USA vs. China Tariff Answers Revealed with Arthur Hayes and Nils Pihl

Transcript

The AI war has barely just started and I think a lot of people in the west are not yet aware of some of the strongest cards that China is holding. I know I know the response. The response is printed money. Devaluation of the dollar and the yuan against oil, gold, Bitcoin. That's that is the only answer unless you want to the worst stock market day that we've seen in America in I think 20 something years. the worst day in Hong Kong and you know this century. Computers are this subordinate part of our reality and then eventually may become like equals and surpass us.

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[Music] Welcome back to the rope guys. We have an interesting episode today covering the convergence of macroeconomics AI. Niels and Arthur here from the other part of the world guys calling in. Niels, welcome. Arthur, good to have you back. Hello. Thanks for having me. I love it. Niels, it's your it's your first time on the show. Maybe you could, you know, explain how you got here. Um, how did you get in contact with Arthur? you know, Malstrom is investing in advising into AUKI AI. Generally, what's been, you know, your your journey up to this point founding an AI company?

So, um, we're working on collaborative and decentralized machine perception. Uh, we work on the ability for digital devices like robots, like AR glasses, like your phone to have a shared understanding of physical space. Uh we're building it in Hong Kong where we met Ashot who is Maelstrom's uh fund manager and uh Ashot took a a very early interest in us uh introduced us to Arthur. Uh Arthur has some uh some other investments in in robotics that I find very interesting and uh of course uh one of our most valued advisers when it comes to uh the crypto side of what

we're doing. Uh when you build a decentralized network like we are uh getting the tokconomics right is very important. Getting your launch strategy right is very important and um Maelstrom was uh a very very important adviser to us in forging our path forward. Love it. And uh you guys are both coming to us from the eastern part of the world. On the last podcast with Arthur, we talked a little bit about this dynamic between American investors and and the eastern uh investors in China. There's a lot happening with China, tariffs, currencies going left, right, and and center and sideways. Arthur, could you kind of and

you also alluded to your next article which is about I I think the the currency changes that are happening both uh in the US and in China. Could you lay out what your reaction has been to like the worst stock market day that we've seen in America in I think 20 something years, the worst day in Hong Kong and you know this century like what what is going on in the market these days and how do China and America react to to the happenings? Yeah. Yeah. So I think this is a seminal moment in global markets history where you have China re re attempting to regain its top spot as a top economic

power that it had pretty much for the entirety of human civilization apart from the industrial revolution in Judeo-Christian America in Europe and that system negotiating how it's going to sort of coexist together in this new reality that we have in 2024. And so what Trump is doing is not his own idea. It's an acceleration of something that was going to happen anyways. And this, you know, blunt force terrorist weapon that he's wielding is sort of the the catharsis that we've been waiting for. And you know, yesterday, obviously, we're recording this on, I guess, Tuesday morning in Asia. Uh markets opened in Asia like

down 5%. NICK down six or seven, HSI down 10, CSI down five. Uh, and then sort of we had this relief rally in the US overnight. I woke up and everyone was like, oh yeah, you know, just rattling off the different countries that have bent the need of Trump. Oh, Japan's going to do whatever it takes. Vietnam's going to do whatever it takes. And which is, you know, part and parcel of his plan, right? I'm going to roll out this this massive tariff number on big bad America and you guys are going to come and you're going to bend the knee.

You're not going to retaliate. You're going to do what I asked you to do, whatever that is, right? But again, this isn't about Vietnam and Mexico and Canada and all these other countries. If you look at the the massive dispersions between who finances the world and who builds the things, it's America and China. It's all about what is the new agreement going to be between America and China. And I don't think that Xiinping can bend the knee um to Trump because that would essentially mean that China is going to go back to 20th, you know, 19th century Ming dynasty where they had drugs sold to them by the British. um they had trade treaties enforced upon them at Gumbboat and he's going to do that again and obviously a

less violent mechanism this tariff thing and just agreed to the big bad white man who tells him he's got to change his economic policy for the 1.4 billion people that he represents. So I just don't think there's a deal that can happen. I don't think the markets recognize that yet. We're still in the denial phase. Oh, China just makes cheap [ __ ] That's really bad. That's what, you know, Americans and lots of people in the West think. uh you know, environmental degradation, child labor, ethnic cleansing, all the same tropes that you can read in every single major uh western newspaper. And and I just don't think that China, Xiinping can sit there and take that abuse and say, "Okay, great.

I'm just going to reform my whole economic system so that, you know, the American side does better than than they have done over the past 40 years." And so ultimately I think that results in China finally running an independent monetary policy which they really haven't done since you know 1949. It's always been tethered to US and a basket of other currencies which has put them in a situation where they have a balance sheet recession. They had an overvalued property market. They purposely popped that bubble because they felt it was um not great for the rejuvenation of China to essentially finance the building of bunch of worthless apartments. They wanted to build stuff, but again, they they had to deflate this asset class.

It's caused a massive economic dislocation in China. The response is to print money and let your currency depreciate. They're printing the money on shore, but they're not letting the currency depreciate because again, I think both sides want to find a deal. I honestly think that neither side will be able to find the deal that works for their domestic populations. And the out the uh the result will be um CNY the Chinese yuan at 8 9 10 11 some level like that. So that allows China to do what it needs to do which is print money fiscal um spending monetary easing quantitative easing and let the currency depreciate massively which is obviously very good for crypto. But that's sort of the frame framework that I'm operating under. We're not there yet. Both she and

Trump are putting out the I want to do a deal feelers. I'm sure there'll be some sort of like jamboree meeting at some point. Everyone's like, "Oh yeah, China and US are going to find a way to coexist economically in this new system. The markets are going to be rallying. Ultimately, they won't be in a deal and then everything falls apart again. And hopefully, you know, by that point, Bitcoin ditches this correlation to the NASDAQ. Um, and we sort of can outperform uh in a meaningful way on on this global reflation and sort of um decoupling of China and sort of the western uh ecosystems. So, that's kind of how I'm looking at it. I think all the all the sort of noise around Vietnam or whoever just going and doing a deal, great. Japan's going to do a deal,

