AMA 113 – How Peer To Peer Is Freeing The World with Jeffrey Tucker


Jason invites Jeffrey Tucker on to the AMA show to talk about the peer to peer economy as well as Bitcoin. Jeffrey is the CLO and founder of Liberty.me and he is also the Director of Digital Development for the Foundation for Economic Education. On the show, Jeffrey talks about his book Bit by Bit, the up and coming peer to peer world, and much more.

 

Key Takeaways:
2:20 – Jeffrey explains what peer to peer means.
5:20 – Jason talks about how the Cuban people make extra money by serving food to tourists in their own homes.
12:40 – There are a lot of costs associated with regulation and that hurts the economy further.
15:45 – Plane tickets are roughly the same price from 25 years ago.
25:00 – Bitcoin is relatively private as long as your public address isn’t attached to it.
30:20 – Top-down planning is slowly beginning to erode.

 

Tweetables:
“It’s been about 40 years since the US has attempted anything like a serious deregulation of anything.”

“The entire craft beer market came about as a result of deregulation in the late 1970s.”

“The problem is you can’t deregulate and still maintain the power of the federal reserve and that’s the problem.”

 

Mentioned In This Episode:
Fee.org
http://tucker.liberty.me/
Bit by Bit by Jeffrey Tucker
Kitchensurfing
Eatwith
Blue Apron
Munchery
TaskRabbit
Fiver
Uber
Lyft

 

Transcript

Jason Hartman:
It’s my pleasure to welcome Jeffrey Tucker to the show. He is founder and chief liberty office, I love that by the way, CLO of Liberty.me. He is a distinguished fellow of the foundation for economic education and former executive editor of Laissez Faire Books. Author of Bit by Bit:How P2P is Freeing the World and you’ll learn all about that in this interview. Jeffrey, welcome, how are you doing?

Jeffrey Tucker:
Good, everything is great today.

Jason:
Good good, glad to have you on the show. Give our listeners a sense of geography by telling us where you’re located.

Jeffrey:
Right now I’m speaking to you in Auburn, Alabama where it’s nice and warm and pretty even though it’s allegedly the middle of winter, I can go outside and in short sleeved shirts, so it’s very nice.

Jason:
Fantastic, good stuff. Well, tell us a little bit about your book if you would Bit by Bit: How P2P and is P2P in this cash Peer to Peer or Person to Person?

Jeffrey:
It could be either, but mostly it’s rendered as Peer to Peer. The idea is to disintermediate our exchanges, which is to say that we don’t have to have third-parties any more with trust relationships between. We establish our own trust relationships one by one. This whole thing really come about I would say mostly since 2008. We saw a glimpse of it earlier in things like Napster where we saw file sharing, eBay, which is just a wonderful global market place for buying and selling goods. It’s like a universal garage sale or something like that. It was really wonderful, because we didn’t have to have intermediaries intervening at our capacity to trade. Also there’s what’s called equipotency in the peer to peer economy so that I could be their buyer or seller or service provider or a service consumer. I can be the make movie or I can watch movie, I can be a driver of a cab, or take a cab. We all have the same tools and that’s very beautiful kind of system and it changes the character of capitalism.

Jason:
I really does, doesn’t it? I know we’re going to talk about Uber, Lift, AirBnB, the sharing economy and how that just disintermediates. People, you know, these lending platforms where people can burrows and lenders can just meet up online. It’s amazing.

Jeffrey:
Yeah, there’s monetary aspects to lending economy. You’ve got all the new cryptocurrencies. I was just looking at one of my favorite sites, Brave New Coin. They have about 68 cryptocurrencies that are out there trading, buying, and selling. It’s very lovely. No body imagined such a thing five years ago. We didn’t even know cryptocurrency was possible, but as you say, in the lending institutions, you’ve got crowdfunding platforms like Indiegogo, Crowdfunder, KickStarter, and the money lenders Lending Club and Prosper and Cuba(#4:02?) and all of these thing. It’s true across the board. It’s even true in service provision like food. So, you’ve got real sharing sites and Kitchensurfing.

Jason:
Tell us about the meal – well I mean, I know you’ve got Couchsurfing, I don’t know about the meal sharing though, Kitchensurfing? What’s that?

