Praxeology is a field of study that focuses on human action, which is defined as purposeful behavior. Every action is a choice an individual makes to move from a state of dissatisfaction to a more satisfactory one. In order for an action to occur, a person must feel uneasy, be able to imagine a more pleasant state, and believe that their actions can help them achieve that state. All action is considered rational because it is a means to achieve a desired end.

Key Principles of Praxeology:

• Subjectivism and Objectivity: Praxeology is subjective in that it considers the unique, personal goals of each individual. It remains objective by refraining from judging those goals.

• Causality and Teleology: Action requires an understanding of cause and effect. Praxeology attributes events to either the conscious intentions of an actor (teleology) or to the unfolding of natural, physical laws (causality).

• Individual Focus: Praxeology focuses on the actions of individuals, not on groups or collective behavior. It operates on the principle that even seemingly unthinking or traditional actions are still the result of individual choice.

• Praxeology vs. History: Praxeology is the theoretical study of human action, using logical deduction to arrive at universal truths. History, on the other hand, is the collection and organization of past human actions. Praxeology provides the framework for interpreting the data of history.

• The Role of Reason: Reason is seen as the primary tool for human action. The modern challenge to reason is not due to its inherent flaws but rather to the inability of opposing ideologies to defeat the logical arguments of classical economists.

The Economic Implications of Praxeology:

• Ends and Means: An action is the use of means to achieve an end. Ends and means are not physical objects but mental constructs that a person applies to their environment.

• Subjective Value: The value of goods and services is subjective and exists only in the mind of the actor. This value is reflected in a person's scale of preferences. All of economics can be built on this foundation of individual, subjective values.

• Cost and Profit: The cost of an action is the satisfaction that is given up to achieve a chosen goal. Profit is the difference between the value of the outcome and the cost of the action. This profit is a purely subjective, immeasurable gain in happiness.

• Time and Uncertainty: Time is a scarce resource that must be economized. Action implies uncertainty about the future; if the future were known, there would be no need to act. Praxeology distinguishes between class probability (knowing the odds for a large group of events, like rolling a die) and case probability (knowing some factors but not all for a single event, like another person's actions).

• Labor: Labor is the use of the human body to achieve an end, and it generally carries disutility. People choose to work because they value the output of their labor more than the leisure they sacrifice.

Part Two - Action Within the Framework of Society

Society is a product of human action and is founded on cooperative effort. This collaboration arises not from sentiment, but from the perceived benefits of the division of labor. This is a foundational concept: individuals come together because it is more productive to specialize and cooperate than to act in isolation. The camaraderie and social bonds we associate with society are a result of these material advantages, not their cause.

The Role of Government:

• While social cooperation benefits almost everyone, some individuals lack the moral will to abide by its rules.

• The primary function of a state or government is to prevent anti-social behavior (such as murder or theft) from disrupting this cooperative order.

• The preference for democracy in classical liberalism is a practical choice to minimize violence and maintain peace, not a belief in the inherent wisdom of the general public. Liberalism, drawing on the value-free principles of praxeology, aims to find the most effective ways to achieve these shared societal goals.

The Division of Labor:

• The increased productivity from the division of labor is a result of three factors: the natural inequalities of human abilities, the unequal distribution of natural resources, and the fact that some tasks are too large for a single person.

• A key insight is that even a person who is superior at all tasks can still benefit from cooperation with "inferior" individuals. By delegating less critical tasks, the superior individual can focus on what they do best, maximizing their overall output. This principle forms the very basis of civilization.

Ideology and Social Action:

• Ideology is the set of ideas that guides human interaction and behavior. It is the foundation of society, as human action—guided by ideology—is what creates social structures.

• All governments, regardless of their form, ultimately rely on popular opinion and the prevailing ideology, not just on force or might.

• The concepts of progress and retrogression only have meaning within the context of an actor's plan. Unlike biological evolution, which is purposeless, human society can be seen as progressing or regressing based on whether the dominant ideologies lead to a more satisfactory state.

