Read_860 - Stone Ridge 2024 Investor Letter

[00:00:00] These are not the writings of serious people. Unhinged leaders and their Bitcoin Derangement syndrome destroy the credibility of their organizations. Completely gone at the WEF and ecb. The reputation of the SEC lies in tatters due to about to be Gone Commissioner confused above, but especially because of the Also about to be gone Chairman Captain Dishonor discharged the oath he took on on April 17, 2021 to support and defend the Constitution of the United States with criminally abject but ultimately impotent disgrace. [00:00:41] The Best in Bitcoin Made Audible I am Guy Swan and this is Bitcoin Audible Foreign what is up guys? Welcome back to Bitcoin Audible. I am Guy Swan, the guy who has read more about bitcoin than anybody else you know. [00:01:16] This episode is brought to you by Fold the Best Way to Stack sats if somebody asked me actually in one of my threads recently, how do you get money into fold? And because they they said it was like there's a lot of friction and having to constantly shift money from their other bank account. And I just want to make this clear. You should use it as your freaking. You should use it as your bank account. I use it as my bank account. Like if somebody is direct depositing, I direct deposit twofold. And of course if you have premium, you can just do what I do, which I'm largely on a bitcoin standard, so I don't do deal in fiat that much. I mean, I do deal in deal in fiat a lot, but it's mostly bitcoin. But you can also just take in whatever you need for bills, push it, send it to bitcoin, and just literally push it to your card. The spread is really low and there's no additional fees. Well, if you have, if you have premium, I think there's a fee if you don't have premium. And just because I kind of like to brag and also this is just awesome, I in December, I I tallied it up. It's actually a lot more than I thought. I got 168,000 sats just in the month of December using my fold card and gift cards. A lot of that actually was because, I mean, it's really because of gift cards. Anytime I can use a gift card, I 100% will use a gift card. But that is $154. Actually, it's more than that now because bitcoin's gone up the last couple of days since I calculated it. I think it's like 160 bucks in a month. But check them out Link in details in the show notes and 20,000 sats for free with my referral. And then also, and this is just in time because I actually have a read lined up that's relevant to these guys. Synonym has reached out and they're supporting the show as well, which is really, really cool. Huge thank you to them and I have been a huge fan. Everything they've been doing with, they've been working with the hole punch crew but also just their bithit wallet in general and, and the peer to peer stuff that they've been building and pubkey is, I'm so excited about. That's what I am going to be reading and it'll probably be next week. By the way, if you have not heard about pubkey or you don't know what that is, stay tuned. Literally this is a really, really cool idea. They have built something truly awesome. So check them out too. Link and details in the show notes. All right, we have got the Stoneridge shareholder letter by Ross Stevens which has become a staple of this show because I always love it. There's always really awesome perspectives and it's also just interesting to follow what they're doing with Stoneridge and Nydig and Wolf. I mean Ross Stevens has been at the heart of so much happening in the bitcoin space and it's so great too because he's quiet because it kind of, it happens in the background until something real and concrete is there to share. And just the Stoneridge investor letter has always just been a fantastic piece of writing. It's always had some brilliant insights about bitcoin, about life lessons about how to do business, about how to. About the culture of long term business and low time preference and what those values mean and how you can actually the challenge and the way to instill those values into a company and thinking how to think about doing business. And as always, just a fascinating read. So without further ado we will jump into today's amazing and rather long read. Get ready. This one's going to be a banger. [00:05:05] And it's titled the 2024 Stoneridge Investor Letter by Ross Stevens. [00:05:17] Don't pay attention to the critics. Don't even ignore them. [00:05:21] Samuel Goldwyn, penniless immigrant and producer of Hollywood's first major motion picture. [00:05:30] You cannot overtake 15 cars when it's sunny, but you can when it's raining. Ayrton Senna, greatest Formula 1 driver of all time. [00:05:41] Never go to sea with 2 chronometers. Take 1 or 3. [00:05:47] Satoshi Nakamoto comment in version 0.1 of the Bitcoin code. [00:05:54] If I skip practice one day, I notice. If I skip practice two days, my wife notices. If I skip practice three days, the world notices. [00:06:05] Vladimir Horowitz, Greatest pianist of all time A wall has always been the best place to publish your work. [00:06:14] Banksy Dear fellow Investor, Can a page have three sides? What if it has to Passing through the initial gates of The University of Chicago's PhD program in the 1990s required passing two brutally difficult exams, one after each of the first two years in the program. Called preliminary exams, or prelims for short, they were anything but thoroughly testing knowledge of an entire field such as management, accounting, finance, or statistics. Fail either test and get kicked out of the program. [00:06:55] Entering the program straight from undergrad amidst fellow students who already had PhDs in engineering and physics, I found myself immensely underpowered in statistics. That was not okay. I decided to take nine statistics classes my first year and none in any other field. Total immersion. With regular classes ending late May and the stat prelim not until late August, I had to determine the optimal time to begin studying. Starting immediately was tempting. 12 weeks to prepare. Enough time to go deep on everything. However, zero chance of retaining knowledge from material. I reviewed those initial weeks of study on exam day. The time distance multiplied by the material's complexity was just too great. At the other extreme, I could cram the final two weeks. Everything I covered would be fresh in my mind on test day, however, zero chance to review all potential material over which I would be required to demonstrate mastery. Just too much to know in too short a time. I picked six weeks prior to the exam to begin my preparation. Not too hot, not too cold. For my first official act, I duct taped an old T shirt over the tiny TV in my tiny one bedroom apartment. No distractions. I then began to methodically populate the only study aid I was permitted to bring in the exam a single 8 and a half by 11 inch piece of paper with with, as I distinctly remember the professor in charge saying, anything you want to write on both sides. How do I summarize nine graduate level statistics classes on 187 square inches? With my mechanical pencil, my only social companion for those six weeks, I began writing formulas on my cheat sheet. As tiny as possible, but just large enough to be legible. A single important chapter often took two full days to summarize and transcribe onto that increasingly sacred page. My delete button was my eraser. It was 1992 and I had to continually reassess the surface area of the remaining white space to ensure I could include the span of concepts to come. A Perilous Process One week before the test, I realized I did not have enough space for the critically important formulas and problems from my final three chapters on Bayesian probability. It was way too late to erase everything and start again. But if I did not include the missing material and it happened to be on the test, I would surely fail. I needed a third side of the page. Desperate and so cliche, I walked around the block to think, what could I do after that first walk? Perhaps embarrassing to admit now, I turned the page on its side to see if I could somehow fit the relevant material onto the paper's 0.1 mm edge. Jeez. [00:10:01] Towards the end of another walk, about to give up and simply hope the missing material was not on the test, my PhD hanging in the balance, I figured it out. I screamed yes. At the top of my lungs and then fist pump, fist pump, fist pump. Ran up to my apartment and sat down at my desk. I picked up my yellow highlighter and proceeded to write in highlighter the relevant material from those final three chapters. I could read the pencil under the highlighter and I could read the highlighter over the pencil. I had found the third side of the page. I passed the exam. [00:10:41] The Law of Large Numbers. [00:10:45] At Stoneridge, we build businesses based directly on material from that stat preliminary though I notice no correlation between exam question difficulty and business profitability. By far the easiest topic on my 1992 exam, the Law of Large Numbers made us by far the most money this year, driving about 85% of our roughly 4 billion in firm wide trading profits. In finance, the Law of Large Numbers is commonly misunderstood as trees don't grow to the sky or Nvidia won't grow 100% per year, else it will soon be worth 800 trillion more than all the wealth in the world. True, and nothing to do with the Law of Large Numbers. The Law of Large Numbers is entirely and only concerned with how accurately we can estimate the mean of a sample distribution. Its central assumption is individual observations in a data set are independent of each other, which also means they are uncorrelated. Allows us to conclude that with enough observations, our mean estimate will be stunningly accurate. [00:11:59] Five years ago, outside of mortality data and casino gaming revenue, I had rarely seen the Law of Large Numbers operative in finance. In fact, we are taught in a crisis, all correlations go to one, so it is dangerous to even look. [00:12:19] What if that advice blinded us to powerful business models staring at us our entire careers decades later, could the easiest question on my stat prelim Inspire us at Stoneridge to reimagine traditional industries in new ways. [00:12:37] Lets consider the curious cases of the natural gas and casualty reinsurance markets. [00:12:44] It is never too late, or in my case too early to be whoever you want to be. [00:12:50] Benjamin Button the Curious Case of Benjamin Button in natural gas markets, the jargon PDPS refers to land previously proved to have gas underneath. Now with wells developed and steadily producing gas every day, PDPs are the least risky part of an energy company but act as an anchor on their overall company PB or price to book ratio A declining asset. Natural gas wells deplete continually over 20 plus years until there is no gas left. Think of a PDP portfolio akin to a large third party asset management fund sitting inside a high growth energy company quietly off to the side continually leaking AUM standalone PDPs like any fund would trade at a price to book ratio of roughly one, while leading US energy companies aspire to PBS of two or more. The market appropriately pays for exploration and growth, not runoff. [00:14:00] At Stoneridge, when it comes to expertise, we never pretend we have it when we do not. But we are equally unafraid of its absence, not historically. Energy investors. About five years ago we had a hunch about PDPs and visited dozens of drilling sites in hard hats and work boots to learn more. Our hundreds of questions ranging from kindergarten to PhD level difficulty were kindly answered by a brilliant faculty of energy practitioners. Forming a proprietary textbook, we studied intensely and without distraction. Total immersion. We then made a series of observations, each building on the one prior, carefully wrote them on our cheat sheet and sat for the energy examination. University of Chicago Scratch that. Stoneridge Energy Prelim Consider the following non traditional perspective Some energy companies are considering selling PDPs to Stoneridge. The more PDPs energy companies sell, the lighter their PDP driven price to book ratio anchors. The more PDP's Stoneridge buys, the higher the ROE of its reinsurance company investors and the less their end clients pay for insurance. [00:15:25] Do you