Great Houses

Gregory Treat: All right.

Hello, everybody.

Welcome to episode 19 of The Great Houses Forum.

Today, we're gonna be continuing our conversation on, uh, the architecture of trust.

So last week we talked about, uh, a little bit about the architecture of trust, and I, I kinda gave you, gave you my thoughts, um, on, on some very interesting articles.

So there's two articles, um, that we're gonna be talking about, uh, today.

The first one is How Funerals Keep Africa Poor, uh, by a guy named David Ocks, and then How to Become Trustworthy by The Creative King.

So what I, what I, I, I t- talked kind of at a high level about those articles and, and what they, what they were saying and kind of my, my thoughts and responses to them.

But I wanted to start off today with some quotes so that we can kind of understand what I'm, what I'm seeing, especially in that, that first article.

So, and, and, you know, as I said last week, this is a, uh, this is a liberal discussing how everyone should just embrace liberalism
in all of its forms, and wouldn't that just be better for them than, uh, you know, maintaining these outdated family structures?

Which, you know, is, is kind of what you expect liberals to do.

But, uh, well, anyway, you'll, you'll see what I mean

So he says, "Kinship societies are actively hostile to economic growth because economic growth undermines the basis of kinship.

That is why kinship societies demand constant visible sacrifices of wealth, funerals being the most spectacular that make it, it extraordinarily difficult for any individual to accumulate capital, reinvest their assets, and pull ahead.

The funeral is a window into a system of wealth destruction that serves above all else," ah, above all else, eh, "to keep people poor." Um, and, and he's talking about the fact and, and, and this
is a real problem, I wouldn't deny that it's a real problem, uh, that in, um, many parts of Africa and, and th- this, this is not just a- an African problem, but, um, there are funeral rituals.

Uh, I'll note that those funeral rituals were developed in a very different economic context.

We'll, we'll get into that here in a little bit.

Uh, but there are funeral rituals where basically instead of actually taking care of your old people or taking care of, you know, your family and kind of having a productive economic base, you spend all of your money on this big party after somebody dies.

And of course, you know, these are, these are, uh, not parties where your, your family and your extended kin group is actually putting on the party.

You're not slaughtering your own, you know, cattle to, to, to be the fattened calf.

You're not, you're not using your own produce because most of these people are urban city dwellers.

They have no productive base to speak of.

They're just going out and spending money on the open markets.

And, uh, so when somebody dies, they, they basically put them in a, a refrigerated box, right?

One of the, the morgue boxes where they're kept for, I think, up to like a year, and they go around to their, you know, increasingly large extended family networks trying
to raise more and more and more money to have this great big splendiferous party and, you know, basically selling them- driving themselves into bankruptcy doing so.

And, and the reason for this, um, as, as he goes into is, uh, there's sort of just the, the, the general idea, which is, "Hey, this is what we do. This is our
tradition." But there's a, there's a... When you study it, there's this real sense that doing this sort of behavior is what loyalty to the kinship group looks like.

Um, and, and the reason for this, they say, is is that kinship groups are threatened by accumulations of individual wealth.

So here's, here's a- another quote that I, I pulled out from there, uh, where he, he talks about this more in-depth.

"If a productive individual can simply withdraw from sharing obligations, then the network must demand more from those who remain, increasing the incentive to defect."

Ah, that's a very interesting word.

So, so, so defection is, is the thing that we're trying to, to, to worry about here, okay?

"So the entire delicate machinery of mutual obligation collapses in a slow cascade.

This is the death spiral for kinship networks." And then he continues, "So over time, societies based around intensive kinship have developed strategies to make defection difficult.

The most important of these is the ritualistic destruction of individual wealth." And he, he talks about the potlatch, which was a, a Native American, um, habit of a- when
you accumulated a certain amount of wealth, you would just gather it all up and kinda set it a- you, you would hold a big party, and people would eat and drink and be merry.

And then at the end of it, that you would set whatever remaining wealth you had on fire.

And so kind of he ends... The, the, the last quote that I'll give you is, "The glue that holds together kinship society is the occasional immolation of built-up wealth." Um, so yeah, this is how funerals keep, uh, M- Africa poor.

Um, it was published on April 9th, 2026 by David Ocks on, on Substack.

So what I would say in response to these quotes, and, and, and again, there, there, there is some, there's some real problems here.

I would say life is hard.

Uh, uh, and, and as, uh, you know, um, as the Duke was, was fond of saying, uh, it's harder when you're stupid, right?

So there is a great deal of difference between strategies that make the individual poor, at least on paper, um, o- and, and the tribe rich, which, which
was, is, is something that many successful tribal societies throughout history and in the present day, we'll get to that probably not, not in this episode.

Um, but, um, but the, the, there, there, there are groups in your country that are doing this w- with, with great levels of success right now.

Um, but there, there's a great deal of difference between s- uh, strategies that make the individual poor and the tribe rich, right, and strategies that make the tribe poor, okay?

And then, and then kind of the, the secondary thing that, um, that, uh, the, the proper level of analysis is probably at the worldview level.

The tribal Ghanian, um, Ghanaians that, uh, Ocks is, Ocks is talking about are, are probably already halfway defectors from the o- older tribal structure.

So there's... You know, when you think about this stuff, something is going on.

Um, and, and you know, last week I talked to you guys a little bit about the, the math of trust, and I, I think a better, a better framework for this is actually the math of defection.

So the cre- creative kingmaker puts forward he, he has a, a, a formula for trust.

He says, "Trustworthiness is the ratio of irreversible cost already paid divided by potential gain from defection." And I think a better framework is that is, is, is to reverse that.

So we, we should say the likelihood of defection is negatively related to the proof of work a person has, uh, in m- basically put in, divided by the benefits of, of defection.

So, um, I have an equation that I've put together, or Grok helped me put together this equation.

The equation is LD equals one, which would be, uh, you know, f- 100% likelihood of defection, uh, minus proof of work divided by proof of work, plus benefits of defection, okay?

