One of the most fundamental and confusing questions in human life is about music. Why does it do to us what it does? Why does it make us want to move? To bob our heads, move our feet, and simulate instrumental participation? Why does it awaken something inside of us that we cannot explain, and that nothing else awakens in quite the same way?
This has probably been the most fascinating question in life for me. Music takes me somewhere that is not even real - or, arguably, that is even more real than reality itself.
But I won’t get too philosophical with this - I just want to give my most basic answer to the question: why does music move us?
I think it’s because it represents patterns and structure in a way that resonates deeply with us, on not only a psychological level, but on a biological one too. Everything about the human mind is geared towards recognizing patterns and harmony. (For some excellent reading on the human bias towards patterns and heuristics, read Thinking, Fast and Slow by Daniel Kahneman.) And I believe it’s the same way with our spirits, our bodies, and our emotions. They crave order. They crave harmony, and patterns.
Why have composers like Beethoven and Tchaikovsky stood the test of time in such an astounding way? Because the music they composed gave us structure, harmony and emotionally-charged patterns in unbelievably intricate and arousing ways. Their music sits right on the border between semi-predictable complexity and layered, patterned harmony. As with so many things in life, it’s the Goldilocks Rule - not too complex, not too simple. Just right. I mean, if you listen to some of their best pieces, and really fall into them, let them carry you somewhere - the amount of organization and harmony and togetherness is unbelievable. It’s hard to believe a human can arrange such lovely agreement between various instruments and sounds and simultaneous sub-stories. When one of the great classical pieces goes into a crescendo and all of the instruments come together after their separate buildups and teases… it’s nirvana. It does something to the human mind and the human body. It puts us in alignment. It organizes us mentally and emotionally into perfect unity with what we’re hearing. It makes us want to move our bodies in sync with the layers and sounds and patterns, or close our eyes and absorb whatever it is that’s going on. To absorb something. It puts us somewhere that we currently are not. It takes us to a plane of existence that is only real inside the body.
It cannot be put into words. It cannot be explained or defended rationally. It’s not amenable to rational or logical criticism. It’s goosebumps. It’s magic. It’s the most human thing there is. Which is why, for people who don’t currently understand it, there’s no point in trying to explain - if they don’t get it, if they don’t feel it, they probably never will. The effect that music has on us is deeply human and abstract - it puts us in a place we don’t understand, for reasons we can’t explain. C’est la vie.
The main point of my discussion here is essentially that: not everything in life is amenable to rational or logical criticism. Not everything is neatly modelable or scientifically/mathematically defensible.
And my second point is, that’s okay. If we only went with what makes perfect sense, we’d never do anything. Because a lot of what humans do doesn’t make any sense. And that’s perfectly fine. It’s how we live. It’s how we create. It’s how we make meaningful bets on the future and on other people and ourselves.
For a second illustration of my point, I’ll take a shallow dive into Bitcoin and cryptocurrency in general.
My friend Alvaro shared a document with me last week. The Bitcoin whitepaper is the original document of intent and theory behind Bitcoin - written in 2009 by Satoshi Nakamoto. What Al shared with me can be cheekily described as a “blackpaper” - a refutation. A negative article. The bear thesis, as it were. Here’s the link, if you’re interested (it’s short): https://www.fooledbyrandomness.com/BTC-QF.pdf
This article was written by Nassim Taleb, a famous academic who gets involved in all sorts of conversations from all sorts of disciplines. Statistics, finance, economics, philosophy, etc. He presents in this article a multidisciplinary approach to Bitcoin that essentially says “for these reasons, Bitcoin (and all cryptocurrency) is worth exactly zero.”
And, by all logical and mathematical accounts, he’s absolutely right. Bitcoin is fundamentally worth absolutely nothing. It’s not a company that will produce future earnings. It’s not an asset backed by a government. It’s not a hard item for which we can trade in the real world. It has mathematical and scientific flaws that make it impossible as a store of value, or as an inflation hedge. And, as much as people have always wanted to claim that it is, it’s not digital gold.
It’s not possible for Bitcoin to ever be a currency. A currency has to be a consistent means of exchange with which people actually want to exchange. The incentives have to align. Think about buying a car. Why would the car dealership accept payment in something that could be worth 20% less by month end? And why would the consumer pay for a car with something that could be worth 20% more by month end? Both of them are taking a completely unjustifiable risk by spending or accepting a volatile asset as payment.