agree or disagree? Show your work. [00:15:29] Use the Law of Large Numbers in your answer. [00:15:33] Stone Ridge Answer first, engineers can accurately but not perfectly predict the total volume of gas that will come out of a given well over its life. Second, the prediction error for any given well in a basin is uncorrelated to the prediction error for any other well in that same basin. This is true on average, both at every point in time and over time. The law of large numbers works almost perfectly to forecast total gas volume production during and through the life of a portfolio of wells. [00:16:14] The earth did not have to be that way, but it is. This observation that volatility of production volume is virtually eliminated by owning enough wells has profound investing implications. [00:16:30] Low volatility of production volume, however, is a necessary but not sufficient condition for low volatility of returns. We still have to sell the gas. [00:16:42] Third, Stoneridge can marginlessly hedge price risk out seven to nine years. This turns a 60 Vol asset spot natural gas into a strikingly low volume hedged stream of cash flows. [00:16:58] Fourth, we can securitize those low volatility cash flows, rate the vast majority of the capital structure investment grade and deliver 200 to 250 basis points of yield over comparably rated corporate credit. And we can make it all arrive with minimal left tail risk because the security has reliably zero correlation to everything. [00:17:24] At Stoneridge we like businesses with returns dependent on geological processes under the earth and the law of large numbers, not the whims of central bankers. [00:17:36] Fifth, our investment grade security can be extraordinarily attractive to reinsurance company balance sheets including our own reinsurer, which means we can do very very very large deals which are especially strategic to the largest energy companies. A super major would much rather sell $3 billion of PDPs all at once to Stoneridge than then attempt 10 individually negotiated $300 million deals over several years each with execution uncertainty throughout a typically full year negotiation and closing process size is a service, thus 200 to 250 basis points over agree. Stone Ridge Vehicles acquired about $6 billion of natural gas PDPs over the last three years. I expect closing $5 to $10 billion more in 2025. We internally source structure execute and risk manage our acquisitions with no information or fee leakage to bankers. The roughly $2.1 billion IG tranches of our last deal, priced at 240 basis points over comparably rated corporate credit and was purchased by 15 of the Bluest chip reinsurance companies in our incredible country. That security was oversubscribed by more than the total size of almost every previous IG issuance in the history of the industry. [00:19:13] The equity tranches with Stone Ridge owners and employees as cornerstone investors bearing the first loss risk have returned net over 25% per year with no correlation to traditional markets extra credit since the Stone Ridge energy business began, Stone Ridge Insurance Company Partners, the highest rated in the industry and among the most iconic firms in our country, have produced record sales in their whole life and income annuity related products. This shift is not entirely or even primarily due to Stone Ridge who but our suite of superior fixed income replacement products has had an impact. We are proud to have played a small part and our impact will be increasingly significant in 2025 and beyond. The benefits of higher investment income get passed on to policyholders in the form of more insurance for less money, a larger annual dividend and a larger surplus, which helps make already super super safe firms even safer. At Stoneridge, we run to work to help all Americans, including our own families, get more and more reliable life, property and casualty insurance for less money. Grade Pass. [00:20:39] Whew. Okay, so far so good. But remember, the PhD requires two prelims to prepare for the next one on casualty reinsurance the professor in charge told us to review Adam Smith's theory of banking, King Arthur's Quest, and Rocky Balboa's primary conclusion. He was kind enough to give us a heads up that technical knowledge of combined ratios and their link to effective internal company interest rates will be on the test this time. The prelim was a take home and it came with some Recommended Reading University of Chicago Scratched Stone Ridge Casualty Reinsurance Prelim Consider the following non traditional perspective. [00:21:22] Virtually everyone believes modern banking works, yet Stoneridge strongly disagrees, arguing the dead pledge is banking's fatal flaw and that reinsurance can provide a better solution. [00:21:40] Do you agree or disagree with this perspective? Show your work. [00:21:46] Use the law of large numbers in your answer. Recommended reading below bank credit is always suspended on the daedalian wings of paper money Adam Smith From An Inquiry into the Nature and Causes of the wealth of Nations, 1776Amidst genius philosophical insights in Smith's wealth of Nations, his foundational Real Bills doctrine was perhaps the most practically prescient and most tragically ignored. [00:22:21] In Smith's time, individual bank customers temporarily deposited gold and silver which could be withdrawn on demand due to their reliance on overnight funding. Smith warned that banks should not support long term loans. In contrast, Smith argued that Real Bills short term loans to commercial traders backed by saleable physical merchandise were safe before an unexpected bank run could cause insolvency, collateral could easily be sold. [00:22:55] Not quite proposing a narrow bank, but rhyming. Smith was the first to argue that a bank can only prudently lend to a borrower the amount that the borrower keeps in liquid reserves at the bank. [00:23:09] Post wealth of nations and driven by Smith's real Bills doctrine, banking was essentially defined by its avoidance of long term loans. [00:23:18] The father of capitalism singled out mortgages Dead pledge in French for banking opprobrium. In the strongest possible terms. Smith advised that mortgages be made only by wealthy individuals whose personal balance sheets, unlike banks, were well suited to holding illiquid assets for decades. Smith, however, only gets an A for not also considering insurance related business models. Lloyd's of London had been active for almost a century before Smith published Wealth of Nations. Smith argued for a higher grade, unsuccessfully citing the fact that Lloyd's primarily served coffee with milk, sugar and insurance merely optional add inside during 89% of its first post launch century. [00:24:13] Tragically, Smith's Real Bill's doctrine and his mortgage advice were soon discarded into the trash bin of history. [00:24:22] Generation after generation of alchemists, bankers instead have never stopped trying to make lead gold scratch land liquid. It is not maturity mismatch Borrowing short, lending long and not permanent Credit losses caused and still cause virtually all bank failures. Despite unlimited government backing and central bankers willing to do whatever it takes, the Holy Grail remains at large and no one can predict when demand depositors will demand their deposits returned. [00:25:08] All fractional reserve banks have the same flawed alchemy dependent business model. Borrow short, lend long. Rub the philosopher's stone on mortgages to make lead gold scratch land liquid. Hope that inevitable bank run does not occur on your watch. Lobby for a post run bailout if it does and try to get rich. Scratch, earn a spread in the interim. Rinse, wash, repeat. [00:25:39] Maximizing moral hazard and minimizing morality. Thuggishly redistributive bank bailouts almost always come sadly. [00:25:52] Stoneridge Daedalian wings are no way to fly. [00:25:59] Ain't gonna be no bailout. Ain't gonna be no bailout. Apollo Creed Rocky the Final scene Assuming Rocky wanted a rematch. Scratch bailout. [00:26:10] Don't want one. Rocky At Stoneridge we always wanted to build the opposite of a bank. Borrow long, lend short. Try honestly to earn a spread. No maturity mismatch. No such thing as a bank run. No possible bailout. Don't want one. [00:26:32] Banks must be trusted to hold our money, but they lend it out in waves of credit bubbles with barely a fraction in reserve. [00:26:40] Adam Smith the wealth of nations 1776 scratch satoshi nakamoto bitcoin talk 2010 to see if we can build a better bank and perhaps help stabilize the financial system in the process, consider the following series of observations, each building on the one prior first, reinsurers borrow bank like by taking in premium from their insurance company clients akin to depositors in exchange for risk transfer services for any given underwriting year. If a reinsurer accumulates claims, I.e. accepts transfers of loss from insurers equal in size to how much it earned in premium that year. In industry jargon, a combined ratio of 100 including all business expenses. That reinsurer essentially financed its asset strategy at a zero cost of funds. A 0% borrowing rate is not bad, especially since reinsurers can be levered 3x or more. [00:27:52] Key insight Reinsurers take in premiums, that is cash from insurance companies, sometimes called float, before they have to pay the associated claims, often by many years. [00:28:07] Second, even the very best individual insurers with world class underwriting organizations have a cost of funds, that is the interest rate at which they essentially borrow from their clients. That can fluctuate wildly year to year depending on the claims they receive, with annual variation occasionally 20% or more. In addition, in any given year looking across insurers, we typically observe borrowing rates varying by 20 to 40% depending on their range of business lines. That's a lot. [00:28:44] Third, reinsurers, by pooling disparate risks from dozens or hundreds of insurers, experience far lower but still quite high variation in their own effective borrowing costs. The insurance rate, that is the combined ratio minus 10 of individual reinsurers, even with world class underwriting organizations, can vary year to year by 10% or more and by 10 to 30% or more in any given year. Looking across reinsurers, that's still a lot. [00:29:21] Fourth, even the most globally diversified casualty reinsurers, while sharing similarities, are also in many fundamentally different and unrelated lines of business. One might reinsure medical malpractice in Australia, another commercial auto in the UK, another D& O in Korea, and yet another workers compensation in the us. Each reinsurer in each of those business lines may have a world class combined ratio of 100 as a long term average. However, because their business lines are sufficiently unrelated, their prediction errors, I.e. the deviations of their combined ratios around 100 are cross sectionally uncorrelated in any and every given year. Aha. The law of large numbers strikes again. [00:30:14] Taken together, these observations led to two fundamental insights which ultimately caused Stone Ridge to launch a casualty reinsurer of reinsurers, not a reinsurer of insurers. Long Tail Re and typical of Stoneridge In Long Tail Re we share risk with many of the same world class reinsurers from our industry leading catastrophe reinsurance asset management franchise. [00:30:44] Fundamental insight 1 combining positively selected aligned and hyper diversified liabilities of multiple casualty reinsurers into a single entity could deliver industry changing improvement in the level and variability of float expense. That is Minimal variability in the interest rate at which long Tail re borrows fundamental insight 2 access to superior short duration fixed income replacement strategies that reliably outperform traditional long duration fixed income strategies and distribute high monthly cash flows to pay ongoing claims strategies. Stoneridge was already proprietarily producing at scale see for example PDFs above could deliver industry leading book value growth agree in its first five years of life. Long Tail Re's all in borrowing costs have fluctuated in an industry leading range of negative 1 to negative 3% lot while our return on assets has annualized at an industry leading 6.3%, roughly 3x