Vietnam's going to do a deal, Bangladesh is going to do a deal, who gives a [ __ ] right? Unless China's coming to the table and bending the knee, then you know, great, the S&P, I think, is up on the day right now. But that's just a bear trap. I I think this really is between the US and China, and I think it's one of the early salvos in the AI war. Actually, the AI war has barely just started and I think a lot of people in the west are not yet aware uh of some of the strongest cards that China is holding. Like according to the World Bank, more than 70% of the world economy is still tied to physical locations and physical labor. You will

have heard Jensen Huang uh CEO of Nvidia at CES this year pointing out that while we are entering the era of agentic AI now the next and final frontier of AI is physical AI AI that can uh act with us in the physical world and manipulate the physical world um the age of robotics essentially and this is an area where China has a very very substantial upper hand like years ahead of the United States people forget that the world's biggest AI company before uh open AAI uh came on our lips, right, was um Sensime, a company founded here in Hong Kong focused on computer vision and machine

perception. And the world's largest drone company by far is DJI, founded here in Hong Kong, uh controlling almost 90% of um of the consumer drone market and 75% of the commercial drone market. And when it comes to robotics in general, right, it was back in 2015 that China's robotic fleet caught up to the US in size. So, you know, industrial robots, things like this. Uh, but by 2023, every other robot sold was sold to China and half of all robots in the world right now are on Chinese soil. So, China is incredibly advanced when it

comes to robotics and have built out this vertically integrated um production stack in Shenzhen which is very very hard for the west to replicate. Just like a a personal anecdote, you know, someone someone working in the space uh we're working on a semi-rootic device and we needed a new kind of camera and I I mean like a new kind of camera. But we couldn't find a single vendor that had a camera to the specs that we needed, right? So, we went to Shenzhen and we explained we need a camera with these properties and they had one made and shipped and on my desk in less than two weeks and for less than a,000 bucks.

Like that is very very hard to replicate in the west. And I think part of what's happening is the US waking up to um AI and physical AI is going to dominate the future economy and something needs to be done to allow America to reshore its industry and rebuild its industrial base. It's not just about the dollar. It's about the fact that Americans don't build things anymore. And if they don't build things, uh China is going to win the century. I heard I heard a stat I think it was in one of these Bessant interviews I think the most recent one that he did with uh Tucker Carlson where he described the relationship between China and and

America in terms of trade. China runs a trade surplus and America runs a trade deficit. And he was making the case that the country in the trade surplus is in the weaker position. The country that runs the trade deficit is in the stronger position because we're the buyers. America is the buyers. America is the demand in this supply demand dynamic. China is the supplier. They're producing the things. They have the manufacturing capacity. They have the robots. They have the cheap labor.

They're making the things. Is this This strikes me as counterintuitive when I first heard it because they have the things. They can withhold it from us. Do you guys who do you think is in the stronger position of leverage the one like America because we there is the buying power and the demand here and if we make it ourselves we'll we'll keep it ourselves we will choke the Chinese suppliers or vice versa and China's in the stronger position because they have the stuff and the means of production. I mean, I don't think there's you can 100% rely on any of this historical example, but we we did this play before and it was 1930s, right? The

United States was China. Western Europe was United States. And look what happened, right? Western Europe imploded into global confration and basically, you know, destroyed themselves. The United States had a very deep balance sheet recession in the 1930s. Uh, and then what did it do? It printed a lot of money and it got itself out of there and became the dominant manufacturing h um entity for this version this stage of the industrial revolution the factory mass production commoditized goods right so if we take you know 2025 right America is western Europe and China is America right China makes the stuff uh and western Europe is the other side of it um but and we're going to

move to another industrial revolution you know I I think you were alluded to this Andy like post scarcity. What does it mean if we have a robot that can do everything that a human can do um perfectly pretty much for free like what do we do as humans in that instead of scenario? are we just you know consumers of entertainment and social goods and hanging out and and whatever right and you know if you've been to mainland China I haven't been since co maybe Neils can speak to this but if you go to like whatever whatever from what I've heard like Shenzhen Shanghai Beijing you like the top tier one cities it is another [ __ ] universe of how integrated things are um the amount that technology plays a role in China now the downside of that is they have essentially the zoomers are all I think

it's called I forgot the Chinese lying flat, which is they're so just disinterested in the system because there's just no opportunity because the robot can do everything. The factories all are all mechanized. The best jobs are held by the exes and the zoom and the boomers are not going anywhere because it's, you know, we're getting healthier and all this type of thing. So like what are they going to do? I mean they can go to a nice concert and you know do that kind of thing, but like the we haven't changed the mentality of you are you what you your job, right? versus you are what you you know your and other connections to humans. So we might have China become this post scar the poster child of a post scarcity society where the robots do everything you know it won't be as like

individualistic as in the west but there is a path forward for if they can sort of rebrand the ideology around what it means to be a productive member of society then the what the west thinks is an Achilles heel of all these unemployed youngsters becomes this is the utopia right party controls everything don't worry about politics. You just go to the you go to the Taylor Swift concert. You you go see, you know, FingBing or, you know, um Andy Chow or one of these K-pop or Chinese artists. Enjoy your life.

Here's an apartment. Yeah, it's not the best and the biggest apartment, but you have an apartment. Here's some food to eat. And you know, there's a robot that does, you know, that manufactures everything. I mean, what's Okay, yes, maybe in a western sense. Well, it's there's no freedom and blah blah blah. But like, I don't know. I think a lot of humans would like that. They like that situation. I think a lot of Americans would take the Pizza Hut and the Netflix credit and the and the, you know, instant drone delivery. I think one core difference that that that I experience as being American, just kind of growing up in this somewhat propagandaled regime around anti-China, which actually I show Speed has just has just done a China

tour. I don't know if you heard of this guy. He's like a big YouTuber. He like Lamborghinis drive like 80 miles an hour and he just jumps over them. Goes crazy, lost loses his mind. And um he just went to China, did a huge China tour. It seems like it was kind of like either incentivized or like there's some there's something happening where he was showing a lot of the good parts of China and like just showing this really positive experience. And so I think that was probably helpful for uh kind of a lot of Americans current perception because I I watched it and I was like, "Yo, that looks sick." like that city looks insane. Like I kind of want to go, right? But kind of zooming out of like the futuristic just back to kind of their the Chinese way of uh conducting

