Bitcoin changes human incentives. Incentives drive human behavior.
The world revolves around money whether you want to admit it or not. It is the reason you go to work everyday. You use money to put food on your table. Money buys the clothes on your back. You work your ass off to save for retirement. Vacation? Better save enough money. Car breaks down? Furnace breaks? Better have a rainy day fund. No matter how you shake it your everyday incentives are directly linked to the money.
Throughout this newsletter I’ve been attempting to show you how our current fiat money is BROKEN. That being said our incentives are broken.
Fiat
Fiat incentivizes short term thinking - commonly referred to as having a high time preference.
“Someone with a high time preference is focused substantially on their immediate well-being relative to the average person, while someone with low time preference places more emphasis than average on their well-being in the further future.” - Psychology.wikia.org
I like to think of it as immediate satisfaction versus delayed satisfaction.
When our money is losing value (purchasing power) through inflation and the infamous money printer we must work harder just to remain in the same place. A dollar is literally worth more today than it is tomorrow so we are incentivized to either spend it (consumerism) or invest it (risk). People, unknowingly, through the devaluing of our dollar have developed a very short time horizon which has manifested in consumerism and cheap “throw away” stuff. Notice how nothing is built to last anymore.
Fiat incentivizes the short term allusion of growth and sacrifices the long term innovation.
Fiat incentivizes encourage more risk taking because you cannot simply save your money. If your money is constantly losing value you are constantly looking for an avenue to make more. Everyone has become a day trader in the stock market - THAT IS NOT NORMAL.
Bitcoin
Bitcoin in theory is worth more tomorrow than it is today due to its absolute scarcity. Bitcoin incentives delayed consumption for future reward. Planning for long term innovation. Take a second to think about this. People are encouraged to work hard and truly save up for things they might want versus taking on debt to buy it now. I use Bitcoin as my unit of account when thinking about costs and I’ll give you an example: buying a house. A $250K house used to cost 25 Bitcoin one year ago, through delayed consumption that same house is now valued at 4.5 Bitcoin. Eventually it’ll cost less than 1 Bitcoin. The same logic can be applied to anything whether it’s buying a new car, taking a vacation, having a wedding, or remodeling that kitchen. Start using Bitcoin as your savings account and your fiat as your checking. Over time this truly changes your perception of needs versus wants.
Bitcoin incentivizes savings and encourages a low time preference.
I would argue that a lot of the “problems” in the world today are directly related to misaligned incentives and misallocation of capital via a broken monetary system.
Bitcoin makes saving cool again.
Everything is getting cheaper in a Bitcoin world and everything is getting more expensive in a fiat world. Your choice.