Now, there's a bunch of different ways you could mathematically model this, and am I saying that this specific mathematical formula is correct?

No.

Okay?

I think that, that, you know, th- It's, it's, it, this is more of a thought experiment.

It's more of an exercise to recognize, hey, when you, when you put some, some effort into a system, all right?

And then there's some real benefit from defection, you're, you, you have a likelihood of defection.

And, and that likelihood is never, probably never 100%.

By the same token, it's probably never entirely zero, and that's, that's, you know, the, what, what, what equations of the type that I've described give you.

The main thing that I want to point out is if you ban someone from having the right to perform some version of this equation, you are saying that they don't, they don't have the right to exist as a group, okay?

You're saying, hey, like the, groups that you say, "Hey, well, they have the right to consider, are you likely to defect and, and if you're likely to defect, to treat you
differently, to discriminate, right? Or to exercise judgment based on your likelihood of defection." There's always some group that has that right in any given society.

And, and whatever groups that we want to cease to exist, we do, we just take this right away from them.

If you're no longer allowed to say, "Well, let me think about this.

If I invest in you, and you might defect, and you might, you know, take the stuff that I'm, that I'm investing in you and, and, and not give me any kind of return or any kind of benefit, how, how should I think about that?

How should I respond to that?

Should I respond... Do I have the right to respond rationally to that type of analysis?" Okay?

Um, and again, if, if you say someone doesn't have the right to do that, then, uh, you're, you're just basically saying that they, they don't deserve to exist as a group and you're, you're probably trying to exterminate them on a, on a variety of levels.

Okay?

Let the reader understand.

So I also wanna emphasize as we're thinking about this that, that proof of work does not equal your current account balance, which is to say, how much could you cash out from a given system, right?

Uh, and, and this is, this is very important to kind of to understand.

You know, people do not merely care about being able to transfer their balances from one ledger to another.

That's great, right?

We'll talk a little bit about a theory of money and, and what, what people are doing with money and what they think they're doing with money.

Uh, but, but when you, when you think about defection and people switching between systems, accounting systems, ledger systems, loyalty systems, um, people care deeply about how hard they
have worked, how much they have invested in one system, uh, no matter how untrustworthy that system is now, and almost in some senses, without regard to how much they can pull out, right?

Like, pulling things out is, is good.

That's nice.

That's in some sense necessary.

They have to be able to pull out enough to, like, live on or have an expectation of living on.

You know, there's kind of a, a minimum floor, um, there.

But if you don't have, um, if, if you don't acknowledge, hey, humans actually care a lot about just how much they've used something, how much they've put it in, um, then, then you're, you're, you're, you're going to misjudge people, right?

People are not actually oriented reliably towards the current cash value of a thing, right?

Or, or, or, or for how much they could pull out.

They are, they are attached and, and you know, you, you can call this sunk cost fallacy and, and there's certainly a, a, a fallacy, you know, to be engaged in there.

Um, but it's, it's really important to understand this is, this is how humans are.

Humans want to have predictability and reliability and, and, and sameness a- across their systems, and if they put a lot of time and
effort in to a particular system, if they've spent a lot of money, you know, in one currency, they're not gonna wanna switch, right?

Um, this is, this is stickiness, right?

And, and you know, kind of the entire app economy depends on stickiness, okay?

So now there's two layers that, that, that I wanna distinguish, right?

Um, so there's, there's doing real work in the real world and exchanging it for tokens, right?

Those can be, you know, fiat dollars.

They can be, in some sense, you know, even gold or silver certificates, things of that nature.

And then what we're gonna call burning a token, once you've already tokenized something more or less real, uh, to acquire benefit in another, okay?

And, and then the, the second layer is these transactions can be trustless or they can be trust-based.

Most transactions are actually trust-based.

Um, and, and a huge amount, I think, of human psychology is actually built around dealing with, with, uh, with trust.

So one of the, one of the interesting things is, and this kind of gets to the, the, the likelihood of defection, um, stuff, is when you had, like, the Bitcoin cash, uh, debates in m- uh, w- when was that?

The mid, mid-2015.

Um, what what I just found so fascinating through all of that was, you know, miners are incentivized to do a s- very narrow set of things correctly and accurately and, and, and, and tr- in, in a manner that's trustworthy.

But people attributed to them all of this interpretive authority, right?

In the discussion, it was... You know, you have the Bitcoin Core team, right, which were the developers, and you had the, the mining community.

And, and these people, the way that the community interacted with, with those groups, as though they were representatives, right?

As though they had some mystical right to speak on behalf of the whole was n- number one, just very interesting to me.

And, and I thought it was hilarious to sort of watch, you know, this, this, this trustless system almost, and then in some... You know,
some people would argue, especially after the Epstein revelations, that it, it perhaps was deviated from, uh, from its original purpose.

Because people, this, this, this psychological tendency to extend trust and to extend representative authority was too strong in humans, and so we did it kind of will, will they, nil they, right?

There weren't enough rational actors in the Bitcoin ecosystem to, uh, to avoid that, which is, you know, hilarious.

So So let's talk about, you know, levels of ownership.

So there's two layers.

Whoops.

Yeah.

Th- th- there's different levels of ownership.

So in, in some sense, all humans have is some measure of time, attention, and effort, right?

And, and some people un- uh, uh, very unhelpfully in my view, or mostly unhelpfully in my view, call time, attention, and effort, they
just kind of combine those three things into labor even though they're, they're, they probably should be distinguished in some way.

Um, don't worry, AI's gonna s- help, help, help solve that for us, right?

So we're told.

Now, we use time, attention, and effort, um, to acquire property rights in tangible, and these are overwhelmingly non-fungible things.

We might call this type one property.

So this is your real property, your chattels, your stuff, your, your clothes, computers, um, um, you know, all of the stuff, your cars, all of the stuff that you use in your life, okay?

And, and, and we would think of all of that as type one property, okay?