their international policy as of the last 10 20 years. It does feel very lone sharky often like it feels very much like I will help you as a as a nation. you know, we will come, but if you don't pay, like we're just going to take that land or that, you know, that's going to be ours or all the fish that are in your sea in your international waters are ours. Whereas, it feels like America has had much more of like this like soft power kind of like, you know, with these tariffs or with like these capital controls internationally. Just feels like it's been a bit more of like a a mutually beneficial kind of way of going about operating in the world. And now Trump just seems to have kind of like taken that away from at least the perception of people. And so perhaps

this is actually making them on a more level playing field from an international policy perspective. Uh but Neils, I'm curious if you have any kind of like push back on that idea or any kind of closing thoughts here on some of your experience there. I China had the one child policy for a long time. So, western analysts have been right to point out that China has been facing uh an impending demographic collapse like there are too many old people, not enough young people. What I think people have missed is how that has motivated China at an existential level to really mobilize because China is an incredibly

ethnist country. like they want one government for the Chinese people, right? They're not communists, they're Nazis. Like they they really want their their ethnostate. And when you face a demographic collapse like this, you only have a few options, right? One is get rid of the old people. No one's going to do that, right? The other is mass immigration. And if you're an ethnationalist, you're not going to do that. So the only thing that's left is mass automation and robots. And China realized this a long time ago and made very very centralized focused bets on uh building out robotics and automation uh

like in a way that I would say is pretty much like mobilizing for war. like they've been very very focused on we need to dig ourselves out of this hole because the only other option is mass immigration and they just they do do not want to do that. So they have for the last at least 10 years just been incredibly focused on uh getting the upper hand on the future for automation. And um ETH Denver was not that long ago, right? And while ETH Denver was going down, there was this huge scandal in Europe. I don't know if it made it to American media, but I think it's worth sharing here. Um, there's a company called North Vault. It was founded by

Peter Carlson, a Swedish national who used to be the chief product officer at Tesla, one of uh Elon's right-hand men. And Northvault raised 16 billion with a B uh to build batteries in Europe. Uh, and the thing was they were going to build batteries from raw materials. You know, a truck comes in with raw materials from a mine and batteries come out the other end. And uh, they build this huge battery plant in northern Sweden. It's going to run on green power. And last year, an investigative journalist starts looking into this company. Um, they've received billions of purchase orders already from, you know, the big German automakers, things

like this. And it is revealed that with $16 billion and [ __ ] Peter Carlson, former CPO of Tesla, they had not managed to build a single, not one battery end to end because apparently we don't know how to [ __ ] make cathode material anymore, like one of the uh main ingredients in how to make a battery. So that had had to be imported from China. Um so much of the world economy is going to run on batteries soon. Not just our cars, but our robots, our drones, etc.

And it's not clear um that the West even knows how to make batteries anymore. Like literally, do we even know how to make batteries anymore? China controls just way more than half of the the battery market. Like just one Chinese company controls more than half of the battery market. and they control something like threearters of all the rare earths necessary for uh making uh batteries and chips and things like this. We talk a lot about how we make better chips in the west. But I think we forget that the chips that China can make are already good enough, right?

Like they have good enough chips and they have all the raw materials. And if this trade war goes on uh for too long, my fear is that China will just say, "Fine, you can't have any of the rare earths and we're just going to do an export ban on batteries." Good luck. I'm curious as to how this could play out. Like we talked about, you know, kind of the the ammunition that each of these countries has at its disposal. The the Chinese have their economic powers and and America has its China has its manufacturing power.

I really America all America has is its economic power right and its and its status as the reserve currency. So I if we kind of operate on the premise of you know chi Chinese inflating its own currency that's fine for the Chinese citizens because they already have all of this stuff. They don't need money to buy stuff. So you just inflate the Chinese currency and you hand out stuff v from the Chinese government uh manufacturing plants to the Chinese citizens. Do do and and they inflate their currency away. Does does this new system, this new world order take China off of the US dollar as its reserve currency? What happens to the US dollar

when that separation occurs? And what happens to China if it goes in this whether it's its own direction or it's this new direction with bricks countries? How does that new world order shake out? I mean, I guess we don't know, but at the end of the day, you think think about it from the United States perspective, they have a they're going to do the similar thing to China, right? China was reflating a balance sheet recession due to a property market bust and sort of over build out of certain things, right? They're going to fiscally and monetarily reflate and the um the balancing factor is the currency. The United States has a different problem.

you know, shipped all of its manufacturing overseas so that stock shareholders could make a bunch of money over the last 50 years. And what's the, you know, it's not like the US can't ever make a battery. It's they just didn't want to do it because it was really expensive. Well, okay, let's just, you know, bring bring all that production home, inflate it, inflate the currency, the dollar goes to [ __ ] Now, maybe not against another fiat currency, but against gold and against Bitcoin, you know, we're talking 80 90% devaluation of of the dollar. In nominal terms, we'll be fine. And so then, okay, maybe over five or 10 or 15 years or whatever the time period is, the United States can make a battery just as good as China can make a battery. And then it just comes down to everyone else's

ideological and geopolitical decision of who they want to trade with, who they can trade with, security agreements, all that kind of stuff, which we can't really predict. But we do know that both systems have a problem and neither system wants to deflate their system and then rebuild. It's okay, we're going to take it where it is. We're not going to completely disenfranchise all of the capital holders or the politically connected entities. We're going to print a bunch of money and our currency is going to deflate against the hardest currencies in the world, gold and Bitcoin. And so I think that's that's the message. We can quibble about like who trades with who, but it kind of doesn't really matter because both systems are going to use the same mechanism to get to a similar sort of goal. Which is why obviously I love

crypto because I don't have to worry about earnings reports and does a CEO go to the right dinner parties and are they supporting the right political faction in each you know you know you have Elon Musk cutting the US government but then 50% of Tesla's production capacity is in a Shanghai factory. Yeah, Trump is going against China saying, "Fuck you. I'll put another 50% tariff on." How does Elon feel in the in the palace right now, right? So, like, well, he's not in the palace anymore. He He got kicked out of the palace there. I think I don't think he liked that either. So, I don't know. It's trading stons is hard. I [ __ ] stick to stick to Bitcoin. And I know I know the response.

the spots is printed money, devaluation of the the dollar and the yuan against oil, gold, Bitcoin. That's that is the only answer unless you want to essentially deflate your system and then rebuild it, which no politician has a stomach for because they won't be reelected or supported anymore. And just to close that rabbit hole and like put a number on like why that never happens because it basically means like sinking the economy, the stock market, everything just like we're seeing now.