Some people say that Bitcoin will eventually stabilize. Those people are not living in reality. It’s not forcefully pegged to any fiat currency, nor does it have a mathematical mechanism in place to ensure stable value - ever. Plus, it has become an institutionalized asset just like everything else. It really only took Bitcoin about 10 years to become exactly what it wanted to be separated from. A Wall Street-controlled speculative nightmare that is arguably net bad for the public. Bitcoin will never be a currency because it has already failed at what it was designed to do. It will always move around wildly (especially as long as Wall Street and whales and sharks are involved, which - they’ll never not be involved as long as there’s any socially-agreed-upon value). And it will always be a prohibitively expensive means of personal exchange, other than for tremendously wealthy parties. And therein lies the problem - it is really only good for people who are already wealthy. Just like every god damn thing else.
It’s nothing but bytes and a promise of future growth. In essence, a pyramid scheme - in order to continue growing and being worth anything, it requires a steady stream of fresh interest. In order to continue being worth anything at all, day to day, it requires wider and wider adoption - or at least the promise of wider and wider adoption. That sounds like… the exact opposite of a sound and reasonable idea. The exact opposite of something that’s sustainable and useful.
Granted, Bitcoin was a hell of a game changer when it was first introduced. It was, at the very least, an idea that could go somewhere. And it did. With remarkable conviction and participation. However, both the technology and the imaginative landscape in which Bitcoin resides have advanced so far that Bitcoin to me looks like nothing but a covered wagon. Primitive. Obsolete. Prohibitively expensive and slow, unusably clunky and inefficient. And you might ask, "well then aren't you bearish on Bitcoin?" Well no, because, in keeping with the theme of this piece, people don't always behave rationally. And neither do economies, or markets, or social groups, or governments. And Bitcoin might not go to zero, because people still do like it. It still has social value. I'm neither bullish nor bearish on Bitcoin. I don't really think or care about Bitcoin at all - I'm completely unimpressed by it. I am much more impressed by other crypto and Web3 projects - ones that actually stand a chance in the speed and usability departments.
Allow me to share a segment of our conversation here, starting right after he posted the blackpaper:
Al: Zero mention of stablecoins, smart contracts, DeFi. I think he has some fair criticisms but it really just sounds like he thought about bitcoin for 3 hours before writing the paper.
Me: Ok see this perspective is fascinating to me, because it's the purist version of the bear thesis. The purely logical, cold, one might even say "academic" approach to the issue (hat tip to Sri, our token facts-and-data academic).
And on the other hand you have the cheeky, punky techno-revolutionaries who also have plenty of good arguments. Financial and economic arguments, personal arguments, sociological arguments. All of which makes sense.
All of these make sense, on both sides.
And it's also interesting to me to look at what you just mentioned, stablecoins, smart contracts, and DeFi, with the same lens Taleb is providing (and I often find myself looking through). It begs the question "what good does it do to build a massive web of tech and infrastructure on top of something that is fundamentally impossible to attribute hard value to". In other, more economic words, how can anything that is not backed by a government or real-world body ever have any actual value. I mean sure, scarcity blah blah blah, but scarcity is only part of the picture. The dollar is backed by the Full Faith and Credit of (well, actually nothing, but) the U.S. government. And with crypto, one can definitely still make the argument that the entire thing is just one gigantic network of pyramid schemes and commerce-for-the-sake-of-commerce. Money-moving-around-accomplishing-nothing-as-a-service.
I mean yes, people are deriving value and making profits. People are owning assets that are "good" for them. We are finally able to play all the games that the banks have always played. But at the end of the day, it's still just a piece of technology that is only nominally valuable and that has the non-zero possibility of going to zero.
It’s just a really fascinating thing to think about.
Al: I really hate all the social token bs and all the other Ponzi stuff but there is some fairly useful things like stablecoins that have instant global p2p capability, betting platforms, insurance policies, deeds of properties. I get how people point to Solana Cum and SAMO and scream Ponzi, but there is a good side.
Me: I think if I had to put the purist bear thesis into different words than Taleb's, it would be "Bitcoin/crypto solves a problem, but in a way that doesn't solve the problem." It gives us infrastructure with which to escape from our current financial system, but that infrastructure is built upon nothing real. It's a city built on clouds. It's a value proposition whose only value is in the proposition.