the average of the top three global reinsurers. It has been a particularly challenging period for traditional fixed income strategies. [00:32:22] Combining our two fundamental insights, Long Tail Re's 20% annualized ROE has been 4x the average of the top three global reinsurers. I expect Long Tail Re to end 2025 with roughly 4 billion of assets and continue its responsible growth trajectory from there provided the market stays attractive. It certainly is right now. Like everything we do at Stone Ridge in casualty reinsurance, we have skin in the game. Stone Ridge owners and employees own more than 40% of Long Tail Re and have more than a billion invested in our various reinsurance strategies. [00:33:06] Extra credit $1 million invested in Microsoft 25 years ago would be worth $12 million today. Not bad. That same investment made in Hanover Ree instead, an inspirational partner to Stone Ridge whose culture and results we deeply respect and admire would be worth roughly $25 million. Perhaps working to build the best performing reinsurer in the world over the next 25 years will be just as interesting. [00:33:38] Grade pass Again, we get to stay in the program and prepare for our dissertation. During our first post prelim year, our dissertation chairman guided us to read widely yet somehow coherently on the architecture of asset management business models, the proper role of critics, longitude and rent control Overtaking 15 cars when it's raining There are roughly two business models of underwriting or asset origination. [00:34:15] Underwrite yourself own asset originators or underwrite the underwriters partner with asset originators. At Stoneridge, we have followed the latter since firm inception and passed on dozens of individual opportunities to do the former. [00:34:31] Our approach is to partner, not compete with the best underwriters in the world. With deliberate practice, high cadence connectivity and internal private scorecards that matter deeply to us. We seek to earn and re earn the right to be the most strategic, long term risk sharing partner to each of our cherished underwriting partners. Why is this business model answer so obvious to us? At least for us, the wisdom of wise crowds. [00:35:06] Our alternate lending franchise has purchased roughly 9 million of individual loans worth about $40 billion in partnership with the leading personal and small business origination platforms in the US we uniquely see the historical results of all partner platforms across all loan grades, borrower types, origination channels and products, including experimental initiatives for which we are often the only capital. [00:35:35] This valuable proprietary data guides our active management, that is our active underwriting of the underwriting of our partners. Our flagship lending strategy has outperformed traditional fixed income by 5% per year since inception in 2016, and every loan we make allows creditworthy Americans to bet on themselves, propelling our country forward. [00:36:02] Our catastrophe reinsurance franchise, our first has purchased roughly 9 billion of cat bonds and supported 110 billion of cat limit via quota shares in partnership with the leading global reinsurer. We uniquely see the historical results of all partner reinsurers across all perils, geographies, attachment points and business lines, including experimental initiatives for which we are often the only capital. [00:36:32] This valuable proprietary data guides our active management, that is our active underwriting of the underwriting of our partners. While we don't call it a comeback, our flagship fund has cumulatively returned net 92% the last two years. And yes, it has been here for years. When we lose money, which we do at scale from time to time, we stand behind people as they rebuild their homes in their darkest hour. [00:37:03] Our single family rental franchise, or SFR, has exposure to roughly 60,000 homes in partnership with the leading independent operating platforms in the US we uniquely see the historical results of all partner operating platforms across cities, neighborhoods, price points and home ages. This valuable proprietary data guides our active management, that is our underwriting of the underwriting of our partners. Since franchise inception four years ago, the Case Shiller Index outperformed the broad US real estate benchmark by about 6% per year and we have outperformed Case Shiller by about 5% per year. Partnering solely with maturity matched forever balance sheets in explicit rejection of banker's mythological quest for liquid land, we have set out to do nothing less than make American housing affordable again. [00:38:03] These business model architectures rhyme with those of our volatility, risk transfer, post war and contemporary art, longevity, income and drug royalty franchises across Stoneridge. We currently have 35 underwriting partnerships, each a cherished and genuine relationship. This means that we kindly but directly share the good and the bad along the way and work on problems, our partners or ours, as they arise together. [00:38:36] Unlike asset managers who own originators, we have no obligation, legal or social, to to continue working with any Given underwriter we can stop on a dime. However, while making necessary lineup changes from time to time keeps everyone sharp, we have never and will never make changes just to make them. Instead, we follow the wisdom of our wise crowd and always seek to race in the rain. [00:39:03] Don't pay attention to the critics. Don't even ignore them. [00:39:10] Immediately after World War II, primitive tribes in Fiji first used machetes and brooms to create long flat strips in open fields. They then built large wooden bird idols and erected tall wooden towers for climbing. They reasoned that if they recreated the structuresrunways airplanes control towers that during the war occasionally resulted in stray food cargo accidentally falling out of the back of airplanes into their territory, perhaps those planes would return and drop cargo again. [00:39:43] Anthropologists coined the term cargo cult to mean effort designed to create a specific outcome that has no relationship to the output of the effort. [00:39:55] Fiat central bankers observe that wealthy people have money. So they reason that printing more money will make more people wealthy. Printing pieces of paper to attract prosperity is no less preposterous than building a wooden bird to tracked an airplane. [00:40:13] Printing paper money is like a stock split. Nothing changes about the quality of a company's products or its client relationships when the price halves and the share count doubles overnight via a split. [00:40:27] Just as one share of post split stock represents less of a claim on the company than it did the day prior, immediately after a fresh fiat counterfeiting. Excuse me, printing one unit of paper money represents less of a claim on goods in the economy than it did the day prior. Since 2017, Bitcoin has been Stone Ridge's treasury reserve asset. We cash sweep our fiat profits into Bitcoin because I know the difference between a wooden bird and a military airplane. Fiat central bankers, cargo cultists, can print money. They cannot print anything. Money buys ethically at an individual level, as a function of physics, at a societal level, we must produce before we can consume. We bitcoiners emerged from our rabbit holes, have total clarity on the direction of causality. [00:41:29] It isn't obvious the world had to work this way. Somehow the universe smiles on encryption. [00:41:35] Julian Assange, Cypherpunk and OG Bitcoiner no one forces anyone to use Bitcoin. Nor does anyone need anyone else's permission. The power in incomprehensibly large numbers makes Bitcoin work for the same reason Bitcoin favors the individual. Normally the men with the biggest sticks make the rules. But no army in the world can break strong cryptography. Beautiful and silent, the Bitcoin network sits blanket like atop the earth's. Topography, robust in its unstructured simplicity. Anyone can transfer bitcoin to anyone, anywhere, erasing borders and linking humanity on a video call. Hold up a barcode on a Message app, click one button or just whisper 12 words. Or don't whisper. Take those 12 words privately, rattling around in your head and walk across a border. They may contain a billion dollars of bitcoin, but forget them and lose your bitcoin, peaceful and provably resistant to coercion. Why does bitcoin generate such intense animosity? [00:42:52] Perhaps for the very reason that it is voluntary, or perhaps because its foundational promise. Individual sovereignty at the expense of personal responsibility is offensive to the foundational worldview of those confused critics who think they're in charge World Economic Forum December 15, 2017 block 49094971 Bitcoin is $17,707. [00:43:25] The electricity used in a single bitcoin transaction could power a house for a month. Bitcoin mining's energy use is growing 25% per month. Bitcoin will consume as much energy as the US in 2019. By 2020, Bitcoin mining could be consuming the same amount of energy as the entire world. [00:43:44] All WEF sentences above are false and as of 2024 bitcoin accounts for less than 0.2% less of global energy, not 100%. The WEF also gets the impact of bitcoin mining on human flourishing backwards. The world has never had a profitable use of energy that is location independent. Now it does Bitcoin mining and the long term implications are world changing. Think about miners utilizing end of life stranded and otherwise useless PDPs or or capturing flared methane to unleash domestic oil production, or redirecting garbage landfill methane to improve neighborhood residential health, or activating non active peaker plants or much, much more. The list and staggering scale of un or underutilized energy sources for bitcoin mining, each of which directly reduces production expenses for energy companies and in many cases uniquely makes otherwise polluted air clean, is limited solely by our imagination. [00:44:52] Bitcoin mining by directly causing sustainably non subsidized, almost incomprehensibly enormous development of abundant cheap energy will directly lower the energy bills of tens of millions of Americans living in energy poverty and be the sole reason hundreds of millions of humans in Africa experience electricity for the first time in the decades ahead. Watch out for the ubiquitous headline Mining Bitcoin is wasting energy to be replaced with not mining Bitcoin is wasting energy. I can't wait European Central bank or ECB November 30, 2022 block 765,357 1 Bitcoin is $16,445 Quote the current stabilization of Bitcoin's value is an artificially induced last gasp before the road to irrelevance. Bitcoin is not suitable as an investment. Bitcoin should not be legitimized. [00:46:01] February 22, 2024 block 831,584 1 Bitcoin is $51,282 quote the fair value of Bitcoin is still zero. [00:46:15] October 12, 2024 block 865,737 1 Bitcoin equals $63,196 quote Non holders should oppose Bitcoin, advocate for legislation to prevent Bitcoin prices from rising or to see Bitcoin disappear altogether. [00:46:35] Two months ago King Canute the ECB impotently commanded the tides Bitcoin to stop rising. Bitcoin does not and cannot rise. Bitcoin ticks Self imprisoned in their cargo cult cage, the ECB does not yet think in Bitcoin. Alas, the ECB's final missive above was an intentional and duplicitous distraction. In the ensuing nine weeks they plunged the euro into a culture rattling 45% shock devaluation. Even Egypt had the common courtesy to limit its latest EGP devaluation to only 34%. When the ECB promised do whatever it takes quote unquote to destroy Scratch save the Euro, it marked a dramatic acceleration in their production of wooden birds. At the time, one Bitcoin could be exchanged for the best croissant in Paris. Today that same one Bitcoin rents a stunning four bedroom apartment in the Champs Elysees for a year. During your stay, the owner will throw in an unlimited croissant supply. I highly recommend Paris on Bitcoin. [00:47:52] Vatican March 8, 1663 376bs Galileo, vehemently suspected of heresy, must not believe the earth moves contrary to Holy Scripture. Advocate for legislation to prevent heliocentrism and to burn Galileo at the stake. Scratch that. [00:48:13] Securities and Exchange Commission after more than a decade of extralegal delay and only after losing in court this January, the SEC was forced to approve a Bitcoin ETF post the court loss, the voting process of the five commissioners should have been a 50 formality. Instead, one commissioner threw her toys out of the crib. Scratch still voted no. In composing her dissent, the commissioner used ChatGPT in hysterical anti Bitcoin teenager mode. January 10, 2024 block 8205187 1. Bitcoin is $42,582. [00:48:59] Bitcoin is subject to manipulation. 