Uh, you could make a distinction obviously between chattels, the things that you can pick up and carry with you, and real property, which you can't pick up and carry with you.

Um, but, but in, in all cases, you know, we're, we're, we're acquiring property rights.

I'll note actually that, you know, conceptually you could distinguish between the thing itself, right, the tangible thing over which you have an ownership claim, and the ownership claim which is sort of an in- intangible legal theoretical right, right?

It's not, it, like, there isn't actually a magical bubble that comes down and says, "Oh, this is owned by, by person A or person B." Um, despite, uh, despite many protestations by the libertarians of the contrary.

Um, so in between the sort of this pure unrealized time, effort, and intention on the one hand, and type one property, we have rights we tend to acquire, societies tend
to acquire rights in highly fungible and increasingly intangible things where your past effort accumulates until at some point you reduce it to a type one property.

We might call this type two property.

And, and, and this is when people say, you, you people, you've probably heard this expression, money is an incomplete transaction, right?

This is the kind of thinking that people are engaging in when they say money is an incomplete transaction.

It's, it's this place to, to stick stuff that you haven't quite reduced to something that you can actually engage with or use or, or kind of enjoy ownership of.

So we're just gonna stick stuff, you know, we're gonna stick this, or have this kind of transitionary phase where we're, we're quantifying and tracking and, and
allowing people to accumulate the, the, the fruit of their effort until they can, you know, accumulate enough to make it worthwhile to cash out and, and get some stuff.

Okay?

So, um, you know, we, obviously the one way of, of, of dealing with this is, is cash, right?

Or, or the, the the first coins, you know, gold and silver, these kind of valuable things that can be chopped up and then later on, you know, property certificates and, and, uh, and then fiat currency as we know it in, in all of its glory today.

But is there any other way of tracking an incomplete, you know, partial transaction, right?

Perhaps people might gather around and decide to give each other badges, uh, maybe ceremonial headdresses.

The Creative Kingmaker talks about mammoth beads, and, and mammoth beads are really interesting, um, because y- you think about how do you get, how do you get a mammoth bead?

Well, you have a tribe, and the tribe has a hunter, and the hunter goes out and he brings back food.

He brings back a lot of food, not just enough for him and for, you know, his wife and his children, but he brings back enough food for the entirety of the tribe.

The tribe has basically no assets.

There's nothing that they, that they can do.

They, they can't really repay the hunter in any direct sort of way 'cause there's no, probably no cash economy.

Um, but he still gives them food.

He still feeds them, right?

And this creates excess labor, right?

Uh, some, the, the internet was, was not willing to give me a straight answer on, uh, how, how long it takes to create a, a mammoth bead, right?

To get some, some bit of mammoth ivory and then kinda hand turn it until it gets smooth and shiny and, and assumes a nice round shape.

Um, but somewhere, it's somewhere between hundreds and thousands of hours to hand turn a mammoth bead.

And so having one of these mammoth beads around means, hey, I come from a place, or this, this bead comes from a place with a tribe that had such a good hunter that he was
able to s- effectively subsidize in non-economically fruitful pursuits somebody to sit there and hand turn a mammoth bead for, you know, 5,000 hours or whatever it was, right?

And that, that recognition of that past work performed confers a, a, a type of social status on, on a person, right?

And so what, what is, what is that social status, right?

It's other people looking at them and going, "Wow, you either are a really good hunter, um, or you have such a close relationship with, with
someone who is a good hunter that they can afford to feed somebody for thousands of hours while they do something that is technically useless."

It has nothing to do, right, the creation of the, of the mammoth bead is not directly related, you know, to anything that the, that the tribe has to do for survival, at least not, at least not obviously.

Okay?

And so h- you know, I just kinda wanna point out that these, these categories are, are non-obvious, right?

What exactly is the ontological difference between spending money on stocks and other abstracted ownership rights on the stock market, and
spending capital to acquire intangible rights to social capital that is valued among your family and peers and friends and, and your tribe?

Obviously, when you live, when you live with your tribe, when you live with 75 to 300 people, and those are the only people that you interact with, uh, that tribe has a lot more influence on your, on your wellbeing.

Your, y- your, their willingness to sort of lend you money or to, to give you labor in anticipation of future gain, right?

Um, is, is much more directly related to your survival.

So we don't, we don't have that now.

We kinda tend to discount it.

But when, when you think about it conceptually, what, what is the difference?

Um, and, and, and I'm gonna propose, you know, a couple of differences.

The differences are, are size and which group of, of people you are trusting to allow you to pull your intangible rights out, okay?

And I'll note that the people that you're trusting to, to allow you to pull your, your, your rights out, allow you to cash out, um- Those people tend to have a religious or a quasi-religious nature.

Okay?

And, and the question is what fees and conditions will they impose on you for, you know, giving you the privilege of cashing out your, these intangible rights for actual stuff?

Another way to, to ask this question is what is exactly the difference between a bank board and a group of tribal elders?

So fun story, I worked for a bank, uh, early in my, in my career, kind of basically while I was waiting for my, um, my bar results to come back in.

Um, and, and a little bit after I got my bar results.

Uh, it was, it was a, it was a fun job, uh, doing credit analysis.

And, uh, you know, I, I kind of... as I, as I became familiar with the way that the bank worked, um, they, they, they were an older bank.

Um, they had, they had kind of a, a more traditional structure, and so that structure included the, uh, the senior pastor, or I think actually he was the pastor
emeritus by that point in time, of the large Baptist church in the town that this bank had originally been founded in, which I just thought was fascinating.

And so I just kind of made inquiries about the rest of the members of that board, and, um, the story was basically these, these, these were the town elders.

These were the tribal elders.

Now, I was there at the bank as they were kind of massively expanding and they eventually I think got acquired by somebody else after I left.

Um, so that is not the case now.

They are now just kind of a corporate, you know, clone just like every other, you know, financial institution that got gobbled up in the last, you know, five to 10 years.