Jeffrey:
We all know what happens at the dinner party, I mean, the dinner party system don’t go on that much anymore. The most we do is invite people over for chips and dips, but there are people who like to cook and there are people who like to eat fancy meals and maybe don’t want to pay restaurant prices. Well, now with peer to peer economy, you can turn your own home or apartment into a restaurant once a week, once a month, or once a quarterly, whatever you want to do, just by listening to the fact that you’re serving some dish you really like. People can sign up to come and pay for it.

Jason:
What a great way to meet new friends or maybe a new significant other.

Jeffrey:
These things are so popular right now.

Jason:
I didn’t even know about those, wow. You know Jeff, I tell you, it reminds me of my visit to a very, obviously, very oppressive country, but I don’t know, Michael Moore seems to like it and that’s Cuba. Years ago, one evening while we were in Cuba, you can get permission from the government, which is not easy to obtain I’m sure you would imagine that to make extra money by hosting dinners in your house. It’s really hard to do and there’s all kinds of restrictions, but if the government allows you to do this, I mean, it’s the complete opposite of what we’re talking about, you can basically turn your home into a restaurant occasionally and invite people over and they can pay you to have a meal there.

Jeffrey:
You know, I think I knew about that. I’ve had many people who have visited Cuba tell me all about this that these…since you’re not allowed to have a large scale enterprise or at least it’s heavily discouraged, yeah, you get to these restaurants operated out of houses. It’s funny you mentioned that, because that’s the first thing I thought about too when I found out about these sites I can Eatwith and Blue Apron, Munchery, and these kinds of thing was is funny, as you say, it’s almost the opposite here.

The problem is the regulations and the official economy are so strict whether zoning laws or health regulations and taxes and all the rest of it have made opening the restaurant really difficult and made them more expensive than they otherwise would be. So, you don’t have the kind of range of options that you should and are true free market. So, now you have the peer to peer economies swinging in with these apps and allow you to do basically what you’re doing in Cuba and everybody loves it. It’s funny, it’s sort of bringing back the dinner party in a lovely way.

Jason:
Yeah and the people are in Cuba are so desperately poor because of their oppressive system that they need to do things like that. Here it’s done more by choice and maybe for more social interest and things like that, but that’s fascinating. I mean, speak a little bit more and I’ve thought about this a lot Jeffrey as to how it change the character of markets and of capitalism. It’s quite fascinating the way things are just flatting getting decentralized, disintermediated. I think it’s an incredibly exciting time.

Jeffrey:
Yeah, it’s a very mutual stage of capitalism. You have to have gone through everything we went through from the industrial revolution to the gilded age all the way to the digital revolution to arrive where we are now where we are really able to connect person to person geographically no contiguous basis, you know, anywhere in the world. If you have a smart phone and an internet connection, you can become provider or a service consumer wherever you are from anyone to anyone is kind of amazing. I’m particular impressed with the service economy, you know, things like TaskRabbit are very interesting.

Jason:
Oh, yeah. Another one or Fiver.

Jeffrey:
Fiver or Odesk or Elance and there’s so many of these things, Freelancer.com.

Jason:
The government is got to be just freaking out. They’re thinking, “How do we tax all of this?” You know? It’s so hard to watch and control.

Jeffrey:
Right, the very nature of these state and local sort of certification rules is to try to restrict the number of producer. Well, the P2P economy and the sharing economy or whatever you want to call it, is really exposing all these rules and regulations for the absurdities that they are. I don’t think you can maintain them really anymore. With TaskRabbit, I can, if I’m good at fixing sinks and I got nothing to do this weekend, I can just put available that I am available on Saturday to come fix your sink if there’s a problem. I get a notification on my smartphone, I’m over there, I get the money, and move on. There’s nothing any of the local regulators can say about. It’s wonderful, because it’s kind of exposing the efficiencies and the absurdities sort of the old fashioned central planning that we’ve been living under.

Jason:
Now, Milton Friedman spoke a lot about the idea of licensure. He argued, as I recall, that it shouldn’t exist. For example, I hold a driver’s license, I hold a real estate license, I don’t know what other licenses I might have, I probably have some others, would it be better to just have all of this stuff be unlicensed? I always think as a Libertarian, I would love to see the government regulate a lot less stuff. I’d like the government to be maybe a good 70% smaller and when you say that to people, they think you’re crazy most of the time, but I don’t think so, because I think with the tool we have nowadays, with the internet, with these types of tools where people can review things and reputation becomes really important.