51% of Bitcoin trading volume is bogus. Bitcoin spot markets are petri dishes of fraudulent conduct with no systematic oversight. Bitcoin is unfit for investors. Criminals use Bitcoin. Bitcoin funds weapons programs to aid attacks on civilians. Bitcoin has historically been subject to volatility. I am concerned there will be confusion. End quote. [00:49:24] These are not the writings of serious people. Unhinged leaders and their Bitcoin Derangement Syndrome destroy the credibility of their organizations. Completely gone at the WEF and ecb the reputation of the SEC lies in tatters due to about to be Gone Commissioner confused above, but especially because the also about to be gone Chairman Captain Dishonor discharged the oath he took on April 17, 2021 to support and defend the Constitution of the United States with criminally abject but ultimately impotent disgrace. [00:50:06] If you see fraud and you do not say fraud, you are a fraud once wrote a very wise man. [00:50:15] In mid 2023, Captain Dishonor decided he alone knew better than all the American people. Worse, he abused his position to direct the state's monopoly on violence to override the collective talents of and hard fought liberty the Constitution enshrines and about 335 million of us in an apex of arrogance, he testified, we don't need more Bitcoin. His tragic comments textbook Bitcoin Derangement Syndrome devastated the most vulnerable Americans as the US DOL dollar crashed 82% in the ensuing 18 months. Had it not been for captain dishonor, those most vulnerable Americans entirely without access to valuable hard assets such as art or real estate, would have had cheap and easy access to shift their savings, however meager, to start to Bitcoin. They would have been able to preserve the value of their hard earned labor rather than see it predictably eviscerated. For shame, Captain Dishonor. For shame. In last year's version of this letter I wrote, the propulsive tentacles of the SEC Chairman's extralegal agenda have ceaselessly sought expansion beyond legitimate boundaries. In the words of heroic fellow Commissioner Commissioner Heroic his agenda reflects a loss of faith that investors can think for themselves. We can. In the past year, the courts have repeatedly defeated the Chairman's agenda. More SEC defeats are likely. All will be okay. [00:51:51] In this regard, all was and is Indeed okay in 2024, Captain Dishonor lost again in court every single one of his one too many additional extralegal attempts to inappropriately thrust his personal tentacles into the private lives of free Americans. Then he finally lost his job. I no longer care enough about the WEF and ECB to even ignore them. I care a lot about the sec. [00:52:23] Fortunately, help is on the way faster than a speeding bullet. The awesome new SEC chairmans Wonder twins power will reactivate next year with aforementioned Commissioner Heroic for years at times single handedly Miss Heroic shielded the greatest securities market in the world against repeated attempts at regulation without representation from Captain Dishonor. Commissioner Heroic's Baby on Board Hitchhiker's Guide Scarlet Letters among the most powerful, inspirational and important US political speeches this century remind us of the unique exceptionalism of our country, the priceless value of our governing document, and bear witness to the potency of nonviolent bravery. America has been lucky to have her on our wall. We get her for six more months. Thank you for your service Commissioner Hyrulic. You will be missed and not forgotten. [00:53:23] A knock knock joke, a riddle and a song lyric walk into a bitcoin bar. [00:53:30] Money is valued not for its own sake, but solely for its prospective exchange utility. That's a fancy way of saying we hope it keeps its value long enough for us to trade it in the future for something we actually want. [00:53:45] Nobody wants green little pieces of paper or bitcoin. We want what those things can buy us in the future. Perhaps an education, a dream house, a wedding, A bucket list trip. Those who excel at delaying gratification and mentally managing the associated uncertainty along the way end up accumulating the vast majority of capital and enjoying the vast majority of health and prosperity. Low time preference is the most reliable source of life inequality. [00:54:19] This means stay humble, stack sats, and hodl an uncomfortable amount of bitcoin for an uncomfortably long time. Bitcoin is the most potent device ever invented from transferring wealth from the impatient to the patient. Be patient. [00:54:40] Knock knock. Who's there? Hodl. Hodl who? Nobody hodles while hodling Bitcoin is necessary and entirely sufficient savings advice. Our knock knock wisdom teaches us that nobody in fact hodls every never sell your bitcoin. Hodler will sell their bitcoin, some of it at some point. This is the entire point of having money in the first place. To be clear, this absolutely is not investment scratch life advice. [00:55:17] Your personal version of time is finite. Take the trip. With bitcoin, you just get to take a better one. [00:55:26] What has cash flows. But doesn't every investment has an expected cash flow? In some cases the issuer decides the timing. At least $100 trillion of global wealth falls into this category. Examples include stocks and bonds. We can generally check their prices regularly and those prices change in reaction to new information. [00:55:51] In other cases, the asset owner decides the timing, that is when they sell. At least $100 trillion of global wealth falls into this category too. Examples include art gold and owner occupied homes and Bitcoin, the answer to our riddle above. [00:56:09] Asset prices also regularly change in reaction to new information. Some folks zillow check the price of their house more often than some bitcoiners check the price of bitcoin. In the two paragraphs above. I see more similarities than differences in challenging matters of valuation. However, I often find Jay Z's lyrical advice dispositive. [00:56:35] If you're having valuation problems, I feel bad for you son. I got a hundred trillion problems, but cash flow ain't 1. Jay Z 99 problems on the non scratch importance of the distinction between issuer versus Asset owner controlled cash flows in valuation theory While there may be good reasons for someone to not yet own bitcoin, the common objections but it does not have any cash flows and used pejoratively but axiomatic but its price is only what someone else will pay for it are intellectually lazy ones. Perhaps all it will take is a knock knock joke, a riddle and Jay Z's wisdom to tweak your no corner friends perspective and help get them off. 0 Now that we know Bitcoin can generate cash flow upon a sale, how about using Bitcoin to generate cash flow upon a non sale? Perhaps just in time to help Hodlers HODL longer look out for efficient AKA cheap Bitcoin collateralized fiat lending HODL loans a powerful new weapon for every Hodler's arsenal. Bitcoin is about as risky as a typical US stock with realized volatility and maximum one day drawdown statistics over the last five years ranging about the 40th to 80th percentile of the largest 3,000 stocks and traded 24. 7. [00:57:58] That means Bitcoin backed loans are realistically less and certainly no more risky than a plain vanilla regular T US stock margin loan. Those loans price at S roughly 50 to 150. Not riskier HODL loans but price at S 450 to 950. Expect competitive forces to drive HODL loan pricing into the regular T margin loan neighborhood in the coming years. [00:58:33] Remember at Stoneridge the first rule of product Design is we build products we want ourselves. We still must pay our bills in fiat and we too grudgingly but gratefully pay way too much risk adjusted for our Bitcoin backed loans. An efficient Bitcoin backed fiat lending market would increase the utility of our stack, keep Bitcoin off the market, accelerate fiat debasement which further increases the utility of our stack which keeps Bitcoin off the market which accelerates rinse, wash, repeat Our Bitcoin subsidiary NYDIG is preparing to enable all Hodlers including Stoneridge to unsheathe their weapon borrowed fiat at a low rate, in an amount and at a time that is right for them. [00:59:23] NYDIG has facilitated billions of dollars of Bitcoin backed fiat loans, though none financed with float. Longtail Re has invested billions of dollars of float in asset backed loans, though none backed by Bitcoin. Imagine float powered Hodling. We found the third side of another page. Stay tuned. [00:59:49] In the interim, however, it gives me great pleasure to announce Adam Smith as the exclusive spokesman for NYDIG's new HODL loan initiative. I am especially excited about this because of Smith's stellar reputation for only promoting products he believes in and uses himself. Smith approached us via email leading with the observation Bitcoin is digital property. We finally have liquid land. He's right, of course. And remember, now he knows about insurance going to sea with an orchestra of chronometers. [01:00:27] A transaction involving a bearer instrument such as a $100 bill does not need to be timestamped, that is, we do not need to record the time of the transaction. If I give you a hundred dollar bill, you have it and I no longer have it. Physics not trusted ledgers takes care of telling us who owns what and when. A transaction involving an electronic instrument such as a $100 wire transfer does need to be timestamped. If I wire $100 to you, someone must verify that you have it and that I no longer have it. We must also trust that person or that bank or that government to maintain the verification via a trusted ledger. [01:01:13] The history of fiat currencies is full of breaches of that trust. Once wrote a very wise man, how can we transact electronically but without centralized trust? [01:01:28] That problem had doomed all attempts at electronic cash prior to Satoshi's breakthrough. I suspect, though I have no idea, that Satoshi was inspired by 1700s clockmaker John Harrison's version of the third side of the page in figuring out his own. Though the stakes were not getting through grad school, Harrison was motivated to save the Lives of sailors Satoshi wanted better money for the world. [01:02:00] Since time keeps its own tempo, like a heartbeat or a tide. Timepieces don't really keep time, they just keep up with it if they are able. [01:02:11] Dava Sobel Longitude the story of a lone genius who solved the greatest scientific problem of his time. [01:02:21] Until the late 1700s, ships regularly got lost at sea. Determining latitude was easy. Using basic instruments and the position of the sun and stars, longitude had been impossible. Hundreds of ships filled with brave captains and sailors lost track of their east west position, missed supply points, ran out of rations and eventually drifted onto shore with their long dead crews aboard. Gruesome in 1707, four state of the art British warships with 2000 soon to die military sailors lost track of their longitude. Soon after they left London and crashed at night. The British government desperate, passed the Longitude act, offering an enormous cash prize equivalent to more than $25 million today to anyone who could solve the problem of longitude at sea. Failing ideas involved the use of compasses, cannons and wounded dogs. The ideas of gravity, famous Isaac Newton and comet, famous Edmond Halley icons. Even at the time in the prohibitive early favorites of Polymarket to win the prize failed too. Harrison's third side of the page, a special clock, was a groundbreaking practical solution to what modern computer scientists 300 years later would recognize as the Oracle problem. [01:03:58] Computers do not and cannot know anything about the outside world and certainly nothing permanently reliable. The outside data source can