There I was listening to a panel with the lead developers of the cryptocurrency Dash, a very successful project with a $4 billion market cap. Like many other assets in this space, it aspires to be a currency for the world.
I couldn’t pass up the opportunity to ask a question that had long burned in my mind. What is it like for a company, in the course of four months, to go from a market capitalization of $4.2 billion up to $12 billion and back down to $4.4 billion?
This wild swing, which is pretty much typical in the cryptoasset sector now again valued at half a trillion, is precisely what happened to Dash between November 2017 and March 2018. Developer Chuck Williams’s answer was interesting: stay calm, manage your risks, and recognize that uncertainty is a universal condition of life.
The panelist went on to observe that government control of money comes with the loss of control over many aspects of our life and, along with that, the illusory promise of security. Government will take care of everything. There are no serious risks that we need to focus on as a matter of life management. Everything is too big to fail. Trust the banks. Trust the government. Trust the bond-rating agencies. Everything will be fine.
He continued to point out that every real entrepreneur, operating in the real world, knows there are good days and bad days. You use the good days to prepare for the bad days. You use the bad days to get creative, debug the system, find new marketing paths, and prepare the ground for future successes.
When the successes arrive, you stay humble, you save, you conserve, you prepare. It’s called risk management. You have to hedge. You look for patterns. You make informed guesses. You never stop innovating. This is the life of running a business.
The Illusion of Financial Security
Actually, it is the real way that all of life should be. But for average people, government has tried to create a different reality in exchange for which you give up control over your life and property. For most of the twentieth century, people have acquiesced to the bargain, that guarantee that the future is not about risk but about compliance. Again, everything will be fine…except when it is not.
What’s happened with the advent of cryptoassets, now owned by vast numbers of young people but, in general, about 8% of the population, is that they have been plunged into a world with grand promise, huge risk, and unrelenting uncertainty of the future. Is it scary? Yes. One of the main complaints that people have against this sector is its volatility. Moreover, there is the serious question of which among these assets are going to die (most) and which are going to thrive. There is also the question of whether they will all be displaced by something else.
The truth is that no one knows the answers to these questions, all Twitter wars aside. We just don’t know. This is not a problem without a solution. The solution is the market process, a main virtue of which is its capacity to gradually reveal the unknown through nonstop discovery. In fact, this is the main job of the market. Day by day, the market process is pulling back on the curtain that hides the future. No living human being knows what is behind that curtain, which is to say that uncertainty is a ubiquitous condition of life.
Uncertainty is also a mighty leveller. Microsoft and Apple face it daily. So does the lemonade stand managed by 10-year olds. No one can be sure whether the customer will show up, much less buy. Yes, highly capitalized companies can outlast losses better than others, but no one can survive losses over the long term. There is no security, even at the top. The smallest business and the largest one deal with this reality daily.
And this is precisely what makes merchantcraft so difficult. It also makes it exciting, inspiring, and a living tribute to the drama of life.
Theory and History
A book that entrenched this conception of time and uncertainty in my mind is Ludwig von Mises’s 1956 masterwork Theory and History. It burned into my brain a map of the trajectory of time. What has happened before just now can be documented as a flow of facts. It is stable. It can be studied. It can be interpreted. Mostly it can be known. Mises calls all time that took place before just now as history.
He contrasts this with theory, which he argues is rooted in known truths about how the world works in all times and places. In his case, he focussed on the social sciences in particular, which have variously conflated these two topics. The empiricists are fine insofar as they are describing events, tracing causes and effects, and crunching numbers of known patterns from the past. But can we derive theory from these? Mises says not ultimately. Good economic theory is deduced from an understanding of the structure of human life itself.
What’s important here is not Mises’s controversial position on “praxeology” itself but the core conception of the great divide that exists between the past, the present, and the future. That divide marks what can be known from what is not known. St. Paul offered this beautiful metaphor concerning the human plight in the course of time. “For now we see through a glass, darkly,” he says. “now I know in part; but then [in eternity] shall I know even as also I am known.”
The State and Knowledge
It is the great presumption of public policy that some people with power, resources, and status can know what is true, and therefore what must be better. This is in contrast to the lowly actors in the marketplace who must deal daily with the problem of not knowing. To navigate life, to find profitable investment opportunities, to discover what it is that society needs now and what can wait, is the great challenge of material life. But the state takes a different route. It declares what is true, attempts to freeze the process of life, and then impose it as a matter of law.
To attempt to override uncertainty is the driving force of many government regulations in the financial marketplace. We have a Fed with the power to inflate unto infinity. They issue debt instruments with a guaranteed payout. They fix price, try to control interest rates, create systems to tame market swings and business cycles. These have been spectacularly unsuccessful because they represent a foundational attack on the structure of the flow of time itself.
There is another cost to this approach: exclusion. Only certain people are admitted to the club of investors and capital builders. The rest are pushed aside, not permitted to live the adventure and thrill of real life but instead doomed to either become a subject and live off the state’s dole or accept a lower financial status. You can find out about these people by googling “unbanked.” In my own city of Atlanta, some 40% of adults live without “an account at a bank or other financial institution and are considered to be outside the mainstream for one reason or another.”
The advent of crypto has been a godsend for the unbanked and the financially excluded. It is available to everyone, very easily and quickly. It’s an example of real democracy at work: inclusive and universally empowering. And yes, with it comes a look at reality. It is volatile. Its future is uncertain. And being an owner is filled with opportunity. This is what freedom feels like.