But then there is no bounce, right? Because the bounce occurs when the there's a bounce. It just takes a while. It just takes a while. It's like it's like it's hard, you know? You could either keep drinking or you can suffer the hangover. And you know in a electoral democracy, no one wants to suffer a hangover. It's like I'll go I'll vote for the other guy. He says keep drinking. And then if you're a strong man politician like she or the communist party which has said I'm going to make sure there's never and nothing ever bad happens to you Chinese proletariat pleb. Therefore support me and give over your sovereignty to me. I said cool great. I got a job. I got an apartment. You know I have something to do. But if you say, "Oh, I need you to go, you know, dig some holes for 10

years because we overinflated the country for the last 30 years." They're like, "Uh, I don't know if that was that wasn't the deal." So, austerity doesn't work in a democracy and it certainly doesn't work in, you know, a communist autocracy. It doesn't work in any system because of what the promises that the politicians sell to you. So in the war of America, this this subtle war, not kinetic war, but in this economic war of America versus China, the winners are the hard asset owners because printing money is the only is is the are the bullets. Yeah. And I think people sort of get down these rabbit holes of uh the Chinese way and the American way and they do this better than we do and set putting their national their identity to these like

madeup concepts called the nation state and missing the point which is they all have to do the same thing. Just own Bitcoin and you're going to be okay. Dude, Arthur, you're like a uh based rich dad poor dad guy. Like he'll he'll hold his tweet like the most boomer way. Like own gold, silver, BTC. It's like nah dude [ __ ] it. [ __ ] stunks. No, you got anything to add to Bitcoin is not just a hedge against inflation as you know the meme goes. It's also a hedge against the excesses of power. You know, crypto is going to play a very important or a couple of very important roles. Not just what what Arthur is describing, but I I think crypto uh can and should arguably must uh play a very important role in what is

uh happening in the AI war as well. Um if if I can get technical for a little bit um a very big part of of robotics and AI is uh related to our privacy and the the reason China had the world's best AI company before open AI was because China was very invested in face detection and and things like this because they wanted to uh you know keep track of its population. But we're not much better in the west. Uh just a couple of months ago, Elon was on Lex Freedman's podcast and he said unashamed that his humanoid robot is going to be

the greatest source of data in the world and that's why he's going to win the AI race. So Elon just completely unashamed is telling us live on air, right? I'm going to be spying on you in your homes. And uh like the the CEO of uh that Norwegian, what are they called? 1X. Uh same thing, you know, greatest source of data in the world. I think it's incredible. We got way too many smart homes now. Smart homes did not need to be smart. Like I we kind of lost the plot here on like the smart [ __ ] You know what I mean? And Andy runs a light node on its refrigerator from what I'm from what I'm told. Too smart. Too smart.

I think there's uh an important path here to decentralize the collaborative robotics and collaborative machine perception stack which is obviously what what we are trying to do at AI but other interesting people in web 3 have have noticed this trend right and I think that that for me I think that this is the biggest call to action that the decentralization movement has faced so far we haven't faced a bigger threat to our to our privacy and our liberty before than the rise of robots if these robots are either going to serve the CCP or serve Elon and both of these have no compunction um spying on you right if we want to have a world where we can enjoy

the benefits of robots and can enjoy the benefits of AR glasses and the like and we don't want to hand over our cognitive liberty either to the state or to big corporations we have to as the decentralization movement as the crypto movement start paying attention not just to def I really hope that the decentralization movement um will start paying more attention to um what is happening in in in robotics and spatial computing because of this. It's easy to forget, right, that just at Meta, there are more engineers working today than

there are active engineers in all of crypto. True fact, right? We are an incredibly small and fragile movement and we are talent poor today. Like we are low on human capital. We need to attract a lot more human capital if we want the decentralization ethos to win. And I think an important way for us to do that is to start focusing on other things uh than monetary policy uh and attract this generation's greatest engineers in helping build decentralized robotics. Innovating finance global institutional and onchain deep liquidity to drive capital efficiency. Now,

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the best in the business, the Biddle Fund by Black Rockck and Superstate. This is stable coin season. It is the yieldbearing stable coin by Fracks, coming soon to a chain near you. Yeah, I mean I think the verifiability ethos of crypto in particular is very very intriguing when combining it with uh decentralized training data inputs, right? like like the there's a lot here that is like the whole you know take over the banks and treadfi and you know these processes and things like this is very valid and it's going to continue to kind of grow and and and I think like the core ethos is there but when you

extrapolate the potential futuristic kind of thought process of where we could be with um the acceleration of physical AI in robotics as well as in digital form. It becomes very apparent that this is the core uh problem of our generation or situation of our current time to like optimize around the end state not being utterly destructive and not to be like a doomer here, right? But I think that that that there's a lot to actually, you know, kind of making making the like taking what we have today in the AI space and kind of reframing it and changing it is going to be quite quite

quite the tall task. So kind of passing back to you, you have this ethos, you guys have this mission of intercognitive improvement, right? You want the world to communicate better and you want to be a part of that. Now, I want to go straight into like post scarcity world, but like we'll get there. What is your mission and like what are you guys building with the robotics um kind of AI in the physical as well as in the digital and and how does this tie into your current to your current uh mi your your vision and your mission?