be wrong or the link to it can break. That's the oracle problem. A 1700s ship did not and could not know anything reliable about the outside world, certainly not about longitude. Harrison's third side of the page solution was a different way to measure time. He built a timekeeping device, the first ever chronometer accurate enough to withstand ceaseless ship movement, which allowed sailors to know the time at their home port and for the first time ever determine their longitude, saving countless lives. [01:04:49] A clockmaker, Harrison had time on his mind. He knew that it took 24 hours for the earth to revolve 360 degrees, so one hour meant 15 degrees. He also knew that whenever the sun was overhead, sailors could conclude it was about noon local time. If the sailors knew it was noon and their Harrison chronometer read 2pm, the ship was 30 degrees, 2 hours, that is 2pm minus 12pm times 15 degrees per hour away from home. [01:05:25] With Harrison's chronometer aboard and long capable of calculating latitude, sailors could now also calculate their longitude and know their close to exact location. [01:05:39] They stopped missing their supply points stopped running out of rations and the concept of lost at sea became largely a historical footnote. Harrison won the Longitude act prize. [01:05:54] If you don't believe it or don't get it, I don't have time to try to convince you. Sorry. Satoshi Nakamoto Bitcoin Talk 2010 Between 1971 and 2009, bookended by a US president depegging the dollar from gold and a UK chancellor on the brink of his second bailout for the banks, more than 50 hyperinflations devastated the lives of billions of people, none occurring in an economy with a commodity based monetary standard. During that 38 year period, determining who owned how much electronic fiat was technically easy with trusted central bank ledgers. Tragically, the history of fiat currencies was full of central bank breaches of that trust. A trustless decentralized ledger powering trustless decentralized money had been impossible. [01:06:55] Just as a stock certificate is title to company property, money is titled to human time. People sacrifice their time for money, expecting to trade that money in the future for the time sacrifices of others. When centralized banks breach trust by printing money, destroying the savings and dignity of the innocently trusting billions of people who had not exchanged their savings for a valuable hard asset, they steal time. Gruesome Satoshi's third side of the Page, a special clock was a groundbreaking practical solution to the Oracle problem that computers do not and cannot reliably know anything about the outside world, including time. [01:07:46] No 2009 computer could trustlessly determine who owned how much electronic money, and certainly not in coordination with an arbitrarily large set of other potentially adversarial computers, including and especially central bank computers anywhere in the world. Satoshi's third side of the Page solution was a different way to measure time. He built the first ever timekeeping device, initially naming it a time chain, only later renaming it a blockchain. Accurate enough to withstand ceaseless central bank attempts at breaching trust quietly and peacefully, allowing any global citizen anywhere to opt out of involuntary wealth and worse, involuntary time confiscation. [01:08:39] How a Cypherpunk Satoshi Had Time on His mind out of 8 total references in the original Bitcoin white paper, 3 were about time stamping. Satoshi's sui generis genius. Realizing that trustless timestamping required causality, unpredictability and coordination and inventing the coordination part, Satoshi's use of a powerful one way cryptographic hash function you cannot unscramble an egg or rewind a SHA256 signature provides the causality without causality make event B impossible without event A first. Make event C impossible without event B first. A central bank protocol could go straight to C stealing time. [01:09:33] Satoshi's use of proof of work you must do work to guess the input that hashes to the provably unknowable in advance required output provides the unpredictability. [01:09:47] Without unpredictability, trust physics and mathematics, not politicians that guessing the correct input had no shortcut. A central bank scratch protocol could go straight to C stealing time. [01:10:02] Satoshi's invention of the difficulty adjustment the conductor of the Bitcoin orchestra keeps the law of large numbers driven metronomic tempo at C equals roughly 10 minute blocks by ensuring that too many or few accurate guesses too quickly or slowly automatically increases or decreases the size of the search space for the next acceptable random number to guess, thereby increasing or decreasing the expected number of guesses required to guess correctly provides the coordination without coordination the Bitcoin orchestra conductor's decentralized recreation of perfectly competitive roughly 10 minute dances despite relentless acceleration in human ingenuity and network computing power, a central bank scratch protocol could make C =0 just for themselves stealing time. [01:11:05] Satoshi's solution A decentralized clock for decentralized time stamping of monetary transactions. Bitcoin is a clock with a new concept of block height, synchronously marking depletion of the most valuable resource in the universe, our time. [01:11:28] Universal constants the speed of light C gravitation G the elementary charge E are physical quantities dependent on no one measurable by anyone and the answer never changes. They have foundational roles in our lives. [01:11:47] Bitcoin's tick the incremental block height pace B is the world's new universal constant silently, unstoppably, trustlessly ticking, dependent on no one measurable by anyone. The answer never changing B now has a foundational role in our lives. Satoshi's B paced clock Emancipated fiat Time enslavement Humanity can finally trust the ledger demolishing our central bank chains. B1 TikTok Next block Do not skip practice for one day what do urban rent control and voluntary employee turnover at Stoneridge have in common? In 1946, 35 year old former University of Chicago PhD student Milton Friedman and his 36 year old university of College professor George Stigler, both future Nobel winners, co authored the landmark essay Roofs or Ceilings? Ostensibly about rent control, their essay provided a blueprint for the kind of firm culture I aspired to have at Stoneridge. When I started the firm, the 1906. San Francisco earthquake destroyed 3,400 acres of buildings in the heart of the city, including half the structures that housed its population of roughly 400,000 people, triggering the greatest housing challenge in US history. [01:13:29] Some people immediately left the city to stay with relatives nearby. For others, camps and shelters were quickly established and new construction proceeded rapidly. Yet about one fifth of San Francisco's population had to fit somehow into the still standing half of the housing stock which was already occupied. This meant that each remaining house had to shelter Somehow, on average 40% more people, and fast. [01:13:58] Not only was there no subsequent homeless problem, the first post quake publication of the San Francisco Chronicle five weeks post event did not even mention a housing shortage. The classifieds contained 64 advertisements of houses available for rent, 19 for sale and only 5 for wanted to rent. [01:14:22] Fast forward a mere 40 years to 1946 just post war. The San Francisco mayor, amidst homelessness on the streets declared housing the most critical problem facing California. The city was being asked to shelter just 10% more people over time than pre war, not 40% more people overnight than pre quake. Comparing the post earthquake and post war San Francisco housing strategies, Friedman stigler called the 1906 method price rationing and the 1946 method rationing by chance and favoritism. Scarcity always requires rationing. The method really matters. The 1906 rationing method applied Smith's free market non coercive. It let high prices lead to skyrocketing supply which led to low prices. The market cleared quickly even without Airbnb, merely weeks after the worst natural disaster in U.S. history. Before or since, everyone had roofs over their head and at affordable prices. As noted above, the classifieds revealed about a 10 to 1 ratio of available to rent to wanted to rent ads. It turns out Smith was just as philosophically right about the butcher, the brewer and the baker as he was practically right about banking business models. [01:15:51] The situation in 1946 could not have been more different. The government acted almost as if they lost their copy of wealth of Nations. Examination of the San Francisco Chronicle classifieds amidst government imposed and coercive rent ceilings reveals that the ratio of advertisements seeking to rent to those available for rent. The reverse order of above was 38 to 1. Worse, the 1946 rationing method, Friedman Stigler's aptly named chance and favoritism undermined civility and citizenship. Consider the prioritization of available housing. [01:16:33] First to those willing to remain in the same dwelling undermine mobility. Second to those willing to pay landlords cash under the table undermine the rule of law third to friends or relatives of landlords undermine landlord incentive for dwelling improvement and fourth to the most productive and law abiding members of society undermine the group working hard to support their family without time to look for the legally available and affordable to them. Needle amidst the San Francisco housing haystack, in a Smith inspired warning also tragically unheeded, Friedman Stigler wrote in 1946 the implications of rent ceilings for new construction are ominous. As long as the shortage created by rent ceilings remains, there will be a clamor for continued rent controls. The shortage of dwellings perpetuates itself with the progeny even less attractive than the parent. [01:17:34] Fortunately, stone Ridge began 66 years post roofs and Ceilings in this country we combine the talents and experiences of such a diverse population that we will often surprise one another. Hester Pierce 2019 SEC Commissioner Baby on board in designing the Stone Ridge recruiting, retention and promotion philosophy, I considered rationing by price talent the 1906 method or rationing by chance and favoritism group identity the 1946 method. The 1946 method was in vogue and I faced enormous pressure to choose it. However, given my foundational view that people are awesome, I went with the 1906 method. Like the classifieds above, our employee data tell a clean, empirical story. Over the last two years, four people voluntarily left Stoneridge, two went back to school, one left for medical reasons, and one left to go to another firm. At Stoneridge, we do not make financial forecasts come ceilings, nor do we have KPIs, except one from me voluntary employee turnover if it is not under 1%. I had a bad year. Imagine you want to be around insatiably curious and insanely smart colleagues. Spend your days working on hard and important problems and report to a manager and a CEO who each know you and want your career to soar. You know it cannot be all roses every day, but you have heard that when the firm goes through periodic significant challenges, all colleagues lock arms together and finger pointing is prohibited. Oh, and imagine you generally get paid pretty well, though totally up to you whether you convert it into bitcoin. I am not aware of anywhere besides Stoneridge. You get to analyze Russia for breakfast, calculate expected profit of bitcoin mining pools for lunch. Start a new SFR asset management company for dinner Help wanted Join a startup with others committed to share dream and build prerequisites. Childlike sense of wonder five days per week in the office, many meals eaten together. Sample projects below. Assume luck favors those having a great time together. [01:20:00] Rusia for breakfast Measure market depth in his last 250 auctions as a potential input into the maximum loan to value constraint in our forthcoming art lending business. Q Trying to make money in art? Take two Bitcoin mining pools for lunch. Evaluate the impact of the pools, ignoring the least and most valuable three blocks per day to determine