US government&#8217;s finances at today’s level of debt-to-GDP.



0.5%! It doesn’t sound like a lot, but if sustained over the next 10 years, NBER estimates that would reduce the baseline forecast for US government debt by $2 trillion.



Over 30 years, a sustained 0.5% boost to TFP would make the US government’s debt-to-GDP ratio 42 percentage points lower than NBER’s baseline forecast (and 80 percentage points lower than its pessimistic one).



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="835" height="465" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-67.png" alt="" class="wp-image-110337" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-67.png?w=835 835w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-67.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-67.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-67.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-67.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-67.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-67.png?w=80 80w" sizes="auto, (max-width: 835px) 100vw, 835px" /></figure>



Given the seemingly hopeless state of government finances, maintaining today’s level of indebtedness is a dream scenario that seems too good to be true.



But researchers at Anthropic think we can do even better.



Anthropic conducted a study of 100,000 Claude.ai conversations to “estimate how long the tasks in these conversations would take with and without AI assistance, and study the productivity implications across the broader economy.”&nbsp;



Its conclusion? LLMs could raise total factor productivity by 1.1 percentage points.



1.1%!



If 0.5% would stabilize the US government’s finances for decades, what would 1.1% do? It would probably fix almost everything.&nbsp;



There are reasons to be skeptical of this optimistic forecast, of course.&nbsp;



The study finds, for example, that Claude saves teachers four hours of labor by creating curricula in just 11 minutes. But estimating how such time-savings might lead to higher economic output requires the kind of economic modelling that’s full of best-guess assumptions and false precision.



So, even if Anthropic is right about the time savings, it might be wrong about productivity: It might be that we use all the time AI saves us to do something economically unproductive, like watch more TikTok videos or read more newsletters.



In that case, AI would raise our welfare (more free time) but not our wealth (more economic output) — still great news for people, but no help to governments hoping for a silver bullet solution to their debt problem.



Conversely, there are reasons to think Anthropic’s model is being too pessimistic: “We don’t take into account the rate of adoption” it explains, “or the larger productivity effects that would come from much more capable AI systems.”



In other words, its study assumes we continue to use AI only as we do now and that we’re still using today’s language models, unimproved, for another 10 years.



Language models get noticeably better every few months and we’ve only just started learning how to use them — so Anthropic is right to say its estimate might represent an “approximate lower bound on the productivity effects of AI.”



If so — if 1.1% is the lower bound for AI-induced productivity — we might pay down government debt and have much more time for TikTok.



And that’s only taking into consideration AI’s impact on non-physical work — just wait until we get robots!&nbsp;



To dismiss such optimism entirely is to think the trillions of dollars that corporations are planning to spend on AI capex and R&amp;D will all be wasted.



Which it might be — technology revolutions don’t always arrive on schedule.



But the biggest reason for optimism is that Anthropic’s 1.1% estimate is based solely on AI “making existing tasks faster to complete” — &nbsp;its model does not account for AI’s potential to completely change the way we complete those tasks.



“Historically,” Anthropic notes, “transformative productivity improvements — from electrification, computing, or the internet — came not from speeding up old tasks, but from fundamentally reorganizing production.”



There’s no way to model these new ways of doing things, but it seems likely its impact will be bigger than the one Anthropic has tried to measure.



Anthropic’s researchers are careful to caveat their hopeful findings by enumerating the limitations of their methodology and documenting the many assumptions they’re making.&nbsp;



And even if all those assumptions work out and AI productivity solves the US government’s debt problem, lawmakers will probably spend their way right back into it.



But given the 100% probability everyone seems to put on looming fiscal disaster, even a small chance Anthropic’s estimates prove correct is a reason to update our priors: The US government’s finances are not as intractable as we think, and the US dollar is not as doomed as we think.



In the long run, productivity is almost everything — and AI might be on the verge of making us a lot more productive.



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The productivity bull case for almost everything

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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“Conventional measures of economic growth omit some of the largest gains in living standards and therefore underestimate economic progress.”



— William Nordhaus
</blockquote>



In 1906, Upton Sinclair went undercover in Chicago&#8217;s meatpacking plants to expose the brutal realities of poverty that he depicted in The Jungle: families living in overcrowded squalor, children working in hazardous, dehumanizing factories, workers maimed and discarded by industrial capitalism with no safety net whatsoever.



In 2025, we have a new kind of data-driven muckraker: Michael W. Green, an asset manager, whose brave discovery that American families making less than $140,000 are living in poverty has gone viral.&nbsp;



One can only marvel at how these families survive on such meager six-digit incomes! By Green’s logic, two-thirds of Americans should be eligible for food stamps.



Unlike Sinclair, however, Green doesn&#8217;t appear to have spent any time with the families he&#8217;s championing. If he had, he might have sensed that his spreadsheet was leading him astray.



Economists who are more adept at interpreting data are seemingly unanimous in their assessment of Green’s <a href="https://www.yesigiveafig.com/p/part-1-my-life-is-a-lie">viral thesis</a>.



Scott Winship <a href="https://scottwinship.substack.com/p/how-not-to-redefine-poverty">calls</a> it “the worst poverty analysis I have ever seen.”&nbsp;



Tyler Cowen <a href="https://www.thefp.com/p/the-myth-of-the-140000-poverty-line">finds</a> that Green’s study is “all wrong. The underlying concepts are wrong, the details are wrong, and the use of evidence is misguided.”



Jeremy Horpedahl <a href="https://economistwritingeveryday.com/2025/11/26/the-poverty-line-is-not-140000/">says</a> “it’s ridiculous to use $140,000 as a poverty measure.”&nbsp;



Noah Smith <a href="https://www.noahpinion.blog/p/the-140000-poverty-line-is-very-silly">says</a> Green “gets his own numbers completely wrong” and that his conclusions are “very silly.”



Green responds to some of these critiques <a href="https://substack.com/home/post/p-179828750">here</a>, but you probably don’t need to be a credentialed economist to sense the critics are right — because surely no one making $139,000 a year is going hungry?



Green’s argumentation is admittedly more nuanced than that.



He cites, for example, MIT’s “cost of thriving” index which estimates that it took 30 weeks of the median male’s earnings to live a good life in 1985 vs. 63 weeks now.&nbsp;



I’m not an economist, and I would not have even made the waitlist at MIT. But, having been alive in 1985, I can authoritatively say that things are now both easier and better than they were back then — economically, at least.



(Television shows, movies, music, fashion and celebrities were all far better in the 1980s, of course. Not to mention the blissful lack of both cellphones and adult supervision.)



But cars, appliances, power tools, video games, beer? Virtually anything you can buy to make your life better is better today than it was then.&nbsp;



In nearly all cases it’s cheaper too, when adjusted for quality.



Even housing.



“Green notes that housing costs have risen,” Cowen writes, “but Americans today have more living space on average than ever before, and live alongside fewer people.”



And healthcare!&nbsp;



Cowen explains that “the overall trend in healthcare has been deflationary, rather than inflationary — or, in economics speak, that the cost of buying an extra expected year of life has been going down rather than up.”



