In the previous three parts of this series, we examined how Bitcoin creates positive incentives. Specifically, people are motivated to plan for the future, find the sweet spot between lazy and greedy, and finally trade fairly.
In this article, I’ll examine how Bitcoin and sound money encourage bravery, grit, courage, or what ancients called fortitude.
Rent Seeking vs Producing
One of the realities of a fiat-based economy is that the government can produce money at any time. If this sounds like a big responsibility, it is. Making sure that nobody abuses this power to enrich themselves can itself be a big bureaucratic mess.
Preventing abuse of power is hard enough as it is. When enhanced with the power to print money, the potential for abuse of power gets multiplied that much more. To prevent abuse, more bureaucracy needs to be added. Indeed, most government bureaucracy jobs essentially start as some way to prevent some form of fraud.
Unfortunately, a larger government also means a larger rent-seeking opportunity — rent seeking here broadly means changing government policy for profit to a specific group. Most businesses and certainly the bureaucrats themselves largely engage in some form of rent-seeking.
What’s terrible is that rent-seeking doesn’t actually add anything to the productive capacity of society. Such efforts stifle innovation and keep bloated bureaucracies (in both government and industry) alive through subsidies.
Under a sound money system, the power of government to dictate economic policy, and to grant rent-seekers what they want, is limited. This is by no means an absolute rule, but sound money prevents the most egregious abuses of allowing businesses and individuals to rent-seek.
Furthermore, as the status quo players are not subsidized by government backed fiat money, innovation isn’t stifled as much. This means that the risk to creating a new business isn’t nearly as much — the red tape that is typically meant to hinder them isn’t as prevalent. There is simply less friction in a sound money system to innovating.
Opportunity and Innovation
More opportunity, and less friction, for innovation means that the threshold for trying something new is lower. That means that more people can and do try new businesses and ventures in a sound money system. Because the market, not government, chooses the winners and losers, more people are incentivized to try.
In a sense, having a fairer market encourages more participants. Instead of a fatalistic world view (everything is rigged and my idea won’t be allowed to work even though it’s good), more people have hope (if people like this, I can make some money) and that causes more people to innovate and create.
This is not to say that nobody innovates in a fiat-money system or that all people would innovate in a sound-money system, but certainly, the incentives are greater for starting something new in a sound-money regime.
Innovation and Fortitude
More people innovate when given a fairer market. What’s more, the people that do the innovating, what we call entrepreneurs, take on a lot of risk. The ability to take on risk while also bearing the cost of failure is what we call courage, guts or fortitude.
Like most virtues, fortitude increases the more it’s exercised. When a person practices prudence, they become more prudent. When a person practices fortitude, they become more courageous and gutsy.
From a market perspective, what we get as a result of sound money is a more level playing field that creates the conditions for more people exercising the virtue of fortitude.
Sound money exposes rent-seeking behavior is in many ways the coward’s way out. The rent-seeker is afraid of real competition, of a fair fight. Perhaps they suffer from some form of impostor syndrome, thinking that there’s no way they could be successful in something without the backing of the government.
Fortitude and Culture
In many ways, we’ve become a rent-seeking culture. Not only are governments bloated and full of bureaucrats that don’t add significant value to society, but a whole class of companies exists to rent-seek from these bureaucrats. More people are concerned with “keeping their job” than figuring out how they can provide something of value to others.
We’ve been raising a generation of people with the ideal of a steady job of doing the same thing for one company for 30 years and retire with a nice 401k. We’re raising a bunch of wimps and cowards who feel entitled to things provided ultimately from a fiat-backed daddy government.
Contrast that with the attitude of the latter half of the 19th century where so many took risks and ultimately contributed to society. The self-made man is an archetype from that era where many people were able to find a way to innovate and provide value for others. The culture of that era was to seek opportunity and create value, not fear innovation and rent-seek.
Under a fiat-money system, people are incentivized to seek rent. If you think of a pie, people in a fiat-money system are incentivized to get as large a piece of the slow-growing pie as they can. This is ultimately because the government has the ability to print money and whatever value created can and will be usurped by government through inflation or taxation.
Under a sound-money system, people are incentivized to innovate. Essentially, people are growing the pie, though they may have lesser piece of the pie, the absolute piece they gain is greater. This is ultimately because they can keep the wealth that they work hard to gain due to sound money.
As Bitcoin becomes more prevalent in society, we can expect to see more innovative behaviors that ultimately result in a more courageous and gutsy culture.
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