Um, but, but in their minds I re- I remember asking about this and asking kind of my supervisor about this and, and he goes, "Well, I mean, that's how all banks used to be." Right?

Like that, that... and in fact that he maintained that was necessary to do good banking, to actually make the kinds of discretionary decisions that you
needed to make to, to, to, to look at people and say, "Well, well is this person gonna, gonna do the things that are necessary to get the loan?" Right?

To, to repay the loan that we want to extend to them.

You know, should we give this person credit cards?

Are they the, are they the kind of person that if we give them credit cards are just gonna run up the credit cards and go bankrupt?

'Cause what happens with that w- a lot of times basically and with modern, uh, modern bankruptcy laws and such is that the credit card companies just are kind of, they get stiff.

They get nothing.

And the bank that sold the credit card companies this client, uh, gets a usually some kind of black mark on them.

Okay?

You know, and, and now th- th- there is a critical difference, especially when it, when it comes to scale, right?

Uh, I've ta- I've talked to you guys before about Dunbar's number.

Um, and, and Dunbar's number is, is sort of this feature of the human brain that you have on average about 150 friend slots in your, in your head.

Now, 90% of the population, I think the number is, I think it's a bell curve, as I recall, and 90% of the population has more than 75 slots, 97% of the population has, uh, less than 300 slots, and then obviously there's, you know, kind of people
on both sides that, that have, um, either way outliers in terms of their ability to track people and, and just, you know, folks that probably have, have some kind of IQ deficiency and they're, they're unable to, to track very many relationships.

Um, but your Dunbar size, your Dunbar number matters to this a lot, right?

Because one of the things that the Dunbar number does is if you... Especially as you get closer and closer to what they call a fully networked tribe, where the only people you hang out with are the
other people in this group of 75 to 150 people, uh, the, the more that you genuinely don't need money because your brain just tracks all of the relative flows of value between the members of the tribe.

That, that's something that your brain can do on a small enough scale.

Um, and, and, and, and your brain can't do it, you know... Again, there, there, there are these very hard limits where half the population cannot track more than 50 connections or 150 connections.

You know, 90% of the population simply cannot track more than 300 of these connections.

Uh, but if you're under the limit, right, for most of the people in your group, money becomes much less of an issue.

You can, you can sort of trade and lend and, and, and, and, and understand, hey, this, this person is a good person, and your, your feelings about them being a good person are actually backed up by how they've behaved, which is really interesting.

Again, this is, this is one of those, um- This is one of those parts of your brain that TV just hacks, right?

So, uh, you know, if you, if you... Most people will have a, a Dunbar category, a Dunbar slot for police officers, right?

And they kinda just view all... And, and this is not, like, something special about police officers.

The reason why groups wear recognizable uniforms, like military and police, et cetera, is to take advantage of this effect, right?

To take advantage of the authority that comes from a, a large group that, that kind of occupies one slot.

You're not, you're not supposed to see the person, you're supposed to see the uniform.

That's, that's intentional, okay?

And so, um, but one of the things you can do in a, in a TV environment is if you show somebody a bunch of TV content of cops basically
being heroic, right, uh, then they will start to attribute those to all people wearing similar cop uniforms that they encounter.

They will just naturally kind of have this feeling of, "Well, c- all cops are heroes 'cause that's what I saw on TV." By the same token, if they watch a bunch of TV content that says, "Well, cops are terrible people, um, uh, you know,
they're, they're, they're corrupt and they're, they're, they're cheating you and they're, they're killing unarmed Black people," and all of these things, you will begin to attribute that emotionally to all cops you, you, you interact with.

So, um, and, and that's like we, we just really haven't figured out a way of solving that.

Like, that just seems to be, um... E- even, even for people that know about the effect and know that it's going on, if you consume that content, you will still experience those feelings.

Um, so you just kind of have to govern yourself to decide what content you're gonna, uh, what content you're gonna watch.

And, and, and, and I've used, I've used police officers because it's the, the least, uh, objectionable of the categories that I could use.

But you could do this for any visually distinguishing category, right?

I'm sure, I'm sure everyone that's listening to me, um, that comes from the, the places that I come from, uh, knows what I'm talking about here, okay?

But one of the things I wanna, wanna, wanna emphasize is that, that these, these types of abstractions, these, these frameworks, these are a priestly function, right?

In, in all times and places, these are religious or quasi-religious structures.

Um, you know, th- there's a great lecture on the historical origin of money by a gentleman, uh, named Professor L.

Randall Wray.

You can, uh, or, um, his, his name actually starts with a W, W-R-A-Y, uh, L. Randall Wray.

Um, and he does, uh, uh, a, an incredible lecture, you can find it up for free on YouTube, about how money actually originates as a, as a blood price, which is just a fascinating, a fascinating thing, uh, to, to be the case.

Um, so, you know, originally money was a, was a temple chit that could be redeemed in, in the animals you needed to sacrifice to expiate your sin.

And the original denominations of money were very large amounts.

They were, they were specifically the amounts that you needed, uh, th- that were necessary to pay, uh, for the sacrifices that were the, the appropriate sacrifice for killing somebody else, killing another human being.

All right?

And, you know, so herdsmen, especially herdsmen who specialize in ritually pure animals, you, you think of the, uh, the shepherds who, uh, who, uh, witnessed Christ's, uh, Christ's birth, right?

The, a child is born unto you, uh, unto you this day in the city of David a, a child is born, right?

That, that, that scene from Luke.

Um, those guys were associated with the Hebrew temple complex.

They were people that their job was to sit there and raise ritually pure animals, not just for the temple in its own pri- but, but for anybody that might be coming in that needed to purchase a ritually pure sacrifice.

And, and this is, you know, so people would, would begin to gather around the temple to sell their animals to the people who needed to perform the ritual expiation.

And this is literally, as far as we can tell, what led to the first written records and the first tax-based governments as we understand it, okay?

The first governments as we understand it.

So, so taxes and the, and the monetary economy of the temple, the temple complex, is the oldest, you know, signs of civilization that we have.