Maybe with insurance companies stepping in rather than, you know, have the building inspector inspect the building you want to build, of course, it needs to be safe. I love the idea of being able to walk into all of these buildings and not have to worry about them falling on my head and killing me and, you know, that’s because the government is there to do inspect it. I go to restaurants and almost never get sick from eating in all of these restaurants, but that’s a really cumbersome process and it increases the cost of everything and it just puts pressure on people and inflation and causes crowding and so forth, because there’s a limited supply and you gotta wait in line at the restaurant and it’s an hour and a half for a table and all of this kind of stuff. There’s so many implications. It’s just incredible.

Jeffrey:
I think everything you just said is absolutely true and I would also add to that when government steps in to try and guarantee the quality of service, what it does, as you say, crowds out a private services. We need to have a world in which we’re responsible for radiant services in which markets are basically regulating. That’s really the effective way to go about it. I talk about some of these kinds of cases in my book on the P2P economics, it’s called Bit by Bit, but just yesterday on the Foundation of Economic Education website talked about the particular case of child care. So, here you have a perfect opportunity for the P2P economy just to really become amazing. You’ve got an empty nester, she’s at home, she’s got space, she’s ready to take care of people’s kids for money. She could just register at a website and get customers immediately and build a business.

Well, the regulators are so strict and so strictly enforced that it’s not possible to do that. In fact, childcare is the most regulated industries in the country and as a result, there’s a massive shortage of childcare and the prices are astronomical and mostly it’s not even worth it anymore if people are going to work and put their kids into daycare, so they end up staying home, sacrificing that second income that people so badly need, and now you have, you know, President Obama saying, oh, let’s fix this. Not through deregulation, which is what we really need, but with a national program of daycare. So, he has to bring all the beauties and merits of the post office to child raising, essentially. This is not the way..

Jason:
We know how good the post office is.

Jeffrey:
Yeah, we don’t want to go this way. I wrote this article that came out, actually it’s up there I think on Fee.org. It’s the top article today and I could only find one or two other pieces on the entire internet that’s used to draw attention to the costs of the these kinds of regulations and how the regulations, which have been going on so intensely since the 1960s, are really responsible for the national childcare crisis.

Jason:
Here’s part of the problem, you know, it’s the old idea of you can’t hear the dogs that don’t bark and unfortunately and I think this is why people on the left or even in the center or even on right, frankly, which isn’t even the right anymore. The right is like the middle and the left is really left usually nowadays. You know, they just don’t get it. You can’t really quantify and see the cost of all of this government regulation. People go about their lives and they think, you know, wow, I’m pretty safe to go to restaurants and get in an taxi and walk into buildings and have them not fall in my head, but the question is, they’re not asking the right question. How much less expensive would this be? How much better would it be? How much convenient would it be? How much more abundant would it be if the government had a much smaller impact on these things?

Jeffrey:
You’re so right to draw attention to these unseen factors and what I find depressing about it is there’s really essentially no public debate about issues like childcare. We’re trying to see some debate about things like school choice and compulsory school in laws and zoning laws and these kinds of things, but we’ve got a long way to go. I think it’s been about 40 years since the US has attempted anything like serious deregulation of anything. Most of it happened under Jimmy Carter in the late 70s, but because of that deregulation we now experience beautiful cellphone markets and low price of gasoline after the oil deregulation and pretty good airplane service except for the TSA, thanks for airline deregulation and the entire craft beer market came about as a result of deregulation in the late 1970s too.

So, just last night I was at a bar and they had four or five local beers that were really fun to drink and enjoyable to hear the names and their proprietors are really proud of them, but that wouldn’t exist if it were not for the deregulation of the 1970s, but it’s been a long time since we’ve really explored this area.

Jason:
Well, I’ll tell you one thing that really is probably easier to see and most people can comprehend. I did a really interesting study on this by the way or at least, I thought it was interesting and that is airline deregulation. So, everybody complains about getting on a plane, you’re packed in like a Sardine, etc. I remember when I was a kid and my mother would send me from LAX, Las Angeles where I lived at the time, back east to New York to stay with my grandparents for the summer, many summers. I would go back there and I remember being conscious of the price as a kid.