More intuitively, Cowen says simply, “I would rather have current healthcare at current prices than 1972 healthcare at 1972 prices.”&nbsp;



Me, too: I’d rather have current anything at current prices than 1985 anything at 1985 prices.



This intuition — that the statistics Green is looking at miss massive improvements in what our dollars actually buy us — is more than just anti-nostalgia, if that’s a word. (Presentism? Currentism?)&nbsp;



William Nordhaus famously demonstrated this systematically by measuring the cost of lighting in lumens. By tracking lumen-hour costs across technologies like candles, kerosene and electric bulbs, Nordhaus showed how ignoring quality change (more light per unit input, in the case of lighting) massively underestimates historical assessments of economic growth.



The cost of lighting a room for three hours — which took about three hours of work to afford in 1800 — requires just a fraction of a second of labor now: a roughly 43,000-fold improvement that official statistics missed almost entirely.



With this, Nordhaus demonstrated the larger point that because technological change is not fully reflected in GDP statistics, we tend to underappreciate how much our standard of living has improved.



The flip side is that failing to account for these changes can lead to some absurd conclusions about the cost of living, as expressed in this classic <a href="https://x.com/dril/status/384408932061417472?s=20">tweet</a>:



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="816" height="297" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-48.png" alt="" class="wp-image-110300" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-48.png?w=816 816w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-48.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-48.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-48.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-48.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-48.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-48.png?w=80 80w" sizes="auto, (max-width: 816px) 100vw, 816px" /></figure>



The joke is that someone stuck buying 1800s lighting technology at 1800s costs would indeed be impoverished because they wouldn’t have anything left over to spend on modern healthcare, housing or smartphones.



Green seems to make the same statistical mistake: He looks at modern families spending on vastly superior goods and services without accounting for the vastly superior value they’re getting.



“There is a major conceptual error in Green’s focus on high prices,” Cowen concludes. “Prices are high in large part because demand is high, which can only happen because so many more Americans can afford to buy things.”



$140,000 a year buys a lot of things.&nbsp;



Let’s check the charts.&nbsp;



Moving on up:



<figure class="wp-block-image size-full is-resized"><img loading="lazy" decoding="async" width="842" height="574" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-56.png" alt="" class="wp-image-110308" style="width:660px;height:auto" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-56.png?w=842 842w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-56.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-56.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-56.png?w=377 377w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-56.png?w=383 383w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-56.png?w=321 321w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-56.png?w=80 80w" sizes="auto, (max-width: 842px) 100vw, 842px" /></figure>



The US middle class has been shrinking, but only because the upper class has been expanding. In 1967, 5.2% of US families earned over $150,000 (inflation adjusted) vs. nearly 34% now.



People have been moving up into the middle class, too:



<figure class="wp-block-image size-full is-resized"><img loading="lazy" decoding="async" width="802" height="570" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-52.png" alt="" class="wp-image-110304" style="width:644px;height:auto" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-52.png?w=802 802w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-52.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-52.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-52.png?w=362 362w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-52.png?w=367 367w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-52.png?w=308 308w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-52.png?w=80 80w" sizes="auto, (max-width: 802px) 100vw, 802px" /></figure>



The percentage of Americans with income more than 200% of the federal poverty line (c. $60,000 for a family of four) has risen by 8.5 percentage points since 1975.&nbsp;&nbsp;



Poverty, however measured, is trending down:



<figure class="wp-block-image size-full is-resized"><img loading="lazy" decoding="async" width="965" height="439" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-55.png" alt="" class="wp-image-110309" style="width:706px;height:auto" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-55.png?w=965 965w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-55.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-55.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-55.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-55.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-55.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-55.png?w=80 80w" sizes="auto, (max-width: 965px) 100vw, 965px" /></figure>



This chart from the <a href="https://www.economicstrategygroup.org/publication/kearney-sullivan-poverty/">Economic Strategy Group</a> shows that poverty has fallen by roughly half according to income-based measures and by more than 80% using consumption-based measures — in both cases, more than government statistics indicate.



Consumption is up:



<figure class="wp-block-image size-large is-resized"><img loading="lazy" decoding="async" width="1203" height="737" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-57.png?w=1024&amp;h=1024" alt="" class="wp-image-110307" style="width:688px;height:auto" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-57.png?w=1203 1203w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-57.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-57.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-57.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-57.png?w=419 419w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-57.png?w=426 426w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-57.png?w=357 357w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-57.png?w=80 80w" sizes="auto, (max-width: 1203px) 100vw, 1203px" /></figure>



An <a href="https://sites.nd.edu/james-sullivan/files/2023/10/2022-Consumption-Poverty-Report_10_20_2023.pdf">academic study</a> of &#8220;consumption poverty&#8221; (in green) and &#8220;after-tax poverty&#8221; (in red) shows that the official, CPI-based measure of poverty fails to capture decades of improvement.



More food:



<figure class="wp-block-image size-large is-resized"><img loading="lazy" decoding="async" width="1254" height="743" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-50.png?w=1024&amp;h=1024" alt="" class="wp-image-110302" style="width:746px;height:auto" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-50.png?w=1254 1254w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-50.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-50.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-50.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-50.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-50.png?w=441 441w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-50.png?w=370 370w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-50.png?w=80 80w" sizes="auto, (max-width: 1254px) 100vw, 1254px" /></figure>



Americans consume about 3,800 calories a day — 15% more than we did in 1985 and roughly 50% more than we’re supposed to.



More healthcare:



<figure class="wp-block-image size-large is-resized"><img loading="lazy" decoding="async" width="1033" height="619" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-51.png?w=1024&amp;h=1024" alt="" class="wp-image-110303" style="width:701px;height:auto" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-51.png?w=1033 1033w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-51.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-51.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-51.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-51.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-51.png?w=436 436w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-51.png?w=365 365w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-51.png?w=80 80w" sizes="auto, (max-width: 1033px) 100vw, 1033px" /></figure>



8.2% of Americans were uninsured in 2024, down from 16% in 2010.



Candles were once a luxury good:



<figure class="wp-block-image size-full is-resized"><img loading="lazy" decoding="async" width="789" height="752" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-54.png" alt="" class="wp-image-110306" style="width:618px;height:auto" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-54.png?w=789 789w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-54.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-54.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-54.png?w=270 270w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-54.png?w=274 274w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-54.png?w=230 230w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-54.png?w=80 80w" sizes="auto, (max-width: 789px) 100vw, 789px" /></figure>



This is a reminder that as recently as 1800, candles were so expensive that it was economic for people to venture out into the oceans and risk their lives hunting whales.&nbsp;



Illuminating:



<figure class="wp-block-image size-full is-resized"><img loading="lazy" decoding="async" width="1001" height="609" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-49.png" alt="" class="wp-image-110301" style="width:729px;height:auto" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-49.png?w=1001 1001w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-49.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-49.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-49.png?w=422 422w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-49.png?w=429 429w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-49.png?w=360 360w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-49.png?w=80 80w" sizes="auto, (max-width: 1001px) 100vw, 1001px" /></figure>



A million lumen-hours is roughly the amount of light you’d get from an ordinary household light bulb running continuously for about two months. In the year 1300, that would have cost the equivalent of $52,000. Yikes.