That's what the ziggurats are.

That's what was going on at all of the ziggurats, and that is the origin of government, and that is the origin of money as we understand it, okay?

So again, when I say what is the difference between a bank board and a group of tribal elders, accounting for context, these are the same people.

And that is why, you know, and I'm gonna disappoint some of the people in my audience, 'cause I know you're great lovers of, uh, of It's a Wonderful Life.

But in its day, It's a Wonderful Life was seen as a very left-wing movie, and the reason was because for hundreds of years, and I've, I've talked several times I think about a Model of Christian Charity by, uh, John Winthrop.

Um, it was seen as the domain of the church, like it w- w- the people that were supposed to be lending to each other, especially for things like businesses and housing and, um, that was supposed to be Christian.

That was supposed to be done by Christians, right?

Um, until fairly recently, uh, b- yeah, I mean, I meant that more in the context of the movie.

Um, probably until the 1890s it was, it was just understood that banks should not be lending to ordinary people.

That's what Christians, you know, and, and other religious groups would do for one another.

When, when a town became Catholic, one of the things they would do is they would start a parochial school, and the second thing they would do is they would start a, a kind of a business lending network.

And, and, and, and everybody understood that that's part of what was, what was, what was happening.

You, you can read a lot about that.

What's, what's sort of glossed over by that is the reality that the Protestants were doing the exact same thing.

Everyone did this, right?

You... What it meant to have a town where you were engaging in community is you lent to one another, okay?

You, you, you looked out for the other members of your covenantal religious community, and you made sure that credit was available to them for things like buying houses, starting businesses, so that your people wouldn't be poor.

And you understood that sending those people outside the community to borrow from people that were not friendly to you would result in your community's, I mean, extinction effectively, okay?

And, uh, you know, if you, there's a, there's a great book, uh, again, A Model of Christian Charity by John Winthrop, um, and there's, there's a link posted in the chat.

And then, uh, there's another book, uh, Brethren in Christ: A Calvinist Network in Reformation Europe by Ole Peter Grell.

I think I'm pronouncing that name correctly.

He's a Dutch dude.

And, uh, you know, basically this is... The, the reason the Reformation happened w- uh, one of the key kind of subtexts, one of the reasons why it, it was able to flourish was a number of the
early converts happened to be Northern Italian bankers who just kind of moved north the more that that, uh, persecution came down, and they financed and funded, uh, the Reformation by and large.

Like, they, those, those guys who understood banking and understood lending were the people that made it all happen.

Um- You know, the, the, the for, for a while there kind of in the early days, the, the Lutherans were able to take advantage of some of the Jewish lending networks.

Um, and, and that, you know, that, that ended abruptly around the time that, uh, of the, the Peasants' Revolt.

And there's, there's pe- you know, people, people kind of have their, their opinions on that.

One of the things that I point out people just don't often seem to recognize is those Jewish banks were lending the money of Charles V. Like it was Charles V's currency that they were, that they were lending.

And when the sovereign said, "Thou shalt not lend to people that are in open revolt against me," uh, they, they by and large stopped, which is usually what bankers do.

Uh, but so then the, the, the Reformation had to replace that.

They had to have their own bankers, and they did.

And this is, this is their story, brethren in Christ.

And it's, it's in some ways it's a really, you know, it's a really interesting historical strategy or historical account.

But it's also, um, it's also a thing that it's like, wow, the, the, the story is also a story of breakdown of, of larger household structure.

So I, I, I commend it to all of you, okay?

Um, but you know, one of the things I wanna point out here, um, is that, that in all of these, in all these cases it's defection mitigation all the way down, right?

Um, you know, one of the things that I, I, I point out to people in, in this, in this context is that there is a relationship between citizenship,
taxes, and government services, uh, if you can call what we receive services, um, that sounds a lot like senseless immolation to me, right?

And if you try and defect from that system, watch out.

Strangely, Ox does not note this similarity.

I just wanna point that out to everyone.

Um, so, so, so, uh, uh, I'm not saying he's unbiased or anything, I'm just, I'm just noting.

Um, so as many people have noted, the biblical taxing model which was very tribal indeed, very kinship group oriented.

I mean, they literally, you know, if your, if your brother died you were required to marry his widow.

Uh, you were obligated to marry his widow, um, to preserve the, the, the name of your brother.

That's, that's, that's as tribal as any group in history, okay?

And it-- and that was in the Bible.

Uh, but the taxing was quite lax by our modern standards.

I mean, it maxed out at 23 and a third percent a year, and you got to eat a lot of that, right?

A lot of that tithe went directly back into, you know, festivals and things that people ate at.

So in some ways it was kind of more like, hey, we're gonna set this money aside and it's gonna be available for, uh, you know, a way of, of, of, of opening, opening things up.

So the question that I would ask you is why is it better for the wasteful spending to be done by the state feeding people you don't know rather than by and to your own family and friends?

And I'll note that this question was AI generated, but I loved it.

I just loved it so much that I, I, I kept it in here.

Um- So a better question is what the ontological difference is between kind of burning power to generate tokens on the blockchain network, which only have future value
if other people value them, and the occasional immolation of wealth to get a measure of social status, intangible and highly fungible among your family and peers.

And, and I'll note that I think the, basically the difference is, a- at least in the cryptosphere, you have fewer priests.

Uh, and, and as I said again, fewer, fewer, not none.

I mean, that was the thing.

It was like sh- they designed this system that actually technically requires no priests if they were just gonna let it run and not, not continue to develop it.

But when they had a, a dispute, like there's, uh, just so much attribution.

If you go back and you kind of listen to some of the debates that people were having, you know, like the people just interacting with Roger Ver, it was, it was all representative, it was all, uh, you know, these kind of
spiritual qualification arguments of I'm qualified to represent X group of people, and I'm going to make broad statements not about what's best for me, but what's about best for all of these people that I am, I am representing.