Yeah. So, uh our mission is to improve civilization's intercognitive capacity. That means our ability to to think together, to experience together, to solve problems together with each other and of course with AI. We got started uh with augmented reality which is a very very tightly linked technology to robotics. What robotics and augmented reality have in common is this umbrella term spatial computing. Spatial computing is the art of teaching digital things to understand the physical world which is necessary for things like augmented reality and robotics. And what we realized many years ago was we had a

very very strong belief that augmented reality is an inevitable part of humanity's future. U in the not too distant future we're going to wear AR glasses. Then we'll wear AR contact lenses. Eventually, we will have augmented reality neural implants, right? Like, yeah, I'm going to get one of those girlfriend things finally. I'm going to get I'm going to finally get laid. It's been a while. Yeah. Yeah. No, they're they're coming. They're coming and and you will be, too. So, I hope so, dude. I'm counting on it, man. I'm counting on it. Yeah, one of the most important pieces of both augmented reality and robotics is something called visual positioning. Uh,

which is essentially a way for uh the device to understand where it is. Because believe it or not, GPS is not fit for robotics or for AR. GPS only has a few meters of accuracy. It doesn't work at all indoors cuz it's actually line of sight. So it doesn't work very well in you know the big Asian cities that are so dense etc. So visual positioning uh is this idea that if you tell me what you're looking at I'll tell you where you are. So anytime you want to do a comparison of what you're looking at to a model of the world. Both those data sets have to be in the same place. So either we're going to send a whole world model down to your AR glasses which doesn't seem

practical. like that's just not going to happen. Or uh what's going to happen is what's happening in a 100% of the cases right now. And all of the big tech companies have built something like this. Apple, Microsoft, Google, Tesla, they've all built something like this where you can send what you're looking at to their cloud and they will respond with where you are. Uh that's a prerequisite for the AR glasses to work. It's a prerequisite for the robots to work. The problem is right that you are literally allowing these companies to know what you're looking at and that is uh an incredibly scary power to have. So in 2021 we decided that one of the most

important things you know not just at venture scale that you can engage in but civilization scale that you can engage in is to decentralize the visual positioning stack. And that means allowing the the venues, the physical places themselves to run the visual positioning system and retain complete control of their data. There are a couple of benefits of this that make us believe that AI will beat Meta to all day AR glasses and that we will beat Tesla uh to all, you know, a commercially viable robot in people's homes. For example, when you approach it, you know, not just the the privacy benefits of this, but you get hyper

local compute as well. Today, uh if you try Meta's latest AR glasses, you know, they're $20,000. You can't really buy them. They're just for research. They only have half an hour of battery. Why? Because spatial computing is incredibly battery intensive. And we demonstrated last year that you can massively extend the battery, massively extend the battery by moving the compute off the glasses to a hyper local compute resource. You can't send it to the cloud because the latency is much too high, right? like it's it's like it's literally impossible to build AR glasses that talk to the cloud um for anything other than uh positional uh corrections.

If you want to do actual real-time spatial computing, it has to happen on the edge hyper local to you. So what we envisioned in 2021 was a network of you know self-s sovereign visual positioning systems and uh spatial compute edge devices that you can connect to that will extend the lifespan of your robot extend the lifespan of your glasses. Uh we think that this is a missing piece of the internet. Like one of the things that really influenced me uh back in 2014, Naval Ravikant uh wrote this blog post saying that the internet was missing a fifth protocol um apart from the the four ones that you traditionally use to describe the

internet. He he said that in the future, remember he wrote this in 2014, right? In the future, we're going to have robots and self-driving cars, and they're going to need to be coordinating with each other uh about the use of scarce resources in the physical world, like how to make use of the road, like how do we negotiate a lane merge. So, he said that cryptocurrencies are likely going to become the trade layer of the internet so that robots can communicate with each other and hugely meaningful. just, you know, put put a number on this. I used to live in Beijing for for seven years, right?

And in Beijing, Beijing is a big city. It's so big that there are more cars on the road in Beijing than there are people in Los Angeles. And the average commute in Beijing is 2 hours. So, if you do a quick back of the napkin calculation, you find that about the time it took to build the pyramids is lost in Beijing traffic every single week. So, of course, there's a huge financial incentive to create self-driving cars that can coordinate with each other. So, you don't need red lights anymore, things like this. But what we realized is you can't do that unless the cars, robots, etc. can also communicate with each other in real time about the physical environment.

So what we are trying to build and what Arthur has been supporting us in is building what we think is the missing sixth protocol uh of the internet. A universal spatial computing layer to allow digital devices to understand physical world the same way we do so that we can be intercognitive not just with each other through augmented reality but uh with our robots and AI. I I think there's a a lot to explore here. I one thing that I I want to point out is this this phenomenon that I think is playing out and and is leading to this conclusion which is that we've gone from this globalist view of the world to one that's more localized and I think we're

seeing that in politics. I think this was almost like this fundamental like polarity shift and now we're going from like you said it we used to be we send everything up to the cloud. You send it to one of your your cloud provider oligarchs. They'll do the computation for you. They'll send it back down. That's almost like a it's almost globalist if it was one cloud provider. What you're describing is hyper local. And so you take you know it's not just that we're global and we're transitioning more local. is that you take that to its natural progression and we end up hyper localized. And I think that's only possible whether I'm not arguing whether that's good or bad, but that's only possible with technology be a a a technology that's so efficient and so powerful that it can coordinate

amongst a a magnitude of local environments at at scale. And I think blockchain is the only answer to that. We haven't had something like that until blockchain and and now it's possible. I I fully agree. I was kind of dragged kicking and screaming into crypto when I had the realization that this protocol we wanted to build wouldn't be possible uh without blockchain. You know, I was very hesitant to enter the blockchain industry cuz you know, you can very easily take a reputational hit. There's a lot of scams around if it's it's hard as an outsider uh to come into crypto.

uh but we realized late 2021 there is no other way of building what we now call DPIN right decentralized physical infrastructure networks you have to do it this way there's no other way to ensure uh uptime when you have decentralized uh supply side like you need to be able to slash participants that do a a bad job being a supply side and it turns out that you would need uh a license in a lot of jurisdictions in the world just to hold a deposit for people so that you could slash Right. So that's that's just practically not going to work. And if you want to imagine a world like we're imagining where when you land in Hong Kong airport, your AR glasses automatically connect to Hong Kong airport's hyper local compute

resources, then you're going to pay a fraction of a cent for the half hour that you're uh using that compute. How how do you do international payments of a fraction of a cent? The crypto is the only way to build. It's not it's not Bitcoin and it's not ETH. Those gas fees are still too high. They're not scaling. Stable coins roll up or what is Yeah, could be. Could be or just some hyper localized very use case specific shitcoin that is like usable, you know, like social currency type of thing like community orientation. But um wait, so so Niels, when you're thinking about this this transition phase here, right?

is we're talking about robots and AR and [ __ ] and like frankly I you know I'm just starting to use LLMs the last year and like you know now we're talking about robots. like where what is this progression here that you see like okay we have LLMs that are very very highly used now like I don't know what the end state is maybe like I got Pizza Hut Jerome coming in and I never have a physical sex ever again like how do I go from like where we are now to like all the way like like what is the logical progression there a a robot needs roughly six things before it can be practical The first part of it we've just started seeing which is a model for locomotion.