In Nordhaus terms:



<figure class="wp-block-image size-full is-resized"><img loading="lazy" decoding="async" width="960" height="592" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-53.png" alt="" class="wp-image-110305" style="width:664px;height:auto" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-53.png?w=960 960w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-53.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-53.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-53.png?w=417 417w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-53.png?w=423 423w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-53.png?w=355 355w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-53.png?w=80 80w" sizes="auto, (max-width: 960px) 100vw, 960px" /></figure>



William Nordhaus made economic progress more tangible by calculating the “time-price” of light. In 1830, you had to work three hours to afford a single hour of candlelight. Today, you earn that same hour of light in one-thirteenth of a second.



Have a great weekend, upper-class readers.



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Economy

Illuminating progress: Is a $140K income ‘poor’?

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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“Even when I was little, I was big.”



— William Perry
</blockquote>



<a href="https://pca.st/episode/421fde7c-e03b-452e-b0dc-e12b35d63e4f?t=1087">The first prop bet</a>



Michael Lewis dates the beginning of betting on everything to 1985 when Caesars Palace offered 20-1 odds on William “Refrigerator” Perry scoring a touchdown in the Super Bowl.



He did — a one-yard rumble into the end zone — and Caesars lost at least $250,000 on the bet (a substantial sum in an era when bettors had to call Las Vegas by phone to place wagers).



That was the first known &#8220;proposition” bet — a bet on anything other than the score or result of a game, and as such, the primordial ancestor to today’s prediction markets that offer odds on seemingly everything.



Despite the loss it took, the president of Caesars called it the best bet they’d ever taken: “We’ve had so much publicity on the bet, whatever we’ve lost was worth it.”



“The next day, just about every book in town, your phone started to light up from every big city in the country,” the bookmaker Jimmy Vaccaro told Lewis. “They heard about Perry scoring a touchdown.”



Now, bookmakers “write” more business on the props — will the coin toss be heads or tails? what will the first commercial be for? will there be a wardrobe malfunction? — than they do on the games.



Before The Fridge, there were only about three bets to make on the Super Bowl: the winner, the total points, the halftime score.



Now, there are hundreds.



As it turned out, that was the last of The Fridge’s three career touchdowns despite his 10 additional years in the league (playing on defense).



But those three short rumbles set us on the path to today’s world of betting on virtually anything with prediction markets.&nbsp;



(Although we still mostly want to <a href="https://x.com/AlexKolicich/status/1995936524492476798?s=20">bet on sports</a>.)



<a href="https://open.substack.com/pub/freesystems/p/inside-the-markets-aggregating-political?utm_source=share&amp;utm_medium=android&amp;r=3qcul">A look inside political markets</a>



Here’s a measure of how sophisticated prediction markets have gotten: When Andy Hall watches sports, he’s now gotten in the habit of checking prediction markets right before a big play “because the markets move several seconds before my TV feed does.”



Hall teaches political science at Stanford, so he’s more interested in how prediction markets are “changing how we monitor and understand politics.”



Hall seems cautiously optimistic that booming prediction markets will prove to be a public good because they should offer “a clearer shared picture of a highly complex political environment.”



But he’s also concerned about the “strange feedback loops” they create.



As an example, he cites a Virginia Attorney General race where unverified claims about exit polls circulating on social media moved prediction markets, which caused social media to post the “BREAKING NEWS” of the move in prediction markets, which, in turn, caused the prediction markets to move even further.&nbsp;



That probably did not do the public any good.&nbsp;



Hall notes that prediction markets are also raising questions about what it means to “win” an election.



“In a world where prediction markets are increasingly seen as sources of truth — many people pointed to when Kalshi ‘called’ the mayoral election in New York City as the proof that Mamdani had won — determining these edge cases will be exceedingly fraught.”



So what does it mean if Kalshi calls a close presidential election in 2028?



I’m not sure I want to find out.



(For another foreboding example of prediction markets affecting reality, see this <a href="https://archive.is/IS2cx">story</a> about bettors changing maps of the frontline in Ukraine.)



<a href="https://red.anthropic.com/2025/smart-contracts/">AI agents are very good at hacking smart-contracts</a>



Researchers at Anthropic report that their AI agents successfully exploited 56% of smart contracts known to have vulnerabilities.&nbsp;



More impressively (or worryingly), when tested on 2,849 smart contracts with no known vulnerabilities, the agents also discovered two novel “zero-day” exploits — a demonstration that agents can find new vulnerabilities autonomously.



Perhaps most worryingly, the agents are getting better at an astonishing rate: “Over the last year, frontier models&#8217; exploit revenue…doubled roughly every 1.3 months,” the researchers report.



(They want you to know that no blockchains were harmed in this experiment — they tested on “blockchain simulators.”)



To put that in perspective, Moore&#8217;s Law describes the performance of semiconductors doubling every two years.



These AI agents are doubling their capacity to exploit smart contracts every six weeks.



Amazing. And terrifying.&nbsp;



Anthropic does not have a particular interest in crypto. Instead, it has run this experiment to measure how adept agents will be at hacking code of any sort: “The same capabilities that make agents effective at exploiting smart contracts — such as long-horizon reasoning, boundary analysis, and iterative tool use — extend to all kinds of software.”



Here’s another amazing thing it’s found: “It costs just $1.22 on average for an agent to exhaustively scan a contract for vulnerability.”



“As costs continue to fall,” it concludes, “attackers will deploy more AI agents to probe any code that is along the path to valuable assets, no matter how obscure.”



Consider investing in a lockbox to hold all the physical cash and gold coins we’ll soon be back to using.&nbsp;



<a href="https://epicenter.tv/episode/627-what-will-quantum-computing-change">Quantum computers are coming for crypto first</a>



The risk that quantum computers pose to crypto is often dismissed with a hand-wavy assertion that once the computers get that good, everything will be at risk, so we’ll have bigger things to worry about.&nbsp;



But the latest episode of Epicenter explains why crypto is uniquely vulnerable.



“Most of the classical cryptography community…has been working on this for years,” Stefano Gogioso explains. “They already have protocols they could use if quantum were to happen tomorrow.”



In Web2, “you have centralized authorities,” he adds. If worse comes to worst, “you have banks that would refuse to transact for a day or two.”



In crypto, however, there are two problems: 1) blockchains use “new applications of cryptography” that have gotten little attention from researchers studying quantum resistance and 2) even if we had solutions, there are so many different voices, opinions and vested interests in decentralized crypto, “it would be challenging to change the infrastructure.”



Even more fundamentally, Gogioso notes, “we built an entire ecosystem for the very purpose of making [our data] available to everybody at all times” — which means that once quantum computers are available, they’ll be able to decrypt the entire transaction history of every blockchain.&nbsp;



So, if you’ve been using a privacy chain like Monero to make illicit transactions, you might want to relocate to a non-extradition country sometime soon.&nbsp;



“Monero is already broken,” Gogioso says.&nbsp;



Gogioso also expects governments to use quantum computers to identify who hasn’t been paying capital gains taxes on their crypto winnings: “They’re certainly going to send them a bill for the money they haven’t been paid yet.”



(Personally, I look forward to the refund I&#8217;ll get on all the crypto losses I&#8217;ve been too lazy to report.)