And, you know, again, if those arguments are valid which, you know, psychologically they're very valid, like this is, this is incredibly reliable human behavior.

All right?

Um, and if those, if those types of arguments are valid, well, then maybe what we need is not, uh, a trustless cryptosphere- Maybe what we need is, uh, just to work on having high-trust people
that we can do business with, that we can work with, that we can know, that we can trust and, and, and just say, "Okay, this, this is our, this is our, our, you know, defection mitigation strategy.

We're gonna lay it out and say, 'Here it is,' and let's just roll with it and see how it works," right?

'Cause again, the larger question we have to ask is why is the tribe not allowed to think about this?

And for the people that aren't, aren't, uh, you know, on the, on the live call, so the, the equation that I've laid out is, is likelihood of defection, LD, equals one minus proof of work divided by proof of work plus benefits of defection, okay?

Um, so why is the tribe... This is an assumption in Ox's article that, that the, the tribe doesn't have any right to, to, to engage in, in, in defection mitigation, right?

And, and I just wanna... Why?

Why aren't they allowed to have a defection mitigation strategy?

Who said that, okay?

And, and another point, you know, that, that I'd like to note, uh, is, is you don't just punish defectors, right?

Uh, most of the time you... If, if someone actually defects, like they've left the system, you can't punish them anymore.

They've kind of, they have exited the building, right?

Horses and barn doors and all of that, okay?

Um, but you, you also punish, you must punish likely defectors, okay?

It's, it's actually likely defectors.

It's the people on the edges of your system that you want to incentivize to move closer, to press in to the center of the system, or you want to incentivize them
to, to leave quickly or, or to not get any benefits and, and so that they can just kind of leave and, and not, not be a drain on, on what you're doing, okay?

And this is the point that I was making earlier about halfway defectors, um, 'cause, 'cause the, the Ghanaian tribesmen that, uh, that Ox is talking about, you know, they, they, they live in a very different world than their ancestors.

So when you build a system of incentives like this, one of the nifty things is that it, it is not necessarily enforced by the people who are most aligned with it.

It is enforced by everyone who uses the system in any way, and again, most vigorously at the edges, right?

If you're gonna have a successful system of enforcement, it's gonna be enforced most vigorously at the edges.

That's how these things work.

This means that the people benefiting from the system and the enforcers are not necessarily the same people, and this in turn leads to the possibility that there is in fact no one who is actually benefiting from the system.

That, um... So who benefits from a funeral-based kinship group system, right?

Who benefits from having these occasional rituals where you spend a lot of resources, you have a bunch of, of, of, of consumption, right?

'Cause that's what we're talking about.

And the answer is landed tribes living in relatively closed villages, right?

Their core wealth was rights over the land, grazing rights, farming rights.

When you s- say, like when I say farming rights, sometimes that'll be manifested as water rights, right?

'Cause you need irrigation most of the time, okay?

Um, and then, and then housing rights, though housing rights are less important in, in, in places like Africa or, or these kind of villages.

Those are kind of thrown in as an afterthought.

It's only in, you know, advanced cultures like ours that, uh, that we, we get into the, "Well, can, can we actually still live here?" Okay?

Um, so, you know, I'll, I'll note parenthetically there's a lot that we could learn from that structure.

So are the tribes that Ox is talking about actually living in villages like this, right?

Well, no.

These are all urban people who are going and selling their labors i- in- in the marketplace.

And, and just a note, their ancestors would have referred to that economic state as slavery.

They would have also, these ancestors, had grave concerns as, I mean, to be clear, as with the ancestors of, of all of us, um, about people in that situation not
being able to follow the, the ancestral rights because of their lack of land, because of their lack of optionality, because of their lack of ownership, right?

These people are not owners, not directly owners or, or through a tribe, right?

Um, and so in the economy of their ancestors' day, they, all of these people that he's describing would have been viewed as likely defectors.

So when the incentive structure that they pass down treats them as l- as likely defectors, it is doing exactly what it was intended to do.

All right?

And, and, and, and again, I think we have to understand these are the kinds of incentive structures that we need, right?

These are the kinds of things that we need to think about 'cause the, the, you know, I'm gonna go into the, the, the two currencies here 'cause the, the main thing that I'm, I'm trying to get to today, and
we'll, we'll, we'll, we will definitely spend at least one, one more week on this, um, is that when you sort of frame out and say, "What is going on here?" Everyone is engaged in a similar kind of thing.

Everyone is doing, uh, some kind of defection mitigation strategy.

Everyone has a ledger in which you're keeping rights that are not in... Like, these are socially granted rights that are, that are quantifiable in some way, but there's always gatekeepers between you and actually cashing out, okay?

Um, and, and there are also, you know, defection mitigation structures, right?

If you begin to act and behave like someone who seems like they might defect, well, then you're gonna get treated differently by the system, right?

Uh, you know, one of the, one of the, the common, the most common things is y- there's just a lot of horrible stories of interactions between large families and hospitals, right?

Large families are associated kind of with the crunchy movement, with MAHA, with all of these things.

And, and those, those families, by the, the virtue of having, like, five plus children, there's a lot of hospitals where those families have a really hard time
because the hospital kinda has this suspicion that this family isn't gonna be on board for whatever, you know, the medical industrial complex might wanna do.

If they were, they wouldn't have so many children.

Capiche?

This make sense?

So, okay.

So we're, there are two currencies.

Um, we, we talk about the family currency.

In the family currency, you burn time, labor, and assets on weddings, funerals, dowries, training, apprenticeship, and household production.

You receive a bundle of rights denominated in honor, succession claims, marriage prospects, name reputation, and enforceable, this is critical, enforceable
kin obligations with the floor of what is owed and the ceiling of what may be demanded fixed by covenant or tradition at the moment of entry, right?

But, but... And then you, you kind of have to constantly negotiate that as you, as you move forward.

But, but these, these things, they're, they're, they're still accessible to you, right?

And the wealth of the tribe, the wealth of the entity of which you have some more or less tangible, um, or intangible share benefits you, right?