Like the robot needs to be able to move around, right? And not fall over. So most robotics companies have now demonstrated that they are capable of locomotion. So what like you need a lot of other things. The second thing you're going to need is a model for manipulation, right? You need to be able to uh touch the world, interact with the world, lift things, etc. And only a few robotics companies have shown a little bit of progress on this. Like man, we're still very very early in manipulation. But still, you need even more than that.

Cuz let's say, for example, that you wanted to ask your robotic girlfriend to water all of the plants at your home. I'm imagining, Andy, that you actually have plants in your home. And uh the robot needs to not only know how to do this, right, which it would know from its manipulation model, but it also needs to know how many plants do you have and where are they. So that means they need some kind of mapping layer, right? But apart from the mapping layer, the robot has to understand where it is in relation to the map. So that's a positioning layer. uh and apart from that it needs to have uh the ability to actually look at the world and understand you know uh so that's the perception layer and then finally number

six it needs an application layer LLMs are probably not uh a very important part of the future of robotics actually like figure AI one of the most written about uh and most highly valued American robotics companies uh recently terminated their partnership with OpenAI and the CEO said well you know LLMs are the least important part of our stack and uh it's it's just holding us back uh where AI is is we are building in the the uh the mapping the positioning and the perception layer and uh we see that most other companies are still focused

on the party tricks that come with uh locomotion and some basic manipulation but to actually ship you a robot that can do something useful. We need to crack these other parts. Uh and making those parts be decentralized and hyper local I think is very meaningful because uh mapping is not going to be solved with a model. Uh that's not the best way to do that. Positioning might be solved with a model but that model again you don't want that model to be controlled by some big cloud. You want a positioning system to work for your home where you can control the data literally. It's not just like, oh, it's your data on my server. Like, no, you can choose to put that data on your Mac

Mini at home and have your robot only talk to that computer. And AI never gets any of this data. And we think this is a much much uh safer version of the future where you don't have to trust people like Elon or me to behave with your data. Yeah. I mean, that's like a big concern in, you know, when I when I use Claude as my therapist because again, I go out and I just can't see. Girls just don't like me. And I'm like, Claude, why don't girls like me? Like, I think I need a robotic girlfriend. And they're like, well, oh, don't worry. you know, you're probably and so when I'm typing to claude, I'm like, and then I'm talking about business and this and then different chats. I'm like, who's getting

this information? Well, it's anthropic. It's in San Fran. But extrapolate that out into the physical world into the into robots and like you like the the effects of that start to become I think much more apparent for better or for worse. So I think like solving this problem now around privacy and verifiability as well as just data storage and um you know kind of the transparency for the users is going to be very very very important and then just like iterating on making them better right because I can just imagine the robot trying to pour me uh water on my plants and it's just like completely missing it and just pouring on the floor because it's like spatially unaware and you kind of got to like tune it up. So um much to see there. kind of want to zoom out of the technicals of spatial

computing and robotics and tie this into a thesis that that I've been thinking about as a 25-year-old Zoomer here, which is that we are entering this era of post scarcity. However, I believe there's this kind of turbulent period that I think has almost already started basically with COVID um into now where like there's just a lot of random stuff that's going to happen turbulent economically, politically. So uh so sociologically, culturally that is going to dictate this like time where effectively we're going to have this period where there's going to be eventually a shift in the way that we think as humans to the effect of why did I spend a lot of time trying to work and

make money and do all this and we're we're going to want to spend time on leisure and we're going to want to have arts and philosophy and and you know this is kind of shared but my specific idea is that there's like there's like this turbulence period where next five to seven years you have a chance to make money to be a part of like the citadel like the link marines for example back in 2017 when I first kind of came around to these guys and 4chan and [ __ ] they're talking about look we're going to get into the citadel and then effectively when everyone's in the matrix kind of like Ready Player One style we're going to we're going to be the ones who kind of control it and we're going to just be able to like basically mess with people like you know you're going you're about

to hit a golf swing in in the metaverse and then just boom, they switch your screen and you're just in your worst nightmare just because they can, right? Kind of, you know, getting off on a tangent here. But so to to kind of tie this up, we're entering post scarcity world. There's this turbulent time that that we have, I think, for entrepreneurs, investors, etc. You have this time period to kind of really like solidify yourself before there's some sort of unknowns. And then I think there's this period where we kind of have this computers are this subordinate part of our reality and then eventually may become like equals and surpass us.

Haven't really gotten all that far yet but you know maybe Arthur help me kind of wrap wrap my head around this like economically or politically like I know I'm crazy man but like what are your thoughts here? people, let's be honest, like there have been science fiction writers and theorists been debating this issue for almost a century now. I think uh and I've just started reading a book, a series called The Culture Series by uh Ian Banks. And it is, if you want to talk about a AI robotics utopia, this would be what it is. And essentially, it's this um panhumanoid mongrel civilization in a galaxy filled with all sorts of aliens. And the humans basically decided way back in the day,

the machines and the AIs are really, really smart. So, we're just going to let them run everything. They are benevolent towards us as humans u and they're not going to kill us. And so, we're in this post scarcity world where there is no money. You don't work. You basically do whatever you feel like you do. you travel the galaxy and you know you enjoy yourself, right? So that this is a utopia and there's more to the books than that, but that's just sort of the backdrop. Um, which one are you? I haven't really gotten to I'm reading Matter right now. Uh, book eight around. Uh, have you read the player of games yet? Yes, that was really good. One of the best villains of all of literature, I think.

Yeah. So again, it's this post scarcity world, but I but then we go bringing it back to 2025, the the pressing part is when in history has humanity ever shared with each other, right? So if we have all this abundance, all this these new technology even today, right? Are we sharing with each other? There's massive, you know, wealth inequalities. We all bust our ass to make money so that we're, you know, socially and monetarily richer than the next person so we can enjoy more things than than the other person. But what happens when all this goes away and we don't have scarcity of labor because it's done by a robot. We don't have scarcity of energy.