It would cost about $500 for that airline ticket and now it still costs about the same price within in that range, it’s about the same price, the difference is though the quality of that trip has definitely diminished. I mean, remember the old commercials for Continental, you get three feet before your two legs in coach. I mean, nowadays you’re lucky if you get 12 inches, but what’s interesting about it, Jeffrey, is I went back and I did some inflation calculations calculating for inflation and, you know, a first class ticket today is about the same price adjusted for inflation as a coach ticket was back then and the experience except for TSA and the Gestapo feeling you up is relatively the same experience. I would say first class compared to coach then.

So, maybe didn’t change too much, but there’s so much into the equation, oil prices, and airlines and Wall Street crookery and all these kind of stuff, but what do you say to the people who say that, you know, the reason we had the great recession a few years ago, the reason we had that financial crisis was because deregulation. It’s all the fault of Glass-Steagall and they’re just not regulating Wall Street enough. I think there’s a big dog’s that don’t bark problem there, but what are your thoughts?

Jeffrey:
I don’t know how you could regulate Wall Street more than it’s regulated, actually. There are hundreds of regulatory agencies and the entire system is basically cartelized by insiders. I mean, that’s the way Wall Street works. Within my amount of just top-down rule making, the whole thing is ripped to be exploded essentially by the P2P economy. I would love to see real deregulation actually take place. It hasn’t taken place. The only kind of deregulation and, they call it that, but it’s not really that that we’ve had with regard to finance and money occurred with the early 1980s. The problem is you can’t really deregulate and still maintain the power of the federal reserve and that’s the problem.

Jason:
Tell us about that, what is the problem there for government? They want to control the money, so why can’t they deregulate?

Jeffrey:
They want to control the money and they want to have a massively flexible monetary policy and so normal forces of competition and market pressure for responsible lending are really in place, that’s why we keep going to these booms and busts. That was the real for the real estate bust or the real estate boom, it wasn’t regulation really, it was sort of unleashing a wild and reckless monetary policy with lots of moral hazard, because it’s public, private, regulatory agencies like Fanny May and Freddie Mac and zero interest rate policies. The funny thing is we learned nothing from that entire experience in the 2000s.

All of these policies created a massive bubble that exploded, so rather than letting the system sort of radical deleverage and get it on a sound basis, the fed got busy and reduced interest rates to zero, created three or four trillion dollars in new money, stuffed the banks full of bunch of fake capital and a lot of that new money is following into the shadow banking system and creating an asset inflation that I think is unsustainable. I mean, I worry sometimes that we are repeating the same mistakes of the 2000s right now.

Jason:
Of course we are and you said something very telling at the beginning of that thought. You said, Wall Street, you couldn’t regulate it any more than it is probably, but it has become an insider’s game and so, again on that dogs that don’t – you can’t hear the dogs that don’t bark concept is what they’ve done through regulation is they’ve created these insider semi-monopolies for all of the big corporate talkarcy-type players, because nobody else can compete.

If you have say a medium size business and you’re an investment banker and you want to go up and you want to, you know, take it to the big time and say you’re an investment banker in Orange County, California where I am from as an adult, okay, and you want to take it big and you want to open up shop on Wall Street, you want to get in the game that Goldman Sachs plays in, right, good luck. You don’t have the lobbyists, you don’t have the clout, you don’t have the money to pay for the regulatory compliance. I mean, that’s how these big companies keep and maintain their monopolies through regulation. They grouse about regulation, but secretly they love it.

Jeffrey:
They’re the ones riding the regulations. I mean, Wall Street is regulated by government for Wall Street and Wall Street comes to government to regulate it. They want a cartel. This is a good example of this, the capitalists are not friends of capitalism.

Jason:
Well, they’re not really capitalists either.

Jeffrey:
In the financial market these days, it’s not even clear to people what they own and what they don’t own. It’s not even clear to anybody what anybody owns anymore. Many times it’s these securities are hypothecated, you know, swirling around inside our banking system. It’s all just become unclear. I mean, sometimes, when you start looking at the financial of the large banking houses, it really does look like a house of cards, it’s pretty darn scary. Sometimes it doesn’t seem, I don’t even know how it’s really sustainable, but this is not how a market should work, really, and this is why I’m optimistic about things like cryptocurrency and P2P economy and the idea of issues and securities on the block chain to allow access and to purify the system in the way and make it more market friendly and consumer friendly. That’s definitely not the system we have today.