Other fun scenarios include someone moving one of Satoshi&#8217;s coins — how will we know if that’s Satoshi himself or just a guy with a quantum computer?



Or consider a US rival like China targeting Bitcoin — not to make money, but to destabilize a system that&#8217;s become ingrained in US finance.



But the biggest threat of all might be Gogioso’s final prediction: that quantum technology could create a form of permissionless, digital money that solves the double-spend problem without resorting to crypto’s exploit-prone model of distributed consensus.&nbsp;



Whatever the risks, the response has been woefully inadequate.&nbsp;



John Lilic notes that because crypto has a $3 trillion market capitalization, if there’s even a 1% chance of total loss, &#8220;we should be spending $30 billion” on making crypto quantum resistant.



His assessment of the current investment? “We’re not spending anything.”



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Thursday links: Prediction markets, agent hackers, quantum risks

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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“Growth in revenues cannot exceed growth in people who can execute and sustain that growth.”



— Packard’s Law
</blockquote>



Arboreal ecosystems operate on a brutal but necessary paradox: For a forest to grow, it occasionally needs to burn.



Without these seemingly-apocalyptic conflagrations, the forest floor becomes choked with underbrush, preventing the new growth needed for regeneration and long-term viability.



Dion Lim <a href="https://ceodinner.substack.com/p/the-ai-wildfire-is-coming-its-going?utm_source=share&amp;utm_medium=android&amp;r=3qcul&amp;triedRedirect=true">says</a> this is how technology cycles work, too.



“The first web cycle,” he explains, “burned through dot-com exuberance and left behind Google, Amazon, eBay, and PayPal: the hardy survivors of Web 1.0. The next cycle, driven by social and mobile, burned again in 2008-2009, clearing the underbrush for Facebook, Airbnb, Uber, and the offspring of Y Combinator.”



The speculative frenzy of investment bubbles burns off non-productive capital much like a wildfire consumes dense fuel — and the inevitable crash clears the way for the market’s resources to be reallocated.



Without these seemingly apocalyptic market conflagrations, a permanent underbrush of failed startups would drain the technology sector of the resources it needs to grow.



This might be why crypto feels so left behind this year: A tangled undergrowth of big projects that never seem to die has been hoarding the resources the ecosystem needs to evolve.&nbsp;



In the real economy, labor is constantly being reallocated from failed companies to successful or promising ones: “Many of Google’s best early employees,” Lim notes, “were founders or early employees of failed Web 1.0 startups.”



This seems to happen less in crypto.



To cite just one example, the Polkadot blockchain — which collected <a href="https://tokenterminal.com/explorer/projects/polkadot/metrics/fees?granularity=day&amp;interval=7d">$72 of fees</a> yesterday — is <a href="https://www.developerreport.com/">supported</a> by 482 full-time developers and 1,404 contributors.



If a project like that — in its sixth year of operations — was funded by stock and not tokens, I’m guessing those resources would have been released back into the ecosystem by now.



This is a problem because <a href="https://www.jimcollins.com/article_topics/articles/the-timeless-physics.html">Packard’s Law</a> suggests that if the scarce resource of crypto developers is not being redistributed to successful projects, crypto will struggle to grow.



Unproductive crypto projects hoard investment resources, too.&nbsp;



Crypto founders are notorious for <a href="https://x.com/hasufl/status/1995417501321040346?s=20">over-raising from investors</a> and living off the proceeds, with no market-imposed urgency to find product market-fit.



For example: One of the original crypto projects, Golem, stockpiled 820,000 ETH in its 2016 ICO, and still held <a href="https://x.com/WuBlockchain/status/1810148153087173023?s=20">231,400</a> of it as recently as last year.



Traditional startup investors expect their capital to be deployed far more quickly than that.&nbsp;



In other cases, projects with inexplicably large market valuations fund themselves seemingly forever by selling their native token out of treasury. Cardano, for example, <a href="https://messari.io/report/state-of-cardano-q3-2025">holds</a> roughly $700 million of its ADA token in treasury, which should keep the project funded approximately forever.



Collectively, crypto protocols are sitting on billions in capital and have little or no incentive to deploy it efficiently — no activist shareholders to placate, corporate raiders to fear or quarterly earnings estimates to meet.



In short, crypto may be too funded to fail.



Ben Thompson has recently articulated a similar fear about traditional tech, worrying that giants like TSMC, Nvidia and Alphabet have become so dominant that the entire ecosystem risks stagnation.



He therefore welcomes the bubble: “What is invigorating or why we should embrace the mania, embrace the bubble, is [that] ‘too-big-to-fail’ was starting to afflict tech as well.”



Thompson notes that the benefit of private enterprise is that &#8220;stupid stuff&#8221; eventually goes out of business. But when companies become entrenched monopolies (or government-backed entities), the stupid stuff doesn’t die. It just becomes over-engineered and inefficient.



He argues we need investment bubbles precisely because they bring risk back into the equation: “You don’t get upside risk without downside risk.”



This might explain why crypto has felt so stagnant this cycle. We have the &#8220;stupid stuff&#8221; — protocols with few users and minimal revenue — but lack the mechanism to make them go out of business.



“Growth becomes difficult when everyone’s roots are tangled,” Lim warns.



Until a forest fire is allowed to burn through the tangled roots of over-funded zombie protocols, the nutrients — capital and developers — will remain trapped, and the next era of growth will remain out of reach.



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Too funded to fail: Crypto needs a forest fire

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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“In economics, things take longer to happen than you think they will, and then they happen faster than you thought they could.”



― Rudiger Dornbusch
</blockquote>



The opening scene of Philip K. Dick’s 1969 sci-fi classic <a href="https://www.amazon.com/Ubik-Philip-K-Dick-ebook/dp/B005LVR6ZA/ref=tmm_kin_swatch_0?_encoding=UTF8&amp;dib_tag=se&amp;dib=eyJ2IjoiMSJ9.JF_a_3YBqUArh4K_Z-iE6I6X9p5rZmjuOVdoQJ2WB_pOXJYsddjBJD-C4GbxF5PWnydxdgUc4oqmKMArafhTlD7WDLvesTxtppG3tuVe4le3qpVkyrP5ILCHmxpK4PwQzG84S5zO1_X4hBi3WbFsSCuYetIwZlBHM-aeR3h0knDZvx-eCVN1xWYCwvl9yP_BRaaMJLQFiMfUchLg7OnMpClGXXjn1Q_bDHY_GK-k04o.yw3FYUPmpQ7IHVLHZEGZAiB6TQljO59oXPF-sq8ttjI&amp;qid=1764648536&amp;sr=8-1">Ubik</a> features an apartment door demanding payment from its owner.&nbsp;



When Joe Chip, behind on his rent, attempts to open the door for a guest, it replies, “Five cents, please.” Short of change, he offers to pay tomorrow, but his credit score is shot so the door ignores him.&nbsp;



He tries to reason with it:&nbsp; “What I pay you,” he informed it, “is in the nature of a gratuity; I don’t have to pay you.”&nbsp;



“I think otherwise,” the door responds, before instructing Chip to check his contract.



“You discover I’m right,” the door says. It sounds smug.