And now of course I'm getting into questions like "what is an economy anyway, it's all just social abstractions" which is where I run into a wall. Because I can't answer those questions.
Al: Yea when I was at the farmer's market I was in line staring at my $10 bill before paying and I was like lmao this is just like an agreed-upon value we are bestowing upon this piece of paper. Backed by US govt is def added bonus but not necessary tbh. Just makes it easier for us to agree upon -- otherwise there would certainly emerge several different private versions.
Me: I think what you just said is the simplest and most direct way to stand in favor of crypto. It has value because we bestow value on it. Socially. And at the end of the day, I'm not a computer. I'm a dude. Therefore I'm willing to bet on crypto just because fuck it why not.
And that’s where I’m at.
Crypto is, essentially, a gigantic independent economy. Inside the crypto economy, we can do a ridiculously varied and interesting number of things. We can borrow, and lend, and earn yield in liquidity pools. We can trade, speculate, and make directional bets. We can mint, share, buy, and sell NFTs and art. We can follow and enrich creators we care about in a way that just isn’t possible in the modern Western financial environment. We can buy and hold for posterity. We can be part of communities and governance structures that mean something to us, just by being present and bearing some financial incentive. We can do things we want to do, with our own money, and nobody can stop us.
Like I said - Bitcoin is essentially worthless to me. The mega-fortunes in Bitcoin have already been made, and I think it’s basically a trillion-dollar digital paperweight.
But I see great financial and social possibilities in other cryptocurrencies. The whole thing is built on nothing, as I said, other than social agreement. And financial incentive. And you know what? Maybe social and financial incentives are enough to make just about anything happen. I mean - that’s how our real-world economy works anyway. Maybe the communities are enough to get people here, and the financial liberty and the returns are enough to widen our scope of adoption. Maybe people will come for the memes and stay for the yield. Maybe Wall Street will get involved in just about all of this, and we will finally figure out a way to benefit from Wall Street’s presence.
(Not likely.)
Maybe the handful of government agencies who have a say in these things will actually do the right thing and encourage this space rather than ignoring it completely.
(One thing I can say for sure, is that the U.S. is going to suffer catastrophically if crypto gets global regulation and adoption and we are too slow to act. If China and the rest of the world set up legal frameworks for crypto before we do, we are waxed. We will lose our position as the global superpower, the global economic leader, because the financial edge that comes with this bet is gigantic.)
It's possible that the social value alone will take the crypto economy to heights we can't even imagine. It's possible that this socio-financial revolution will achieve exactly what it aims to achieve, and more - directly in the face of all contrary evidence and reasoning. It's possible that the crypto projects being incubated and built right now will change our lives forever, and brighten our futures in ways we aren't even dreaming of. And, like all great things, it'll start with small bets and people willing to take chances.
I’m willing to bet some of my money on crypto because why the hell not. Maybe I’ll be part of something cool. Maybe I’ll make a lot of really interesting friends and be part of brilliant social groups. Maybe I’ll make a lot of money. Maybe I’ll be an early adopter of something that changes the world.
I’m not risking anything other than money. There’s no risk to my family, or my home, or my belongings, or my mental health. There’s no risk to my safety, or my social status. There’s no risk other than “being wrong.” The downside is simple and limited, and the upside is potentially so large that it can’t even be quantified. The upside is a number of things.
As a serious investor, I care about fundamentals. I care about what story the numbers tell. I care about reasonable and logical assumptions, and I am accustomed to using hard, defensible reasoning to justify my investments. I am used to having proof.
But I’m also human. And I also know that some of the best opportunities in life don’t really have any reasonable justification. You don’t ask why you like the song so much - you just get up and dance. You don’t know why you like that pretty girl so much - you just sack up and ask her out.
That’s human life.
Now of course none of this is financial advice. And none of this is dating advice, and I’m also not telling you to dance if you’re not a dancer. That might not turn out very well. I’m just talking about the human experience of taking chances on things that aren’t logical and rational. Because I think it’s important.
Be reasonable where you can - and where you can’t, take some chances.
All that matters is that you make good bets. Bets that leave you with a possibly bright future, but have little or no capacity to cripple you. Bets that show love and optimism and encouragement, without the possibility of leaving you bitter and jaded and destitute.
They might not come along often, but when they do, I think sometimes the answer is “Why the hell not.”
“Stop making sense.” - David Byrne