the true cost of not self mining. Q Nydig Self mining. Take one SFR Asset Management company for dinner. Based on our observations about the history of bank runs, an Adam Smith inspired view of the most ethical long term owners of SFR and our CEOs anaphylactic aversion to bailouts. Launch a firm comprised only of investors with forever balance sheets. Stay tuned. [01:20:52] No one has just one job at Stoneridge and no one wants one. [01:20:57] Instead we have an explicit majors and minors system and even some double majors and some double minors. School is more interesting that way. [01:21:08] I'm going to speak my mind so this won't take very long. Banksy Firm Wide communication at Stoneridge is the oral tradition. I have not written a memo since firm inception. Somehow everyone knows how to behave. Our culture distinguished by a civil war of kindness, pitting colleague against colleague elevates the smallest minority on earth, the one worthy of protection and special treatment, the individual. At Stoneridge, discrimination on the basis of anything other than merit is strictly forbidden. We do not measure and I do not care about the percentage of any employee group identity. As a matter of practice, we do not keep list of irrelevancies. Not having HR means never having to play pretend games with pretend data with pretend motives. If you work at Stoneridge it is because you are awesome 1906 style. We do not need HR or the government to tell us that rationing talent by talent is the right way to manage Stone Ridge and the only chance I have of hitting my annual KPI. [01:22:17] That last constraint has cost us many billions of dollars of AUM since before our firm had an office, employees or assets. When it was just me alone in my apartment cold calling, I answered employee demographic Questions on Investor DDQs with N A I decided that if the answer needed to be different for me to have a firm, I would not have one. We still regularly get these questions and I still want to ace my exams. N A is our answer. It is the only one that gets full credit. [01:22:50] A wall has always been the best place to publish your work. Thanksy. [01:22:57] I invite you to visit our office in 2025. Our office is such a special place to us. It is our dojo. It is where we go to train. There is no dust in the corners. We practice reinsurance and lending and Bitcoin, yes, But our deepest practice is seeking mastery of compassion towards each other. In witness to our repeated, mostly unsuccessful attempts at breakthrough creativity, Unafraid to publish our work on the wall, we try again and again and again. I have yet to find the upper limit of my awe of the talent, fearlessness, and determination of my colleagues. Our progress at Stone Ridge has not been and will not be a straight line up and to the right. We have not been and will not be immune to known unknowns and unknown unknowns causing significant and unexpected loss. On your visit, however, I am positive you will feel the ascendant energy of our space. In hindsight, I realize I have been holding us back by too timidly placing the bar on our potential as a firm. I now know I do us a disservice by placing it anywhere. [01:24:11] Our partnership. [01:24:14] As we enter 2025, our tanks are filled with energy, gratitude and inspiration. We innovate to prepare for an uncertain future in pursuit of our mission. Financial security for all. [01:24:30] Stoneridge is most proud of the partnership we have with you, our investors. We are on the path. Together, you contribute the capital to propel and sustain groundbreaking product development. We contribute our collective career's worth of experience in sourcing, structuring, execution, and risk management. Together. It works. In that spirit, I offer my deepest gratitude to you for sharing responsibility for your wealth with us this year. We look forward to serving you again in 2025. [01:25:05] Warmly, Ross L. Stevens, founder and CEO. [01:25:13] My favorite thing about Ross Stevens is that he's an introvert. But when he gets writing, he will just get straight fire. The whole section about the WEF and the SEC and everything and the ECB was just. Just beautiful. And I love that he's just like, I don't have anything to say about the ECB and the WF because they've so utterly destroyed their reputations and they're so irrelevant that I don't even have the time to ignore them. [01:25:41] Just perfect. [01:25:43] But every Stone Ridge investor letter seems to have one, like, really one takeaway that I really, really like. [01:25:55] The last one was. Or maybe it was the one before that. I don't know. It's been. It's been a minute now. So maybe it was two years ago. Was the. [01:26:04] And that one has stuck with me. And I know I've talked about it a number of different times on the show, but was the whole framing of I get to do this. And I remember specifically because it had changed my thinking, it had really changed my Perspective just reading it with what was going on with my dog at the time. We had Roxy and she was. She was at the end of her life. And it was. It was crazy how fast she declined too, because I was just looking at video the other day, like digging through some stuff and found some old video of her. And it was crazy that, like, just two or three months before we lost her, she kind of had a bit of a rejuvenation. She'd gotten like, sick a couple of times. And we kept wondering if this was the time she wasn't gonna come back from. From it. And I was watching this video of her and she. It was crazy because she was kind of like back. She was super excited. She was out in the backyard and she was hopping around and she still couldn't really tackle the stairs very well. But she tried and she had a lot of enthusiasm about it. [01:27:14] But that wasn't. I guess it wasn't three months. [01:27:18] It was a little bit before. Before she passed. But I remember Rad was also really little and he was having some really hard time with sleep. And so were we. It was just an awful combo of a bunch of things. And we were constantly up and down. And we had just gotten towards the end of this crazy feeding schedule because he was really small to start out with. And we had a hard time kind of getting kicking that into gear. And they put us on this absolutely insane three hour feeding schedule, which was just impossible. No sleep. And it was just like chaos. And you know how you're. You really lose that. That foundation of sanity when you have not had sleep. Like, why? It's like somebody's just like running around in your head and just kind of like unplugging wires. And you're having to try having to think through molasses. [01:28:24] Well, as Roxy was getting really bad, we were keeping her in the room. She couldn't jump up on the bed anymore, but she would just get up in the middle of the night and she would poo and pee and it was terrible. And she was basically blind. So she would just walk. She would just pace in circles and she had like, just awful, like, messy everything. And she would walk through it and she would pace this disgusting circle around our room. And it would wake me up. The stink would wake me up at like 3:00 in the morning. And I would have to clean all of this mess and I would have to clean her and get her in the shower. Then I have to pick her up and carry her outside so that she can finish using the Bathroom. [01:29:17] And man, did it piss me off when we had had no sleep and the middle of the night and I'm, you know, just barely getting a couple hours in and then wake up to the stench of just ugh. And having to deal with all of that, you know, it took an hour and you know, I had to clean the rug and stuff, which I have to have a shampoo thing. And I would constantly. We had a bunch of the mats. I mean just. It was, it was a thing. And I'm carrying her outside after clean her all up. And somewhere in here I read the Stoneridge letter. And I can't exactly remember which story or whatever, whatever that he used as reference for this, but it was just about perspective. And he went on this rant about I get to do this about those things that really frustrate you or that you have to deal with. And I think about this a lot when Rad's having a hard time going to sleep because it'll take an hour and a half to put him down some nights and I'll just be walking him and it will hurt. And you know, I. My back is killing me and I am carrying this kid pacing around the room for literally an hour, an hour and a half. But this still stays with me because all I can think is how little that guy was a year and a half ago. I mean like a baby. Baby I was looking at. Like I said, I was digging through stuff and I was seeing pictures just the other day and he is a little kid now like so fast. He is running around, he is telling me stuff. He is, you know, building things on his own with his toys. [01:31:12] And it just. That frame just makes me realize that he is going to be. [01:31:18] He is going to be a kid and a teenager. Like the. The time is going to move so unbelievably quickly and there will be a time probably in the like it will not feel like the too distant future in which I will not be carrying him at night anymore. [01:31:44] There will be a time where he doesn't want me to carry him at all and I can't carry him. [01:31:52] That'll suck. [01:31:56] And every single time, every single time I catch myself getting annoyed or frustrated, it goes through my head, you get to do this. And there is going to be a time not too far off in which you're gonna wish you had that little kid. [01:32:15] And then he'd be crazy excited because you came in for no reason whatsoever and coming give you the biggest hug. [01:32:23] And I read that, that piece during the whole debacle with Roxy with the dog. And I remember that totally shifted my perspective on that. [01:32:37] Or at least I had this moment. And maybe, maybe I read it afterward, I don't remember, but I had this moment where it just hit me because it was clear Roxy, or it was becoming pretty clear that Roxy wasn't gonna get better this time, or I began to fear that that was the case and I realized I wasn't gonna get to carry her around anymore. [01:33:02] I wasn't gonna get to, you know, spend time, just me and her taking a bath at 3 o'clock in the morning. [01:33:14] And that one day, probably pretty soon she was gonna be gone and I was going to have my nights back and I was gonna hate it. [01:33:25] And for the next few weeks I didn't bother me nearly as much. [01:33:33] Kind of nice actually having time with just me and her in the middle of Jesus Christ when two years still gets me. [01:33:50] But the one of the takeaways from this piece that I really loved was actually I have it highlighted here. Hold on a second. [01:34:08] Money's not valued for its own sake. [01:34:12] Okay. Yes, those who excel at delaying gratification and mentally managing the associated uncertainty along the way end up accumulating the vast majority of capital and enjoying the vast majority of of health and prosperity. Low time preference is the most reliable source of life inequality. [01:34:40] Just that I love that framing and just the kind of the power of that statement. Low time preference is the most reliable source of life inequality. And it goes on to say this means stay humble, stack sats and hodl an uncomfortable amount of Bitcoin for an uncomfortably long time. [01:35:04] Bitcoin is the most potent device ever invented for transferring wealth from the impatient to the patient. Be patient. [01:35:19] That I love that it is the most potent device invented for transferring wealth from the impatient to the patient. [01:35:30] And man, if that doesn't just encompass everything that is going on and why the perspective is so different, why the mentality is different, why the mental framing is different, why Bitcoin and crypto are different, why bitcoin and tradfi are different, why the development mindset is different, and why the strategy for success in Bitcoin is actually really really simple, but also really really hard. [01:36:02] The most important thing that Bitcoin does, the most important incentive that bitcoin shifts lays a foundation for is low time preference. But understand you have to see bitcoin as a long term thing. If you don't think if everybody is in this is why everybody in the quote investor mindset and the crypto mindset, they're all