When Chip starts to unscrew the bolt mechanism with a knife, the door threatens legal action, but Chip is undeterred — “I’ve never been sued by a door. But I guess I can live through it.”



Before any damage is done, Chip’s guest pays from the other side and the door finally opens.&nbsp;



Later, the refrigerator, coffee maker and shower all demand payment before rendering their services — and the guest has to pay the door again to leave.



Such was Philip Dick’s dystopian vision of the future: Apartments turned into pay-as-you-go vending machines.



But this might also be the u-topian future of decentralized finance.&nbsp;



The dream of decentralized finance is to transform every asset into a programmable financial instrument that automatically enforces the terms of its own contract.



The problem with decentralized finance is that it’s limited to crypto assets, because a smart contract can’t reach into the physical world to repossess a car or evict a tenant.



But what if a smart contract could lock the door to your house, car or refrigerator? In that world, a lender could accept those kinds of real-world assets — anything that can be locked — as collateral against onchain loans.&nbsp;



It’s not a new idea.



Way back in 1997, Nick Szabo <a href="https://nakamotoinstitute.org/library/the-idea-of-smart-contracts/">described</a> the utility of turning smart contracts into smart locks: “Many kinds of contractual clauses (such as collateral, bonding, delineation of property rights, etc.) can be embedded in the hardware and software we deal with, in such a way as to make breach of contract expensive (if desired, sometimes prohibitively so) for the breacher.”



“These protocols would give control of the cryptographic keys for operating the property to the person who rightfully owns that property,” he added, “based on the terms of the contract.”&nbsp;



So far, that property has only been tokens, because that’s the only property whose ownership can be embedded in smart contracts.



But smart locks, controlled by smart contracts with verifiable, immutable rules, could turn the whole world into a vending machine.&nbsp;



Szabo called vending machines the &#8220;primitive ancestor of smart contracts”: a mechanical contract that holds an asset (a can of soda, say) and releases it to anyone who satisfies the conditions of that contract (inserting a coin). No human or corporate shopkeeper needed.



The rules-based machine becomes the shopkeeper — much like Joe Chip’s door becomes his landlord.



Szabo thought something like the latter was where we were headed: “Smart contracts go beyond the vending machine in proposing to embed contracts in all sorts of property that is valuable and controlled by digital means.”&nbsp;



Sixteen years before the advent of Ethereum, Szabo envisioned smart locks granting digital control of real-world property, citing cars as the “most straightforward” use of smart locks.&nbsp;



“We can create a smart lien protocol: If the owner fails to make payments, the smart contract invokes the lien protocol, which returns control of the car keys to the bank.”



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="839" height="314" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-23.png" alt="" class="wp-image-110212" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-23.png?w=839 839w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-23.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-23.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-23.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-23.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-23.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/12/image-23.png?w=80 80w" sizes="auto, (max-width: 839px) 100vw, 839px" /></figure>



Nothing exactly like that has happened as of yet, but Szabo was at least directionally correct — on two counts: Smart contracts exist, on Ethereum and elsewhere, and auto-loan lenders are securing their collateral with remote locks.



Starter interrupt devices (SIDs) that allow lenders to remotely disable a car when a borrower has fallen behind on their payments have become popular with sub-prime auto lenders in recent decades.



This raises some obvious questions: What if you need the car to get to work to make money to catch up on your loan? What if you’re doing 80 on the freeway when your lender decides to disable your auto? 



Unlike Joe Chip’s door, you can’t drop coins into the dashboard of a SID-disabled car to unlock it. And good luck getting someone on the phone at the lender to plead your case or even make a payment.



You could, however, quickly top up your payment via smart contract, on a smart phone with a digital wallet.



This is not a new idea, either.



In 2015, Slock.it promised exactly the kind of digital locks (Slocks) that Joe Chip negotiated with: “With Slock, the person who rents your house pays directly to the lock itself. The lock enters into a smart contract with the renter.”



For reasons that remain unclear, Slocks didn’t catch on — or get into production, even.



(The Slock.it team may have taken their eyes off the ball when their side project, The DAO, nearly sank Ethereum.)



But it might also be that they were just early.



If so, now may finally be the time for blockchain-based smart locks.



The infrastructure is built: Chains are fast, transactions are cheap, frontends are user-friendly.



TradFi wants to tokenize everything: Crypto assets have flopped this year, but the enthusiasm for bringing real-world assets onchain has only grown.&nbsp;



Investors want alternative assets: The demand for productive yield outside the shrinking universe of public equities is seemingly insatiable.



Smart contract smart locks might be the way to provide it.



Consider Turkey, for example, where borrowers pay 5% per month on their <a href="https://www.fibabanka.com.tr/en/product-and-service-fees/personal-interest-rates/auto-loans">auto loans</a>, which works out to over 100% per year — 70 percentage points above inflation.



If those loans were tokenized and governed by a smart contract that automatically disables a car when a borrower defaults, wouldn’t that attract investors from everywhere?



BlackRock’s Larry Fink <a href="https://www.economist.com/by-invitation/2025/12/01/larry-fink-and-rob-goldstein-on-how-tokenisation-could-transform-finance">said</a> this week that “tokenization can greatly expand the world of investable assets beyond the listed stocks and bonds that dominate markets today.”



Philip K. Dick predicted the technology. Nick Szabo wrote the manual.&nbsp;



Now, finance just needs to build the door to this investors’ utopia.



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smart contracts

The sci-fi future of onchain assets and smart locks

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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“It is essential for human flourishing that we conduct substantial parts of our lives unobserved.”



— Tiffany Jenkins
</blockquote>



Hallways were the first privacy tech.



In 1716, the Duchess of Marlborough questioned the architect designing Blenheim Palace because of all the long, narrow rooms he had planned. The architect had to explain that these were “no more than a passage” between rooms.



Another contemporary builder articulated the purpose of this revolutionary new design:&nbsp; “All the Rooms in this House are private; that is, there is a Way into each of them without passing through any other Room.”



In other words, hallways created privacy.&nbsp;



“It took a century for this architectural feature to become commonplace,” Tiffany Jenkins writes in <a href="https://www.amazon.com/Strangers-Intimates-Rise-Fall-Private/dp/1529034167">Strangers and Intimates; the Rise and Fall of Private Life</a>. “But once it did, the Victorians embraced it wholeheartedly.”



Before the time of hallways, “there was no strictly separate private sphere, no aspect of life where others could not legitimately intrude,” she explains. “The outside world could pry into anyone’s business and was expected to do so. Curiosity and nosiness were mandated.”



Counterintuitively, that began to change with the Puritans, whose insistence that matters of religion and conscience were private freedoms established the first barrier the state could not cross.



Once established, this zone of non-interference expanded into a Victorian definition of privacy that protected bedrooms, communications and commerce.&nbsp;



In 1844, the privacy zone was tested when the British government was caught opening the letters of the political exile Giuseppe Mazzini to snoop on his correspondence with Italian revolutionaries.&nbsp;



Mazzini proved the surveillance by having friends mail him grains of sand and poppy seeds. When the letters arrived otherwise empty — the grains having fallen out during the government’s clumsy inspection — the breach of privacy sparked national outrage.