Jason:
Well, it definitely isn’t, so tell us what your thoughts are about that. I’ve said many times on my show, I love to be wrong about Bitcoin and I hope I am, I just don’t think it’s going to have a great future, because the powers, the federal reserve, and the government, and central banks around the planet are not going to sit idly by as this new competitor that is really taking their power away raises up. I mean, I hope I’m wrong, I hope decentralized currency happens. I would love nothing more than to be wrong about this, but we’re talking about the most powerful forces in the world that they are competing with.. I mean, they’re just not going to let it happen, right?

Jeffrey:
You’re certainly right. They’re trying their best to regulate it, but what’s important about block chain, economics, and cryptocurrency is that you can regulate it as far as you have kind of a constant switching between national currency and cryptocurrency. That’s the mechanism that they’re using to regulate Bitcoin right now, because they can say, who can be able to exchange business, you can’t be able to exchange business and when you’re moving to dollars to Bitcoin and back again or whatever coin it is like when Litecoin, Darkcoin, Dogecoin, anything, Peercoin, Namecoin. It’s the back and forth that becomes subject to sort of their sort of cohesive control, but once you’re in the crypto ecosphere and stay there and are willing to accept your income in that and stay within that realm, there’s very little way that any government in the world can touch, because cryptocurrency lives on a distributed network, which is to say it’s a ledger that lives in the internet cloud and it doesn’t pay any attention to geography at all.

You can move your money around anywhere essentially instantly, so there’s no way they can regulate it anywhere near the extent they regulate national currency and let’s not forget too how incredibly unsuccessful governments have been even at regulating national currencies. I mean, the biggest black markets in the world operate entirely based on dollars, which are attached to the physical world. You’d think if it were possible to stop black markets that attacking dollars, physical dollars, would be the way to do it, they’ve never been able to manage to do that, so how much more difficult is it going to be in the crypto world?

Jason:
I mean, they’ve been unsuccessful, I mean, you can certainly argue that they’ve been unsuccessful regulating their own currencies in the sense that they debase them, but what do you mean about the black market? You mean with drug dealers and human trafficking? I mean, they can’t know where the dollars are?

Jeffrey:
Well, yeah, of course the drug markets are a gigantic..

Jason:
Isn’t the whole point is the currency gives people freedom. It is untraceable, that’s what I like about it. They say that Sweden may become the first cashless country. There’s almost no cash transaction there. Almost everything is on a credit card and while that is convenient and I use credit cards constantly, I love the convenience of them, but boy, I like having that back up of cash, because it’s private!

Jeffrey:
I agree with that. Well, if you like the way dollars are private, cryptocurrency is infinitely more private than that as long as your public address is not attached to you, you can move around in any kind of crypto..

Jason:
I heard that they trace Silk Road guys through the block chain. I mean, can’t they just go back through that block chain and trace them?

Jeffrey:
They got the Silk Road guys because Ross Ulbricht posted his email address on a public form.

Jason:
It always comes down to some dumb thing like that.

Jeffrey:
What’s funny about that Silk Road case is now there are at least a dozen other Amazon style drug market places that have popped up since. They arrested Ross and shut down Silk Road one and they’re a vastly larger business. The crackdown that they did didn’t do anything but advertised the technological possibilities to the world. The market has matured so much in the last two years. It’s actually breath taking.

Jason:
So, what do you say to the price of it? I mean, why is the price of Bitcoin so low now?

Jeffrey:
I have a hard time with the term so low, because when I first began to look at Bitcoin, it was, I guess I began to notice it about the time it was $1 and many early miners of the Bitcoin space immediately sold all their Bitcoins, because they thought there’s no that it could ever achieve dollar parody, surely it must be a gigantic bubble now, you know? This is only three and a half years ago, something like that, maybe as much as four years ago. We’re talking about a very short period of time and for it to be sitting now at $250 is something that’s just awesome and amazing.

Jason:
But why did it go down from, what, what was the high, $1,200?