It's better to be from a big tribe than it is to be from a small tribe.

And, and so what we want, again, if you're in, in, in a circumstance, people will look at these kinship groups that are, you know, setting things on fire.

Well, they're setting things on fire in a way, m- most, most of the time they're not actually literally setting things on fire in the modern context.

Most of the time i- in the modern context, they're spending money, and they're spending money in the wrong kind of way, right?

We'll, we'll get into, you know, there, there's, there's a couple of communities, most notably, most successfully the Jewish community, which has done this very well.

And basically, they, they don't lose much money from their broader community.

Now, they spend it.

They have rituals.

They have pl- things that they spend money on that from the outside you're like, "Man, that makes no sense." But because of the way that their
vendor structure works, and, and yes, it basically has a similar effect of it, it, it in many ways makes the individual person have less wealth.

But his tribe, his group, his community, that wealth doesn't leave their, their ledgers.

It stays within the community.

And so the fact that he has removed optionality, removed liquidity from himself means it can come back to him, um, and, and you know, at least for the Jewish community, usually in a tax optimized, usually in a some kind of, you know, inflation hedged fashion.

All right?

And, and we should be seeking to imitate that, to be clear.

So, uh, in family currencies, you have internal credit, you have internal vendors, and internal asset ma- markets, and these close the loop, right?

Well, I'm gonna talk more next week about closing the loop.

Uh, now this bundle is largely illegible to the open market.

It cannot be sold to a stranger.

Okay?

And, and to quote, uh, you know, Bernie Sanders, "And that's a good thing." Um, but inside the covenant community, it moves freely.

Now, there's defection.

Defection blocks the defector from everything denominated in this register at once, unless there is restoration.

Um, and, and there is a tax rate.

The max tax rate, as I said earlier, tends to be 23%, three tithes, two, two tithes a year and then, and then, uh, one tithe every, every third year.

That, you know, that's from the Bible, and that is, it's a remarkably like consistent thing across cultures and across time.

Okay?

So then we think about, let's consider the, the fiat currency.

So the fiat currency, the rights you receive are portable, uh, across strangers, but they require constant ongoing demonstration of loyalty to the issuing institutions, right?

You have to have institutional loyalties, and you have to be prepared on a fairly regular basis to, to demonstrate that institutional loyalty.

The rights are denominated in fully specified short-term fungible instruments, right?

Um- So what, how, how does the fiat currency think about defection?

Defection also costs the defector everything denominated in this register at once.

Um, one of the key differences is there is effectively no reciprocity for any of the banked costs, right?

So one of the nifty things about f- family currencies is that they're, like, the possession of those currencies kinda comes with, uh, uh, a concierge, right?

Sort of, sort of like the, the best example I can give is sort of like the, the, the concierge credit cards, right?

People talk about the, the American Express Black card, right?

Costs, like, $25,000 as an initiation fee.

It's like joining, you know, some, some sort of Illuminati-style club.

But if you, if you're in, then in a bunch of cities around the world, there's a, this whole economy that's suddenly accessible to you just because you have the card.

Uh, now you're, you're assumed you're going to spend money on that card, that's why they've extended that to you, right?

Um, but, but that sort of experience is and was accessible to people at the, at the family currency level, okay?

Um, oh, and again, you better pay your taxes, which are frequently much higher, uh, than 30%, much higher than 23%.

They, these are, um, you know, taxes, again, when, when, when, when people go around criticizing tribal economies because they make people spend money on funerals while
you are paying the modern tax burden, I, I just, I just want, I just wanna point out there's a massive inconsistency there and we need to ask why it's there, okay?

Now, when we're talking about fungible tokens, modern, kind of modern fiat currencies, we need to understand that the monetary economy is good at certain things, and it's primarily good at commodity goods.

It is good at allowing people who have no connection to each other to price commodities, all right?

And, and commodities, one of the key definitions of commodities is that they are demonstrably or, or testably, uh, provable as commodities, right?

You, you- when you have, when you have steel, bar steel, you can test the steel to see what its purity and what its, you know, engineering specs are without destroying it, right?

The more that, that it becomes, well, we just have to trust the person who gave it to us to have given us a good version, ooh, th- that, you know, the, the, the farther you are down that road, the less you're talking
about in a co- a, a commodity and the, and the more you are just relying... Th- there's some other trust register that you're relying on to say, "Well, this, this, you know, this is, this is gonna be good quality," right?

Uh, but so it's, it's very good at commodity goods.

It's very good at these kind of long-form transitions.

It's very good at, you know, again, pricing financial abstractions, allowing us to do the, the, the arbitrage that makes the money markets work and, and, and good and necessary for those things.

But for specialized goods and services, you have to insource, right?

Uh, Jethro Sheets and I have a mutual friend who says, "Always reinvent the wheel.

Always reinvent the wheel." Um, and, and, and then basically he proceeds to tell a bunch of horror stories about what happens if you have a project where you're
trying to design something or trying to have something that you're engineering to s- particular specs, um, and you use general purpose off-the-shelf wheels.

If you use general purpose off-the-shelf wheels for your specifically engineered purpose, you are frequently not going to get good outcomes, right?

So always reinvent the wheel.

And, and we know this in, in the manufa- well, uh, we, we, we sort of know this.

We, uh, uh, we have spent the last, you know, 40 years sort of, uh, trying, hoping that this is not the case.

Um, but unfortunately it is the case.

Uh, and so, so here we are, okay?

And, and the point that I... And, I mean, that's why we're having to do all this, this insourcing push.

You know, famously the, the United States is, is, has very, very weak, uh, supplies of munitions, of medical supplies, of, of a whole list of things that you would think the world's number one power would have access to

So we, we, we are painfully learning this to our cost that, that it's not always the best thing just to have, well, we're just gonna
trust the markets, and the markets are gonna deliver to us kind of a, a universal general purpose version of the thing that we need.

Okay?

So the, the kind of the, the closing point that I'll make today is that household services are always bespoke.