thinking that this is a company. They all think, they all compare it to Facebook and MySpace and they all think it's a bunch of tech, frivolous tech crap and they're gambling on, you know, meme coins and just, just absolute garbage is because they have no idea what it is. They don't think about it in the context of money. Money is that thing that is so trust minimized. That is such an independent unit that you have to see, you have to look and see it 50 years out. You have to realize that it's going to be here and there's nothing anybody can do to kill it, nothing anybody can do to stop it, that it simply will be. I mean, people, like honest, intelligent people tell me that the Bitcoin run is over. Okay, well, you know, it went up. That's probably where it'll go and it won't go any further. And this is it. This is, this is the market for a digital asset. And they do not see the monetary path. They do not see the maturation of a money happening. If they did, they would understand that there is no end to it. There's not a conclusion to the investment thesis of Bitcoin. The end result is it's the global money. It's the dominant monetary good in society. And therefore its growth in value reflects the growth of society itself. It becomes the mirror of all of the available goods and productivity and value within the economy that uses it. It will never stop growing because people will never stop innovating and society will never stop getting better. But without an understanding, without knowing the history of money, the reason why it is a good money, and without falsely or incorrectly focusing on one silly element or one piece of it and missing the monetary story because you're worried about payments or you're worried about some kind of arbitrary details rather than its clear and base foundation of trust and independence, absolute immutability of the underlying rules that allow the economy to emerge to begin with, that allow the monetary standard to be enforced. Instead you get lost in comparing it to Apple cash or a Visa credit card, which so completely misses the point. They have totally different purposes and both need to accomplish entirely different tasks to actually hold the core value proposition of what the thing actually is. Visa is a retail payments network. Bitcoin is a monetary foundation. Nothing about Visa confirms or validates or verifies or assures the quality of the dollar. And if you cannot separate, if you cannot understand the quality of the dollar outside of the context of being able to use it with Visa, then you don't you, you're not even on the same, you're not even in the same book of comparisons. You failed to acknowledge that Visa uses every fiat currency and there are good fiat currencies and, well, there are shit fiat currencies, currencies and are really, really garbage fiat currencies. [01:40:07] If you're lost in the thought, the ridiculous realm that the amount of payments that Visa allows through them is what creates the monetary value, then why would Zimbabwean dollars and US Dollars have different value? They're both on the Visa network. I thought the Visa payment network gave them their value. [01:40:29] Obviously that's not actually true. But it's crazy how many people just get lost in some frivolous, shallow piece of this where they're hyper focused on one thing or they're trying to compare it to a tech stock. Or it'd be like comparing PGP keys, like how somebody uses their PGP key with how to connect something to their Twitter account, as if those are even slightly related. Because you, you don't own, you don't own your Twitter account and you certainly don't own the account that you've connected to your Twitter account. Twitter owns both your account and the one you've connected to it. And it's funny, it's actually got a lot of similarities to the whole cargo cult analogy that Ross Steven gives in this piece. I feel like is the, and I love this story. I've heard this before, but it's, it's always good to be reminded of. And I haven't thought about it in a long time. But the, the primitive tribes in Fiji that after World War II, they rebuilt the facade. They made it look like just out of bamboo and wood just in the middle of fields. They made this mimicry of an airport, thinking that the planes, the warplanes would come back and drop off cargo if they just made it look like there was a flight tower and there were other big wooden birds on the ground. And it's such a constant human error. It's the whole idea of, you know, we're going to change the thermometer in order to make it hotter outside. We're gonna break the altimeter in our plane that's barreling like plummeting to the earth. And we're gonna just push the gauge up in order to make it look like the plane is flying level. And now everybody will be okay. And there's a quote from this section that I just love because those are, I bring those two analogies up because those are the analogies I've tried to use in making sense of Keynesian economics and this idea that the, the outcome metric is the thing that they are actually striving for. If you can just make GDP look like this, well then that means that there was wealth. And it doesn't matter how many things we had to manipulate to get the GDP to look like this. Oh, we want to do. We're worried about the velocity of money. We want economic activity. So let's break a few windows and then people will have to do stuff. Ross Stevens has a quote from this. It says, fiat central bankers observe that wealthy people have money. So they reason that printing more money will make more people wealthy. Printing pieces of paper to attract prosperity is no less preposterous than building a wooden bird to attract an airplane. [01:43:23] And it's crazy not only how true it is, but how truly absurd it is, but that we've like, this is the, this is the norm. [01:43:39] This is a system that the whole world runs on. And it is so deeply and fundamentally backwards. [01:43:51] Just totally and utterly wrong. [01:43:56] Just stop and think about that. [01:44:00] The thing, the network that the entire world economy runs on is fundamentally backward. And the only reason it doesn't just utterly fall to pieces is because it has broken so many times that fiat central bankers try to limit the thing that they do, as a rule, as a course of this is how it works. They specifically limit it because they know if they do it too much, the whole thing will literally burst into flames. But the incentive to get that wealth, to extract it from the economy, to make themselves wealthy, to make them more powerful, more relevant to every conversation, is so unbelievably strong and it is so easy for them to, to just create denial, to just put the thermometer before the temperature, to just pay themselves out the ass to build wooden birds and just tell everybody that we promise we've done all these studies and there's this great correlation that airplanes will finally show up this time when literally all of their metrics include the wooden planes that they fake and build on the ground. Like that's literally what it is. Like the GDP only goes. The GDP literally goes up because they print money. If you didn't think that that metric was utterly useless, all you have to do is know two things. [01:45:41] That GDP goes up during hyperinflation and that the GDP went up in the US during 2020, when the entire world economy was shut down. When 40% of small business across the country permanently shut their doors, the GDP went up. [01:46:04] I cannot stress to you how much of utter useless, arbitrary bullshit that metric has to be for those two things to ever be true. [01:46:21] And this is what they do. They've created an arbitrary metric, an arbitrary way to count a bunch of stuff. And it seems to go up when things are good. So if they can just print money and make it go up, it means things are good. They do the same thing for like, this is the universal thinking of the entire government apparatus. This is the failure of governance through democratic just majority rule, which is just mob rule. You get the lowest common denominator, the lowest common denominator of intelligent thought literally running the nation. How can you dumb something down enough for everyone to have some sort of frame of reference for it, to have it appear to be beneficial? [01:47:14] This is exactly why you get these government programs where they're like, okay, well look, here's some very successful middle class and upper middle class people. And if I, if I look at it, it looks like they all have like really nice lamp posts on the sidewalk and they all have white picket fences and they all have a house. Therefore what we are going to do is we're going to create this one trillion dollar program and we're going to replace all the lamp posts and we're going to put up picket fences for everybody and we're going to buy everyone a house. And then they do that and in like three weeks the entire thing is destroyed. It's worked completely backwards somehow. There's a housing shortage and have no idea why, they have no idea why at all, why it has utterly failed. And they just get mad. They just say it's a bunch of greedy corporations. It's not them, it's clearly not their stupidity and the fact that they just blew a trillion dollars worth of resources that were actually going to go to a high value use case. It was actually in the top right corner of the give a shit matrix where you actually cared about the cost and you cared about what it, what you got out of it. And they put it entirely in the bottom left in which they didn't really give a shit what it cost. What the hell is a trillion dollars to them? It's just like 12 zeros. And they certainly don't care about the results because all they had to do was sell this to a bunch of people and nobody even knows that. The reason they're actually a lot poorer at the end of the year and why groceries are so expensive is because of this ridiculous trillion dollar bill and wasted program. And they got a bunch of happy corporations, they got a bunch of subsidy grifters that they partnered up with. And they went all to their galas and got their big $2000 donation plate bullshit scams. They got CPAC lined up forever. And they're the most important people in the room because everybody wants a piece of it. Everybody wants their contract, everybody wants to be friends with them. So to them it was a wild success. And it was just the stupid economy. It was just stupid free markets that destroyed it and made it not work. So it couldn't be easier to excuse that. Of course they should still keep doing this because their lives are a thousand times better. They're so much more important. So many more people scream their name and clap at whatever bullshit they say and they'll get it right next time just as long as they stay in power because we need them. They're really important and they're the ones with the big plans that are going to fix everything. And it never even occurs to them to consider that maybe it's actually a set of values, maybe it's actually a culture, maybe it's actually a time preference that produces the nice lampposts that stay in good condition and the picket fence that the people who live there actually care about and replace loose boards when they get loose and repaint it when it starts to fade. And who actually care about and live in the house because they actually had skin in the game. They actually worked their butts off for years and years saving, improving themselves, thinking about their long term financial situation in order to finally get that house. [01:50:35] It would never occur to them that those prerequisites, that getting the result without the prerequisites actually destroys the likelihood of ever producing the prerequisites. It actually doubles down on teaching bad values and bad culture at the same time as disincentivizing the correct values and the correct culture and the correct low time preference. Because you literally steal from the people who have actually earned and made the right decision and have the right values in order to reward the people. People who just begged the government for something for free. And when you fail to recognize that it is a set of values and a human mindset, a way of thinking about the world that is actually the foundation for society and makes all of that cooperation possible, you realize that government