Thomas Carlyle called opening a man’s letters a “scoundrelism” equivalent to picking his pocket.



Radical MP Thomas Duncombe said the practice was “subversive of the public confidence essential to a commercial country.”



Most tellingly, the plots of two Charles Dickens novels — Bleak House and Little Dorrit — revolved around stolen letters that threatened to expose family connections and economic dealings.



All of which confirmed, as Tiffany Jenkins says, that “a revolution in the value and esteem of privacy had taken place.”



But while Victorians were the first to embrace this cultural ideal, the United States was the first to write it into law — sort of.



In 1890, Samuel Warren and Louis Brandeis published <a href="https://www.brandeis.edu/library/archives/exhibits/ldb-100/career/privacy.shtml">The Right to Privacy</a> — a foundational article arguing for a fundamental &#8220;right to be let alone&#8221; that was written in response to the privacy intrusions of newspapers and early photography.



This was a &#8220;seminal moment&#8221; in the history of privacy, Jenkins writes. But, in researching their article, the two lawyers observed a surprising gap: There is no mention of privacy in the Constitution — not even in the Amendments.



Despite the influence of the article, the constitutional silence on privacy persisted for decades.



In 1928, the Supreme Court upheld the government’s use of warrantless wiretaps in Olmstead v the United States, which ruled that wiretapping did not violate the Fourth Amendment (because there was no physical trespass onto the defendant&#8217;s property).&nbsp;



Writing on behalf of the four dissenting justices, Justice Brandeis warned that “the progress of science in furnishing the Government with means of espionage is not likely to stop with wiretapping. Ways may someday be developed by which the Government, without removing papers from secret drawers, can reproduce them in court, and by which it will be enabled to expose to a jury the most intimate occurrences of the home.”



Exactly that has happened, of course.&nbsp;



(Less prophetically, Brandeis also warned that “advances in the psychic and related sciences may bring means of exploring unexpressed beliefs, thoughts and emotions.”)



It was not until Griswold v Connecticut in 1965 that the Supreme Court asserted a constitutional right to privacy. And even then it took some creative logic.&nbsp;



“To rule that privacy is a constitutional right,” Jenkins writes, “Justice Douglas argued that the Bill of Rights’ specific guarantees have ‘penumbras’ which, when drawn together, add up to a de facto right to privacy.” Penumbras — a concept that sounds more astronomical than legal — seems like a precarious legal foundation for privacy.



In 1967, the right to privacy got a little more concrete when the Supreme Court ruled in Katz v the United States that the Fourth Amendment protected not just places, but people, too.



This was celebrated by privacy advocates because it decoupled privacy rights from property rights, ensuring that the Fourth Amendment applied in places like the telephone booth where Charles Katz was illegally betting on college basketball.



In hindsight, though, the celebrations look misplaced because the court simply required that the government get a warrant for its eavesdropping.&nbsp;



“The ruling actually normalized wiretapping surveillance as a tool of law and order,” Jenkins writes.



For privacy advocates, things have only gone downhill from there.



“Through a series of rulings,” Jenkins writes, “the Supreme Court narrowed the definition of prohibited searches while broadening the scope of permissible searches and warrants. As a result, constitutional protections for privacy were progressively undermined.”



To illustrate just how undermined, Jenkins cites the case of Monica Lewinsky, who was forced to surrender her private correspondence, gifts, and clothing simply because her infamous correspondent was accused of a crime (and not even a big one).



With the government granting itself that kind of subpoena power, privacy is no longer a locked door at the end of a hallway — instead, it’s just a paperwork requirement.



Jenkins laments this.



“It’s essential to have a private space shielded from corporate, state and public scrutiny,” she concludes; “a place where we can be alone.”



But her history of privacy demonstrates that, contrary to popular belief, “it’s neither ‘natural’ nor universal to have a private life.”



So if we want one, we’ll have to build it.



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Cybersecurity

Privacy is not a ‘natural’ right — it’s an invention

Fundamental insights and behind the scenes perspectives from the industry’s key operators and innovators

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Investigates the macro landscape as the laws of investing are being rewritten, helping investors adapt to a rapidly changing environment.

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The essential source for all things Solana — exclusive news, deep analysis, and the latest trends.

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Detailing Bitcoin’s rise from internet plaything worth less than a penny to global phenomenon disrupting money as we know it.

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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“Trading is a hard way to make easy money.” — Wall Street aphorism
</blockquote>



<h2 class="wp-block-heading"><a href="https://open.substack.com/pub/zeneca33/p/letter-89-the-golden-age-of-crypto?utm_source=share&amp;utm_medium=android&amp;r=3qcul">The golden age of crypto is over</a></h2>



The newsletter writer Zeneca uses his perspective as a former poker player to declare that crypto’s golden era of easy money is over: “It’s only going to get tougher from here on out,” he warns.



When Zeneca started playing poker for money in 2003, he says “the average level of skill was extremely low,” and as a result, “basic strategies worked” to make money.



From there, however, the game progressively professionalized, and by 2010 making money in poker required learning math, statistics and game theory.&nbsp;



Today, the game is so efficient that, to have any chance of being profitable, you have to learn to play theoretically perfect poker from AI solvers. (Which really takes the fun out of it.)



This newsletter writer, using his perspective as a former equities player, can relate.



In the 1990s, you could make money in equities just by being a little quicker or paying a little closer attention than your human competitors.&nbsp;



If, say, you saw a positive headline about a company on the Reuters ticker, you had a few seconds to buy some stock that you could probably sell a few minutes later for a profit. It wasn’t that hard.



Better yet, investor flows were often bigger than traders could collectively accommodate.&nbsp;



This created easy money for anyone who cared to take it, sometimes by doing something as obvious as shorting stocks that were scheduled to drop out of an index and buying the ones being added, for example.&nbsp;



But equities professionalized on about the same timeframe as poker.&nbsp;



Starting in about 2000, quantitative and algorithmic trading made markets increasingly efficient at the same time that more and more people were trying to trade them.



By about 2005 there were too many traders trading against not enough investors — you could still make money trading, but it was increasingly hard work.



Now, though? Fuhgeddaboudit. Equity markets are so efficient you need a doctoral degree in a quantitative science to have any hope of trading them.



The crypto market seems to be progressing along the same path.&nbsp;



Zeneca likens crypto now to poker in 2012: “It’s still possible for many people to make it with a bit of work. But it’s no longer like shooting fish in a barrel.”



As with poker and equities, that’s partly because you’re now often competing with algorithms — sniper bots being one example.



Mostly, though, I think it’s what happened to equities by 2005: There are too many traders in crypto relative to the amount of investors in crypto.&nbsp;



Zeneca warns that traders waiting for a new wave of retail enthusiasm to make trading crypto easy again will be disappointed: “Just about anyone that has ever had any interest in speculating on crypto would have done so by now.”



I agree: Trading crypto won’t get any easier until there are more investors to trade against.



<h2 class="wp-block-heading"><a href="https://blockworks.co/news/blockworks-solana-investor-relations-platform">Blockworks launches investor relations platform</a></h2>



Blockworks is doing its part to attract the new investors crypto needs now with a platform offering “high-fidelity” data, institutional research, “ecosystem intelligence,” and investor relations workflows for Solana-based projects — in short, all the things that professional investors have long taken for granted in equities.