Okay?

The things that people want at the household level, healthy food, childcare, eldercare, you know, moral formation, moral vetting, which I- I'll note is onboarding, right?

Like, moral formation and moral vetting are, are the necessary things that ca- that, that have to be in place to connect you to these more abstracted fiat systems, these more abstracted monetary systems.

If you don't have a set of reasons, if you don't have something that motivates you to participate in, in what's going on in the world, right?

If you don't, if you don't have something that says, like, you know, people talk about, well, well, what's the purpose of making money, right?

What's the purpose of having money?

Well, it's to make more money.

Well, okay.

Right?

But at some point you're gonna wanna cash out, right?

At some point you have to have goals.

At some point you have to ask why, right?

And, and fiat currencies, monetary currencies, even hard monetary currencies are terrible at answering the question why, right?

They're, they're great ... Once you have identified a need, once the market has, has said, "Okay, we want this," right?

The, the why question is solved.

We know, we know why.

Then it's, okay, we have this need.

How do we fill that need?

What, what is the most efficient way of getting to the end of, of, of, of this identified kind of market desire, right?

Um, that's what, that's what monetary economies are great at, amazing at, incredible.

They find efficiencies, right?

The price mechanism helps you find efficiencies that, that you could never find on your own.

Not, not, not with 1,000 years and, and, and probably not even with, with all of the new-fangled AI that we've invented, right?

So, but in order to get that why, you need moral formation and moral vetting.

You need, you need some sense, right?

As, as Steve Jobs, you know, famously said that, "The people don't know what they want. I know what they want," right?

He, he was, he was relying on kind of his ar- aristocratic taste.

And all of these things are specialized goods and services, right?

So what we need to do is we need to insource those goods and being will- and be willing to develop specialized supply chains.

Okay?

And one of the, the constant things, I think there was a conversation going on in one of the chats that I'm in, I mean, earlier today.

How do I ... Okay, I, I have, I have now recognized that if I wanna have more than 1.7 kids, right, then I, y- you know, I, I probably am gonna need to have a nanny at some point.

I'm probably gonna need to have some kind of household staff.

I'm probably gonna need to My wife is probably gonna need a m- you know, some amount of staff.

A good rule of thumb generally is about half as many staff o- as, as are in your personal reports, right, if you're, if you're a business leader.

If, if the Based on similar pressures, your wife probably needs at least half as many staff as you have.

Okay?

Um, okay, somebody's sold on that.

They have, they have done the numbers.

They have come to the conclusion that that is correct.

Where do we find these people?

Where do we ... Like, what do we do?

Like, how do we, how do we find

There's no supply chain.

There's no school.

Now, you know, one of my, uh, to any, uh, you know, private equity in- investment guys that are, that are listening to this podcast, one of my long-term goals, dreams, is to have a f- a, a school or maybe even a finishing school for
household staff, for butlers, for nannies, for all of these, these types of necessary household intermediaries that, that, that, that are really good and really helpful to have around if your goal is, how do I have more than 1.7 children?

Okay?

Um, but we ... So the answer is we need to build those supply chains.

We need to recognize, okay, the, the solution here is let's go build a supply chain and, and, and let's do that.

Okay?

Um, and then we need a method for tracking and incentivizing good behavior in this specialized supply chain, and that's what kinship groups are.

And that's why you have to have defection, and that's why you have to have ... You know, one of the things that, that, you know, that's, that's fairly common in those
contracts, 'cause I've drafted a couple of those contracts, is, um Basically a lot of them, uh, to be successful, you have to have a big payout at the end, right?

In order to have household staff be reliable, th- there, there has to be some kind of thing where you can't give household staff large amounts of liquidity all the time.

All right?

If you give them large amounts of liquidity all the time, then they will quit.

And, and, and they'll regret quitting, but they will quit.

And so what you have to do is you have to have term contracts.

They get room, board, and enough money to kind of, you know, get, get them fun, fun things, right?

You want them to have fun things.

Um, and then at the end of, you know, two years, five years, 10 years, whatever it is, whatever planning capacity you have, they have a large bonus, right?

A very large bonus, something that, that, that launches them.

All right?

Um, and then if you wanna keep them, you darn well probably better th- offer them some way of investing that money so that, again, in five, 10
years, you can have another discussion of, "Okay, do you wanna do this for the rest of your life, or are we launching you out on something else?"

Right?

Um, and, and frequently after, you know, 10 years, a lot of times people will mature into more h- you know, higher level positions of trust.

I frequently know, uh, people that were, you know, the nannies.

They babysat, uh, you know, the kids.

And by the time, you know, that, that, that nanny, especially if she's a sharp lady, by the time that that nanny was, was, you know, in her, in her late 30s, early 40s, they had her babysitting, you know, startup companies.

Not, not that she was in there day-to-day running, but that she was one of the key kind of ... They, they got her trained on some kind of HR thing, and then she would go in, get access, or, or another one would be accounting.

She'd have access to the company's records, and that lady would know, 'cause she was you know, had developed deep connections and
loyalties with the family that had, had, you know, carried her through all this stuff, and she was very economically useful to them, right?

But you couldn't give her liquidity, and, and that's just the way it is.

Like, like, like, y- you have to accept that this is how, you know, human psychology works, right?

And so this is what kinship groups are, and that's how you're, you're supposed to use them.

That's the theory behind it.

That's some level, since, since we're, you know, in, in some ways a, a, uh, a, a crypto friendly or, uh, you know, alternate investments friendly, I wanted to, wanted to give you that, that, that little bit of math.

I'm not primarily a math guy.

Um, but so that's, uh, concludes my prepared remarks for the day, so thank you everybody who's been listening to this, uh, the public free version of, uh, of the Great Houses Forum.

Um, tune in next time.

We'll be talking about specific examples of communities that have done this and that are, uh, you know, know how to be successful in it.

And, um, you know, hopefully we'll, we'll learn something from them.

So thanks everybody,