Jeffrey:
Yeah, $1,200 was last year. Why did it fall? I think there are really three reasons and the exact weighting of these reasons are hard to tell. One is that the miners had bought so much equipment on such high leverage, because of zero interest rate policies, they all began to sort of expand their facilities way beyond what was sustainable. So, when they would mine their cryptocurrencies they’d immediately convert them into dollars just to serve their debts. That put a lot of downward pressure on Bitcoin in particular.

Jason:
That’s interesting, because the same thing happens with, I don’t want to say real currencies, but I’ll say real fiat currencies, how’s that?

Jeffrey:
Yeah, it’s a very interesting interaction between the real economy and the synthetic economy, I guess you could say. There’s still..In that sense, Bitcoin is subject to sort of business cycle booms and busts just because the miners have to buy equipment and they have to pay for large facilities and heat and cooling, all the rest of it. So, there’s that and the other thing is you’ve seen so much merchant adoption in the last year in Bitcoin, but it’s not taking the form of people accepting Bitcoin and keeping them or paying them out to employees, but the form that it’s taken in is that big processing firms like BitPay and Coinbase are receiving Bitcoin and then giving merchants the dollars.

So, that’s put a lot of selling pressure. We’re seeing essentially the adoption of Bitcoin outpace the algorithm at creation of Bitcoin, so that’s changing the pricing structure. That put a lot of downward pressure. I’d say the third big force is that a lot of people are really afraid right now. When you’ve got governments running around saying down with Bitcoin, we’re regulate Bitcoin, We’re going to arrest you if you use it, you might be subjected to money laundering. Everybody gets kind of scared. So, this is contributing to the selling pressure. People are happy to accept it, because, of course, it’s a fraction as expensive and so much faster. You’re exchanging real property instead of just promises to pay. That’s all very exciting, but as soon as they get it, they’re ready to move back into a national currencies and that’s putting a lot of selling pressure on the price.

Jason:
So, what’s next for this? You know, whether it be the sharing economy, whether it be Uber, which by the way I want to mention something about Uber just for a quick moment. I love the idea of Uber, but I tell you, Uber is acting too much like Wall Street firm for my tastes. They’ve got all sorts of lobbyists that they’re trying to make so Lyft and other companies can’t compete with them. It’s like, here we go again.

Jeffrey:
Yeah, capitalists will be capitalists, right. This is what they do. It’s extremely annoying. I look at these things as being rolled out in phases. Uber is a very impressive company at first, now it’s become very conventional, so now we’re waiting for a better replacement which will then also become corrupt and so on.

Jason:
Creative..Thanks for Joseph Schumpeter though, creative destruction is just, as long as the government and the system help it, it’ll keep happening and that’s good. It’s good for the consumer. It’s good for everybody.

Jeffrey:
This is also why I come up with it like that. We can’t expect perfection to arrive at one iteration. It’s going to be an ongoing process. What my book traces is a kind of trajectory and how technologies is helping us get gradually towards a world of self-determination and individualism and peer to peer economic structures that operate outside of the nation state and I don’t think we’re going to get there this year, next year, and the next ten years, but I’m looking at a trend line and I think that’s extremely significant, but all of it is counter to the sort of 21st century model of top-down planning and command of control and that’s what I think we’re seeing gradually erode and by gradually I mean, pretty quick by historical standard, but still bit by bit.

Jason:
Right, right, very good. Jeffrey give out any websites you want people to have.

Jeffrey:
Sure, so I’m a distinguished fellow at the foundation for economic education at Fee.org. You can go and read my article on child care there right now. My book, Bit by Bit, is available at Amazon. I’m posting also every day at a website at a company I started, Liberty.me and my own particular sort of real estate there is Tucker.Liberty.me and there you’ll find a vast archive of writings. So, thank you for having me on your show and I’m happy to catch up with you again sometime.

Jason:
Excellent. Well, thank you so much for joining us Jeffrey.

Announcer:
This show is produced by the Hartman Media Company, all rights reserved. For distribution or publication rights and media interviews, please visit www.hartmanmedia.com or email [email protected] Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate or business professional for individualized advice. Opinions of guests are their own and the host is acting on behalf of Platinum Properties Investor Network Inc. exclusively.

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