The platform will even provide quarterly reports, Dan Smith <a href="https://www.youtube.com/live/uju9vU4lfzo?si=lnLpCqY1kjlm_SIp&amp;t=18983">promises</a> — in a form that I’m guessing will make equity investors feel more at home in crypto.



Crypto builders looking to attract those kinds of investors can sign up <a href="https://lightspeed.vip/get-access">here</a>.



<h2 class="wp-block-heading"><a href="https://obviously.substack.com/p/why-your-coin-isnt-pumping">Why your coin isn’t pumping</a>&nbsp;</h2>



The crypto-native investor Santiago Roel Santos thinks it’s no mystery why tokens have been going down: “We valued casino flow like recurring software revenue.”



Token investors began paying attention to revenue this cycle and protocols began to prioritize, with notable success: An all-time high of <a href="https://1kx.network/writing/2025-onchain-revenue-report">$1.9 billion of value</a> was distributed to token holders in Q3.&nbsp;



But, perhaps disappointingly, these payouts have not helped token prices much.



Santos says that’s primarily because the quality of the revenue is so low: “You don’t give a Shopify multiple to a business that only makes money when the casino is full every three to four years.”



Critics responded to Santos by calling this a boomer take: Protocols are not businesses, they argue, they’re networks, so traditional metrics don’t apply.



Santos responded in turn with a <a href="https://obviously.substack.com/p/crypto-is-priced-for-network-effects">follow-up post</a> arguing that valuing crypto on its network effects leads him to the same conclusion: Tokens are egregiously overpriced.



“Crypto is valued at 5x–50x more market cap per user than Meta,” Santos says, “without having any of the economics that justify it.”



That’s kind of surprising, in a way: The purpose of crypto is to disintermediate businesses like Meta by creating peer-to-peer networks controlled by users who can come and go as they please.



Surely a user in that kind of network will be less valuable than a user trapped in a network like Facebook? Alternatively, it might be that crypto investors are paying up for tokens in anticipation of the imminent tokenization of everything — in which case, a huge influx of users will justify today’s valuations even if the open nature of blockchains makes it hard to monetize them.&nbsp;



Santos thinks the influx of users is possible, but doesn’t want to pay for it: “Right now,” he concludes, “too much future is priced in upfront.”



<h2 class="wp-block-heading"><a href="https://www.complexsystemspodcast.com/episodes/understanding-perpetual-futures/">Will crypto successfully export perps?</a></h2>



Patrick McKenzie thinks perpetual futures are unlikely to catch on with equities speculators, mostly because “liquidations are not the business model of traditional brokerages.”



“Liquidations” is a good business: Binance, McKenzie notes, charges a 0.5% liquidation fee on the notional value of the perps trades it liquidates.&nbsp;



On a trade leveraged 20x, that’s a 10% fee!



(This might explain why Binance’s BNB token is valued at $122 billion.)&nbsp;



McKenzie doesn’t think TradFi customers will pay those kinds of fees — especially as “learning on a day when markets are down 20% that you might be hedged or you might be bankrupt is not a prospect that fills traditional finance professionals with the warm and fuzzies.”



In other words, TradFi professionals are unlikely to accept the perps market practice of auto deleveraging (ADL).



McKenzie concisely defines ADL from the perspective of the broker: “You can either force the customer to enter a closing trade or you can assign their position to someone willing to bear their risk in return for a discount.”



Those are the only two options because perpetual futures are a “closed system” in which winning traders can only win as much as losing traders are willing to lose.



ADL is the clever mechanism by which trading venues ensure there are always enough losers to pay the winners. But it’s a messy process: By <a href="https://x.com/tarunchitra/status/1998451762232177041?s=20">one estimate</a>, perps venues liquidated winners 28x more than necessary during the Oct. 10 crash.&nbsp;



This estimate is <a href="https://x.com/chameleon_jeff/status/1998567869848891699?s=20">highly disputed</a>, but whatever the real ADL numbers are, margining practices are much friendlier in equities.



So it’s hard to argue with McKenzie’s conclusion that the crypto industry is unlikely to “export” its perpetual futures to traditional markets.&nbsp;



On the other hand, using perps to import retail speculators in search of easy money might still work.



People love to trade.



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crypto traders

Links: Trading, valuations, and the end of crypto’s ‘golden age’

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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
&#8220;The dollar is always going to be the reserve currency. Anyway, for a long time.&#8221;&nbsp;



— Jerome Powell
</blockquote>



When the price of oil suddenly quadrupled in 1973, Saudi Arabia was wholly unprepared for the billions of dollars that started flooding in.



Strictly speaking, the money never actually made it “into” the Kingdom: Global buyers of Saudi oil sent their payments to accounts at Citibank and JPMorgan in New York — where the money sat idle because Saudi finance officials barely knew how to move it, let alone invest it.



With billions piling up in non-interest bearing accounts, the Saudi Arabian Monetary Agency (SAMA) reluctantly asked an American banker, David Mulford, to manage it for them.



Mulford and a small team moved to the underdeveloped port town of Jeddah where they scrambled to secure accommodation in houses newly-built in a part of the desert with no roads (to get there, you simply drove over the sand).



The houses lacked telephones, televisions, mail delivery and even trash removal (the bankers left their trash in the sand for Bedouins’ goats to feed on).



The office they commuted to six days a week was even worse.



They were assigned a single room in a “decrepit” building, furnished with only chairs and desks — no computers or telephones.



“Across the hall from our room a simple toilet was set in a long, deep room with an open drain behind it,” Mulford wrote in his <a href="https://www.amazon.com/Packing-India-DAVID-MULFORD-ebook/dp/B00NU62U36/ref=sr_1_3?dib=eyJ2IjoiMSJ9.LOBUN5zB9XV0oSGK2tFiXyc1UhA-SVwKAJG3H-rIy99eO7oIlMLcXWcgl9PADmuEt9Hy5s6wE3QoN9rE02IQC7zz1VkT34SDz96Fs0ogcn-bAkQralgtN-7sViJC32oW-vO3BPg-oitFRYSLCnH6M6Np266erYCcdqKUlerTOuHbSV-S8O6TbMGy5BTH3QTF1KsrZmuzjZHUvaQAGLysjbso_Us7htB-mbFGYhXrLzY.QIz7Ev6QkEqIZ1X--TazBzBNkN2BkOtqT8I2pULHYIY&amp;dib_tag=se&amp;qid=1765389659&amp;refinements=p_27%3ADAVID+MULFORD&amp;s=digital-text&amp;sr=1-3&amp;text=DAVID+MULFORD">autobiography</a>. “This was used by our section of the building and flushed once a day at three in the afternoon.”



Investment deals were negotiated, agreed and processed via the building’s single telex machine (a kind of hybrid typewriter/telegraph) that was constantly in use — a single deal required dozens of telex messages and weeks to complete.



And yet, as Mulford recalls, “we had to invest money at the rate of approximately $500 million per day just to prevent ourselves from falling behind.”