has literally, fundamentally undermined the thing that allows society existence to exist in order to create a facade in its place, a cardboard cutout that just kind of looks the same. [01:51:47] Now imagine you could create a foundation, you could secure a foundation that corrected those incentives without their ability to manipulate it. [01:52:02] You just didn't have to worry about them anymore and they could screw up the dollar as long as they wanted. They could screw up the fiat incentives. And the more they did, the more they just accelerated the death of fiat and the inevitable correction to where the incentives of nature and reality will be returned. And their survival depends to exactly the degree that they do not embrace it. [01:52:31] So either they embrace the correct incentives and the correct values to measuring the genuine cost of resources in the real world, the low time preference that it directly incentivizes in order to keep their fiat currency alive, or they don't and their fiat currency dies and they have to embrace low time preference and the incentives are corrected anyway. Because at the end of the day, there's no magic wand. [01:53:04] Fiat currencies die because it's just about the timeline. There's no faking reality. There's no tricking the universe into thinking that you can get something from nothing. It's just fraud. [01:53:20] It's just covering up the fact that the nothing is actually a significant cost. How do you just make it look like nothing but reality will come rushing back to punch you in the nuts or to punch your grandkids in the nuts? Doesn't really matter. Reality doesn't care. Reality doesn't. It's not about karma. It's about the fact that you're lying to yourself about a simple and fundamental truth. And reality will punch you in the face every single time. There is no getting around it. Magic isn't real. And you cannot wish away the lack of resources. You cannot move a bunch of numbers around on a financial spreadsheet and fix the fact that there aren't enough houses on a long enough timeline. Bitcoin is inevitable because society literally doesn't survive without the foundation that Bitcoin is. Without a sound money. It is a necessary piece of the puzzle. And it will just keep cycling through hyperinflation, destruction, starvation, a return to simple truths, a temporary prosperity, continued and growing. Fraud. And then they'll do it all over again. Either that foundation is fixed and there is a money that cannot be manipulated, or the cycle of monetary fiat happens over and over and over again until that foundation is built. And there will be enough pain and enough innovation and enough time that people will slowly wake up and there will be a person like Satoshi who says this problem needs to be solved. This is insane. But luckily that moment is behind us. And now we may have. We may very well have that solution. We may have that solution for generations and generations to come. And Bitcoin is the most potent device ever invented for Transferring wealth from the impatient to the patient. Be patient. [01:55:36] All right. [01:55:38] I actually want to say there's one other thing that I'm really excited about just because I have a bitcoin backed loan and I think this is such a cool part of the financial ecosystem around bitcoin and it's such a brilliant use of the idea of multisig and shared custody and how incredible these the fundamental nature of the protocol enables these sorts of services. And it's actually gotten me thinking also about ecash and these things is how you can actually have an ecash provider that actually had a proof of reserves where you can actually issue your own ecash or payment token by locking up into a multisig with some sort of a provider or a time lock and then actually have that time lock and those reserves easily verifiable with every single ecash token. So somebody could receive, you know, gai tokens or gaisats, whatever the hell you want to call them, gie cash and they could go to the gycash provider website or the. It could be a protocol for crying out loud and just confirm that those tokens are locked up for the next six months in a multisig and that this is one to one to this E Cash token and they could essentially have a proof of reserves that that E Cash token is valid. Bitcoin is real Bitcoin. It hasn't inflated the price. It's not fractional reserve. Anyway, it's a little bit of a tangent. It's just something that's interesting about how the, I feel like the multisig and the shared custody and these sorts of services could be utilized to build an entirely new type of network of trust minimized and or proof of reserve like this. An entirely new subset and model of financial system that is literally just built on multi sig and financial services and has a completely different relationship and model and everything from traditional finance and it's still all just kind of custodians and stuff but, but so fundamentally different as to just alone, even in a custodial nature to have such a fundamental impact on how the economy actually evolves. But again, this, this wasn't about E Cash or anything. It's just kind of a tangent that I've been thinking about recently because there's a couple of really cool E Cash proposals and we'll, we'll be talking about a couple of them on the show as well as the new L2. I just saved the piece again because I had forgotten to come back to it. Of the new L2 model. There's one that's really really cool where only while the payment is in flight is it actually trusted as opposed to having the ability to exit the contract unilaterally and that that payment itself is in ecash. So there's already also a very private payment system. Just some really cool ideas of combining a lot of these things. But the thing that interests me most and is really exciting to potentially dig into at some point is the in fact I'll just read this quote because this section just kind of got me oh man, this is going to be fascinating. Quote an efficient Bitcoin backed fiat lending market would increase the utility of our stack, keep Bitcoin off the market, accelerate fiat debasement which further increases the utility of our stack which keeps Bitcoin off the market which accelerates rinse, wash, repeat. Our Bitcoin subsidiary Nydig is preparing to enable all Hodlers including Stoneridge to unsheathe their weapon borrowed fiat at a low rate, in an amount and at a time that is right for them. NYDIG has facilitated billions of dollars of Bitcoin backed fiat loans, though none financed with float. Long Tail Re has invested billions of dollars afloat in asset backed loans, though none backed by bitcoin. Imagine float powered hodling. We found the third side of another page. Stay tuned. [01:59:49] This, this has me really jazzed because the interest rates on loans on bitcoin backed loans are rough. They're serious. Like I think they even mention it in here if I'm not mistaken of like 14% and it's because of the lack, it's literally a lack of liquidity and that should equate it should equal to the fiat lending rate until the market becomes liquid enough. Until we're talking about a ten $20 trillion market where the interest rates actually match the genuine interest rates and the genuine cost of capital allocation or time and opportunity cost of investing in bitcoin. So I think it will balance out to the expected growth rate of Bitcoin. And after Bitcoin is 20, 30, $40 trillion it will probably settle into a 7% ish, 10% year over year growth that might actually occur even a little bit further down the road. Really hard to say because there will be so much growth unlocked by a global sound money especially as the ecosystem and the infrastructure builds out for actually using this in so many different ways and building new alternative payment networks. And just like I said, the new the idea of a completely new financial model and financial services that are that have nothing to do with borders and nobody, the borders aren't even relevant. Like the value add, the prosperity, the productive unlock that will be created from that is just going to be wild on top of the fact that we're still during the monetization phase phase and everybody who is patient and just buys for the long term buys and hodls is going to experience a staggering amount amount of wealth preservation and growth at the exact same time. And I don't think people realize just how much wealth preservation itself just being able to preserve it because they do not know and they do not understand and they cannot calculate, they cannot measure exactly how much is being bled from them, how much they are losing. And just preserving what they have is such a game changer to 99% of the people on the freaking planet. But to have that market liquid, to have someone who is able to get capital access at low rates, turn around, still make a return and basically bolster the bitcoin backed loan market. Oh man, if they do that, if they do that early and first and can get that at 5%, 7% loans, even 8, 9 and 10, honestly that could have an enormous impact, like a huge impact. And that has me really excited to see see what they have coming. [02:02:53] But with that actually there's one other thing and I will have this in I bought the audiobook and I'll have the link in the show notes but I don't know if you know, I don't know if young guy would think that old guy was just a. I mean I was always a dork and a bit of a nerd, but holy crap, I, I want to read the book about longitude. The story of a lone genius who solved the greatest scientific problem of his time. And I so I bought the audiobook. I will be reading or I guess listening to that in the not too distant future. So I will have the link to that in the show notes as well if you want to join me on that journey. That sounds like a fascinating thing. I love the idea, you know, like bitcoin has a clock and I love that analogy, the comparison of that story and how that was essentially the chronometer was used to judge distance and attach that sense of time to a sense of location. [02:03:54] Such a clever, I mean genius in, in hindsight it seems obvious but in like looking forward it's just so genius and so simple. And I mean that's kind of the same thing with proof of work. Like when you establish, when you build that connection you're able to connect the digital world to something measurable in the physical, you literally attach the concept of probability to the cost, to a cost of literal human energy, to energy in the real world and then create this elegant coordination system on top of it. Just wild. Bitcoin is such a crazy thing, but we have to end this here. We're two hours. Holy crap, man. [02:04:44] Great piece as always. A shout out to Stoneridge, A shout out to Ross Stevens for always having something amazing to read. And everybody who linked to it and recommended it to me. Thank you for making me aware of it. I was out of the loop and hadn't seen it yet. Shout out to Fold. Don't forget my referral link will get you 20,000 sats for free. You want to sign up and check it out. And you should absolutely be using gift cards. It is the best way to just stack sats to earn sats and literally get a discount on the things that you do. And a shout out to synonym. Synonym to specifically. I have been a big fan of their BitKit wallet. I just. And I love the design of it. That is one thing I have always loved. Their designer is literally on point. But check out the Bit Kit wallet if you haven't. And the many other tools. And PubKey, which actually have something that I've been meaning to read about. Pub Key on the show they announced at Lugano and just. Just such a cool thing. And we're gonna be having John on. I haven't reached out to him yet, but I talked to him at one of the conferences and we talked about doing a show together because I really wanted to go over this in depth and it's such a cool thing. But lots of stuff to come on that front. But also just a shout out to them for being supporters to the show and my work. It's much appreciated. So check them out. Links, details, show notes, referrals, all good stuff. And I will catch you guys on the next episode. I am Guy Swan. This is Bitcoin Audible. And until next time, everybody. Take it easy, guys. [02:06:41] It isn't obvious. The world had to work this way. Somehow the universe smiles on encryption. [02:06:50] Julian Assange.