We maybe we figured out um nuclear fision or or something like that. And so this concept of a you know a currency that basically all it does is determine resource allocation. That's the point of money. We don't we don't have that anymore. And so then the folks that spent all this time and money and capital building all these things that now could essentially liberate the entire of humanity from work as we understand it. Are they going to sit back and say, "Okay, I busted my ass. I did all this work. Me, I did all these things and now 8, nine, 10 billion people, y'all get to just, you know, put down the tools. You're done."

Is that what we're going to do? No. No. No. You're going to be Citadel, Arthur. No [ __ ] way. You're going to be It's just not going to happen. You know, we're humans. We're imperfect imperfect being. And so then the question is like, how do you survive between between this period? And you know, the way I think about this, you need to make as much money as you can so you can sort of try to step your ass out of this [ __ ] and just watch as far away as possible as [ __ ] gets completely reworked and blown to smitherines. And so I think that's the that's the crypto angle, right? If we're talking about a post-work society where there is some sort of token that's moved between the eyes, the machines, and the humans, it's going to look a lot like Bitcoin. It

might not be Bitcoin, but it'll be something similar. It certainly isn't going to be the US dollar, the yuan, the euro, the yen, right? These are specific country things for their specific populations. We're talking about a human machine society that we're fastly moving towards. And the people who invested all the capital are not going to share it with everyone else. Or the countries that did really well, the developed west and maybe China, are they going to share it with the Bangladeshi or the Filipino that were selling their labor to basically earn a living? Are they going to say, "Fuck you. You you're you're not worth it because you weren't smart enough or didn't support the right leader to get you on this technist future. So you can go die in a tsunami. We're we're over here. Okay. No

immigration." That kind of thing, right? I think that's a future. It's a very bleak future, but that's human nature. I fear that you're right and that the ladder is about to be pulled up. And my my personal bet here, you know, like since I believe that the economy will grow over the next 20 years to encompass at least a 100red billion AI decision makers, build what AI wants to buy. Like that's my personal bet. Build what AI wants to buy. That's what motivates me to get up in the morning and build a decentralized machine perception network. Because these 100 billion devices need to see the physical world, understand the physical world. They're going to want to buy data from each other, compute resources from each other. And

that's that's me trying to grab the last rung of the ladder before it's pulled up. I I I think that's exactly the this brings us full circle to to the post scarcity in China that we're seeing as on a trial experimental basis right now with all the technology and automation that's happening there now. those who realize the impending ladder that that you mentioned being pulled up, they're going to try to grab onto that ladder and and exactly make as much money as possible and and grab on and invade the citadel and be a part of it versus the ones the rollup the rollup citadel and and the ones who don't realize that are

going to be perfectly happy with their Beijing apartment in a post scarcity world going to see their favorite K-pop and but I think Beijing is like a great place to be. I'm talking about the Philippines Bangladesh subsaharan Africa, parts of Latin America. These are places that we barely care about today in any event, but certainly Xiinping and Donald Trump are not selling their population. I'm going to invest in the national glory of America and China so that we can share all this with the rest of the world. That is not the message. Um, so if you're a proletarian fle in Beijing, you have hit the [ __ ] lottery. You're not in [ __ ] Manila or somewhere else um just dying.

But even those in Beijing or those in America are still going to see this metaphorical ladder and try to grab onto it. Sure, but they're within they're within a certain but I I think point is that there's a lot of people that don't have a chance to grab the ladder right now and the post scarcity society is going to be very unevenly distributed. scarcity is going to get worse for some people is what I think Arthur is saying that as the the rich world gets richer, the poor world will get a lot poorer because no one seems incentivized to just like, hey, now that we're rich, let's make sure that poor poor Venezuelans can can live.

100%. And in that same Bessant interview, I heard another statistic. It said in the summer of 2024, more Americans have took European vacations than ever before. In that same summer of 2024, more Americans have visited a food bank than ever before. Just to illustrate the point that like you guys are like I 100% there is this growing disparity between the rich and the but at least there's a food bank. So that's not not to denigrate poor people in America, but at least for the there's there's no [ __ ] food bank in Manila or in like Laos or Camb like Cambodia, there's no [ __ ] food bank. So like you can't go anywhere. There's not even a chance to get any human like

compassion. You're just [ __ ] So that that is the scary part. And that's you know four three four billion people we're talking about because all they do right now is they sell their labor to the us. They're the helper in our home. they're the delivery a person to the cheap construction worker. But when we in a post scarcity robotic world governed by AI and computers, we don't need any of those people anymore. And so then are we as a global society, whether you're communist or democratic or whatever, are these successful systems within their own right going to say we're going to extend a helping hand to those who have no have nothing and we need nothing from them either. That's I think the scariest part of this 100%.

and and that's probably a a sort of intermediate stepping stone where there is like post scarcity in certain jurisdictions and then there is still a lot of scarcity in those those Philipp I think we're kind of stepping around this idea that this is a like AI and robotics is very seems like a very deflationary uh active force in the total sum of all of what's going to happen very deflationary force but kind of looping back all the way To Arthur, your original point from some of your tweets today was around if China's going to go and do this independent currency theoretically inflated a ton based on, you know, what guys like Niels are providing in and in this industry,

right? Automation, etc. Like like are these forces going to be able to kind of uh cancel each other out or like how do you think about like we're circling around this idea that AI is very deflationary and how is it it's going to affect uh certain countries? Yeah. I mean, I think the whole fiat fractional reserve baking, which every single country runs, isn't regardless of what they claim on the on the tin, that doesn't work in a system where you don't need a a a monetary thing to determine who gets what, right? If everyone could theoretically have it.