Mulford’s account of his nine years at SAMA debunks the persistent conspiracy theory that the Saudis invested their oil money in US Treasurys as a quid pro quo for a security guarantee.



Instead, the Saudis invested in US Treasurys because they had to: No other market in the world could absorb the $20 billion a month the Saudis had to invest.



And none was so safe and easy to invest in — important factors when investing by telex.



SAMA actually tasked Mulford with moving 30% of their investment funds out of the US market. But he struggled to do it.&nbsp;&nbsp;&nbsp;



“In most markets outside the US in those days, a currency trade of $5-10 million was enough to move markets,” he explains, “so there were practical limitations on the amount of currency diversification that we could achieve.”



This, I think, challenges the idea that dollar dominance can be engineered through either coercion or clever policy: The Saudis chose Treasurys because of what America was, not what it promised or demanded.&nbsp;



Even in the 1970s economy — plagued with both recession and inflation and a president that resigned in disgrace — US financial markets retained the depth (quantities of high-quality assets), liquidity (easy tradability of those assets) and safety (rule of law) that made it the best option for the world’s largest investor.



Today, the US has all the best companies, too: Non-US investors own roughly <a href="https://www.apolloacademy.com/foreign-ownership-of-us-equities-treasuries-and-us-credit/">$19 trillion</a> of US equities (more than double what they own in Treasurys).



It also has a central bank that&#8217;s retained its inflation-fighting credentials despite political pressure to finance ever-bigger fiscal deficits.



The current head of that central bank, Jerome Powell, fundamentally <a href="https://finance.yahoo.com/news/powell-says-expects-dollar-remain-173200618.html?utm_source=chatgpt.com">attributes</a> the dollar dominance to “democratic institutions” and “the rule of law.”



That institutional foundation is central to its appeal.



“I think the dollar will remain the reserve currency as long as those things are in place,” he added.



There’s no guarantee they forever will be, of course — and many economists doubt they will be for much longer.



Ken Rogoff, for example, <a href="https://www.hoover.org/research/dollar-dominance?utm_source=chatgpt.com">warns</a> that the dollar is “fraying at the edges” as foreign investors worry about a “breakdown of our institutions,” unpredictable policy making (that may disadvantage foreign capital), and threats to central bank independence.



All of which is adding up to “a loss of confidence in investing in the United States.”



If so, efforts to manufacture demand for the dollar — through, say, promoting stablecoins — are unlikely to help much.



Stablecoins are in demand precisely because the dollar is in demand — a dynamic that’s unlikely to ever work in reverse.&nbsp;



If the US chooses to surrender the dollar’s structural advantages, no amount of manufactured demand will save it.



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Dollar

Dollar dominance can’t be manufactured

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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“Money has been reduced to a simulacrum of its former self, a mere obligation by a counterparty to perform bookkeeping functions.” — Stefano Gogioso, A Quantum Moneyfesto
</blockquote>



In Star Trek, it took only seconds to travel from the Starship Enterprise down to a nearby planet.



Crewmembers only had to step into the Transporter, which dematerialized them into a pattern of energy (accurate to the quantum level) and beamed them to a target location where the energy would be converted back into matter so the person could be reassembled.



But is the person who beams back up the same that beamed down?



The official, in-universe answer is that they’re one and the same. The consciousness of transported crewmembers remains continuous, they say, thanks to the perfection of the Transporter’s quantum-level scan and reconstruction.&nbsp;



As proof, they cite crewmembers claiming a memory of being in transit.



But we’ve since learned how quantum-level transportation works, and that’s not it.



In quantum teleportation, first <a href="https://journals.aps.org/prl/abstract/10.1103/PhysRevLett.70.1895">discovered in 1993</a>, the only thing being teleported is information.



Teleporting, say, a qubit, requires that the original quantum state of that qubit be destroyed: By the laws of physics, collecting precise information on a quantum state collapses its superposition, thereby destroying it.&nbsp;



But the collected information can then be sent as classical data (ones and zeros) over a satellite or fiber optic cable and then, thanks to the physics-magic of entanglement, reassembled (from other particles) at its destination.



So the unsettling truth is that the Transporter on the Starship Enterprise can only have worked by killing its passengers — the crewmember who beamed down is not the one who beamed back up.



This has some sci-fi implications for the future of money.



In banking, the way money is &#8220;sent&#8221; from Bank A to Bank B is that Bank A subtracts a number in its spreadsheet and sends a message to Bank B instructing it to add the same number to theirs.



Only the message is sent, not the money — which is why we need banks: to send each other messages about our money.



With quantum money, however, the money sends its own messages.



Quantum money is the idea that value could be represented by the quantum state of a particle and exchanged via quantum teleportation.



“The most important thing to understand here is that quantum [money] behaves like a resource, not like data,” <a href="https://x.com/fabgenovese?s=20">Fabrizio Genovese</a> explained in an email.&nbsp;&nbsp;



Where a bank deposit is information about money and Bitcoin is a consensus record representing money, quantum money would be the money itself — an uncopyable atom, photon, or molecule that is money.



Not data about money but the physical resource of money.



This has utility because it would allow money to be secured and transported according to the unbreakable laws of superposition, entanglement and the no-cloning theorem.&nbsp;



In other words, physics might someday do what databases and distributed ledgers do now, but without the database or distributed ledger.



Quantum money would therefore have the self-custodial properties of physical cash: You could keep qubits of money in a hardware device the same way you keep cash in your pocket.



That would make exchanging money perfectly permissionless (no intermediary required) and perfectly private (there’s no ledger of transactions).



But quantum money would also have the transportable properties of digital money: Destroying the money on your device creates the sendable information required to recreate it on another device, however far away.



(There is a moment when the quantum state, in transit as classical data, does not exist — which proves that the Star Trek Transporter really is a suicide machine.)



Sending quantum money will be like sending physical cash in the mail. But better, because it arrives instantly.



Sending money over great distances created the need for banks, but solving that problem introduced the intermediaries that now control nearly all of our money.



Bitcoin, of course, is a way of making peer-to-peer transactions possible over great distances.&nbsp;



But quantum money would be the unstoppable way to do it.



“Blockchain transactions are not quite peer-to-peer,” Stefano Gogioso <a href="https://www.youtube.com/live/_ZoKdulXcVk?si=deNi9vnwICRAulOa">says</a>, “because there’s always going to be part of the mechanism that can stop your transaction from going through. For economical, political, or technological reasons.”



Nothing will stop a quantum transaction, for any reason.



There is one limitation, however: Unlike Star Trek, where Captain Kirk could beam down to a newly discovered planet, quantum money can only be transported to a hardware device prepared to receive it.



That device does not yet exist, so quantum money is not yet feasible — we’re three or four years away from the earliest iteration, Gogioso estimates.&nbsp;



When it arrives, though, it will be the safest conceivable way to send money.



Getting security from quantum states, Genovese says, is like getting energy from the Sun: “It’s what the universe gave us.”



As such, he expects all cybersecurity will eventually be done through quantum states — including money.



We&#8217;ll still have to give that money value, however, which might prove to be the hardest trick.&nbsp;



Building a transporter to teleport qubits is one thing; getting others to accept them as payment is another.



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