Systems thinking to learn from FTX’s mistakes – Bitcoin Magazine
This is a transcribed excerpt of the “Bitcoin Magazine Podcast”, hosted by P and Q. In this episode, they are joined by Matthew Pines to talk about China’s plan for world domination and why FTX and Binance are “like a bug hitting the windshield” when it concerns the general macroeconomic scene.
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Matthew Pines: We made these typical imperialist hubristic mistakes with Iraq, and we had a major financial crisis that kind of focused on domestic politics, and geopolitics kind of went to the back burner or became the domain of Sunday news programs. “Shall we do an Iraq surge or shall we do a reset with Russia?” Or whatever.
Now it’s going to be present because it filters into every aspect of your lives where you get your stuff. Is there a next time? I think COVID kind of woke us up to this. I think we felt it was just going to be like a temporary disruption and then everything would just go back to normal. That is not the case.
That is why Taiwan is important. That’s why these things matter because they are highly path dependent. We live in a highly non-linear, coupled dynamical system where the butterfly flaps its wings and you get a hurricane. That’s why you need to pay attention.
Why focus on all the little things? Because the little things can become very big things very quickly. FTX is a good example of this. “Oh there’s something weird going on with CZ and why did he just post that thread?” And then, suddenly, the token drops by 90% in one day.
Like these systems we built look stable and then they break. That’s why I like Bitcoin because Bitcoin is one of those systems that by definition is decentralized, so it can absorb a lot of shocks. The mining ban in China was a good example where it took a massive exogenous shock boom. But then the hash rate is at an all-time high. Does not mean that the dollar price will in any way be stable; it is likely to be highly volatile. But these are very different models of how you think about building systems, and that’s what attracts me a lot about Bitcoin is that they model a type of system that assumes that nothing will work out and assumes that things are going to break. You just need to build resilience and redundancy, decentralization into these systems so that you are not vulnerable to single points of failure. You’re not vulnerable to an opaque balance sheet or a single person making a bad decision that has far-reaching implications for everyone nearby.
That’s kind of my broader thesis to kind of connect these things, why it’s so important to look at FTX and say, “We should learn from this.” You’ll see it reflected in asset prices, but if you’re not a day trader, if you’re not trying to time tops and bottoms, it won’t matter to you.