So, that's the point. And then, okay, well, that's the end game or some sort of intermediate end game. We don't know how long that takes, but along the way, how do you survive to get to the promised land, right? Uh, and that's I think that's crypto, right? It's the only thing that technically could survive a complete deflationary bust of the entire system. And obviously the way that those in charge who absolutely recognize this is not like we're we're some special people record. We're just reading fiction and looking at things that any other person could do. If you're at top the current fiat system like oh [ __ ] right? like I'm going to try to forstall this as long as I can to make my money. So, let me inflate this [ __ ] away. So, let me print all the money I can to to make sure that we

don't have this adjustment while I'm while I'm at risk. So, which feeds into the same thing, heads I win, tails, you lose. I'm trying to build robot money, right? That's that's what I'm I'm I'm trying to do, you know, Bitcoin hard money. That's great. AI robot money. And I'm uh that that that's my bet. That's how I'm going to feed my family. Um that's how I'm going to uh not get eaten by the robots, make robot money. One key takeaway from this pod is there's 21 million Bitcoin and there's 7 billion people and counting. and apparently a hundred billion AI decision makers who will need to have some sort of currency and and a 100red billion

hyper localized compute environments that will all coordinate with one another. Well, Neils Arthur, it's been an absolute pleasure guys just kind of closing out um where do we go from here Arthur? What the the hell is going to happen in the next couple weeks on the tariff side, market side? Do you think we are in for a prolonged first half of the year bare for crypto? Uh some people are calling for an entire year bare and also is ETH just completely cooked just to be surpassed by every other better asset because it's absolute garbage now.

That's what everyone's saying. Or are we in kind of deep value territory here? Uh so I am obviously extremely bullish on crypto and even the pretty short term. I haven't been able to do enough research, but I believe there was a closed dooror Fed meeting yesterday. Obviously, I'm sure to talk about market movements. There hasn't been a statement out about it yet. Uh before I got on this uh recording, I took a look at the move volatility index of the bonds. It's at 135, which is pretty much where it was in September of last year when PAL decided to cut 50 basis points to help Kamala Harris attempts to win the election because of some other issues in the global monetary system.

So, we're on the cusp of central bank intervention. I haven't taken a look at the um well, they'll come out in a few hours. The uh the fix for the the yuan this morning by the PBOC, but offshore traded as high as 7.35, which is probably a 5year uh high in terms of USDC. Are they going to jack rates internally in China to bring that back down to strengthen the currency or is China saying, "Fuck you, Trump. I'm just going to uh start this devaluation that I was going to do I had to do to to reflate my economy. So I think that we yes it looks a bit a bit bleak and all these sorts of things but again what do we know is true they must print money they being anyone in charge because they

do not believe that they need to retrench and have austerity measures and cut spending to a degree to rebalance the system. Therefore, I think this is this has basically accelerated the start of the, you know, as Raul Paul say, the banana zone, right? Because if we didn't have this tariff thing, we would have limped along. I don't know how long it would have taken. We would have gotten to the same place. I guess would have taken a much longer time. Um, but Trump, for whatever reason, I'm I'm going for it. And this tariff thing has is forcing us to realize the the faults in this system that we're going to be able to have to be fixed with printed money anyways, but we're going to get there sooner. Now, what that means for stocks, I have no idea. I think that people, you know, buying the S&P and NASDAQ at these

levels are um are idiots that think that it's just going to get smoked because you look at what happened in 2008. You know, once you start printing money in this sort of collapse, the markets don't necessarily automatically respond. There's a little bit of a lag between uh what happens. But if we know, we know Bitcoin responds pretty much immediately to uh a change in central banking policy, which I believe that we're on the cusp of. So, I'm extremely bullish. Again, I use no leverage. Um, we've been, you know, buying dips. We think Bitcoin dominance is going to continue, which means that, you know, ETH and all the other shitcoins are going to struggle for a while. But, you know, I think we could get back to 70, you know, 70%ish level on Bitcoin dominance. And then if you get a ripping Bitcoin market, then we get sort of the

explosion in alt season. And I think because ETH has been the most hated layer one, probably the most hated mega cap crypto the last cycle, it's probably poised to perform the best in in the next leg up. So I'm extremely on a riskreward basis um bullish on ETH because everybody hates it. Amazing. And um whether you're holding ETH or Soul or Hype or TIA or Sweet or Aptos or whatever name your layer one um ETH has definitely underperformed and so I think there's a I think a part of the community has missed that and I think that's partially because we haven't that's kind of why I I think that we haven't gotten all season like it's always just been ETH kind of leading the

way. I mean we had a Salana season we had and we had a meme season. Um, do you think Fartcoin is going to be the leading memecoin for the next bull cycle? I hope so. I guess be funny, but I don't know. It doesn't matter. I'm sure I'm sure if you have on, he'd have he'd have he'd have a thesis on what why something in his portfolio would go up. But, you know, one of them would do well, but I don't think memecoins is coming back as a trading uh situation as it was past cycle. Just the same way that NFTTS while they still exist and there's punks and all the other things that still have lots of value, they weren't traded in the same uh amount in this particular little mini cycle from 2023 to 2024. So, it'll be something new. I don't know

what the new shitcoin meta will be. Um, we'll be participating as with everyone else because it's fun, but yeah, who knows? Do you have a favorite shitcoin? A favorite shitcoin? No, I don't have a favorite right now. Um, I wanted to do something ridiculous. I don't We We need You mean maybe Bitconnect? Just because I love that video of uh Wow. Bitcoin. One of my favorite videos probably have to be my favorite shitcoin.

That That is so legendary. I think we have to we got to start the podcast like that is Arthur saying. Yeah. Hey Neils, just to kind of wrap us up here, man, take us on a more serious note home. What are you most excited about with what you guys are are cooking? Um what's exciting in the robotic, spatial computing, AI space for crypto? Um and yeah, man. Um where do we go from here in in this space 2025, 2026? Uh we are in the process of rolling out to a thousand locations right now with a a single customer. uh on track to hit 10 million ARR this year. We think about a

quarter of that will be onchain burns and by this time next year we believe we will be the biggest deepin by revenue. Uh we're incredibly excited about the bet that we've made on collaborative machine perception and making the physical world accessible to AI. Like I truly believe there is no higher leverage activity that we can do as a civilization right now than prepare the physical world for the coming of the robots. The robots are coming. The institutions are coming.

That's what we said in 2017 and now they're finally here buying our bags. I was trying to tell my friends this the other day. I was like, "Guys, the robots are coming. The institutions are coming. Just be patient." Arthur, I just did a pod with Arthur. He said that they're going to print. Now I just did next one with Neil's AI guy. Don't need a job in five years. I gotta have a girlfriend. We're all gonna be all right. Thank you guys for joining us. Thank you guys. I appreciate it. It's been fun. Thank you