• The Industrial Revolution, for example, could not have happened without ideological shifts that led to political and legal reforms, giving individuals the autonomy needed for economic progress.

Types of Social Cooperation:

• Human cooperation can take two forms: contractual and hegemonic.

• In a contractual relationship, individuals cooperate on an equal footing, which allows for peaceful coexistence.

• In a hegemonic relationship, one person or group holds power over subordinates. Even here, the subordinate still acts by choosing submission over the alternative. However, hegemonic societies are inherently prone to conflict, as a hegemon will always seek to expand his rule.

• The development of arithmetic and economic calculation is a feature of contractual societies, as individuals need a way to compare and rank potential outcomes to make rational choices in an environment of equal exchange. Without this ability to calculate, a modern economy would be impossible.

Part Three - Economic Calculation

Economic calculation is the process by which acting individuals evaluate and compare the costs and benefits of various courses of action. The fundamental problem is that while technology can tell us how to produce something, it cannot tell us which of many possible methods is the most efficient or "economical." This is where money and prices become essential.

The Role of Money and Prices:

• Money is the key to solving the problem of economic calculation. As a universally accepted medium of exchange, it provides a common denominator for all goods and services.

• Money prices are not a "measurement" of value; they are historical records of the ratio at which goods have exchanged in the past. They are essential for an actor to determine the cheapest way to produce something, allowing them to compare the costs of a vast array of inputs.

• The system of money prices, while imperfect, is the most effective tool for guiding human action in a complex, cooperative society. Because the future is uncertain and subjective valuations are always changing, prices are constantly in flux.

• Economic calculation relies on the institution of private property in the means of production. Without private ownership and the ability to exchange, there are no market prices, and therefore no way to perform a rational calculation of costs and revenues.

Key Concepts in Economic Calculation:

• Capital: The very concept of "capital"—the monetary value of the resources available for a project—is tied to monetary calculation. It is only in a capitalist society, with private property and money prices, that the notion of capital can be meaningfully used to evaluate the profitability of an enterprise.

• Profit and Loss: Monetary calculation allows actors to evaluate both potential actions (based on expected costs and revenues) and past actions (through accounting for profit and loss).

• Subjective Value vs. Objective Prices: While the subjective value a person places on an item is purely ordinal (a ranking, not a number), economic calculation uses the objective, historical fact of money prices to make decisions.

• The Non-Neutrality of Money: Changes in the money supply are never neutral; they cause real, rather than just nominal, disturbances in the economy because new money enters the market at specific points, altering prices and resource allocation.

In essence, monetary calculation is the guiding principle of action in any society with a division of labor. It transforms human thought by providing a framework for evaluating potential actions and assessing past outcomes, making rational decisions possible in a world of complex economic interactions.

Part Four - Catallactics or Economics of the Market Society

Catallactics is defined as the analysis of actions that are based on monetary calculation.

To understand the market economy, economists use imaginary constructions, which are mental models that abstract from the complexities of the real world. Examples include:

• The pure, unhampered market economy, where there is no interference from government or other groups.

• The plain state of rest, a momentary state where all mutually beneficial exchanges have been exhausted and no more transactions are taking place.

• The final state of rest, a hypothetical endpoint where all the effects of a disturbance have played out and prices have reached their new final state.

• The evenly rotating economy (ERE), a more complex model where all prices have reached their final prices, and production and consumption occur in a perfectly predictable, unchanging cycle. While production continues in an ERE, there is no real action because there is no uncertainty, and thus no reason to change behavior.

The Function of the Market

The market economy is a social system where individuals specialize in their occupations and the means of production are privately owned. Although each person acts in their own self-interest, they do so by striving to satisfy the desires of others.

• The Market as a Process: The market is not a physical place but a dynamic process driven by individuals' actions. The prices that emerge from this process are constantly changing and serve as signals that guide individuals to best serve each other.

• Capital and Income: In a market economy, capital is a mental concept representing the estimated monetary value of an enterprise's assets. Income is the amount of consumption that can be had without reducing capital. The difference between income and consumption is either saving (if income exceeds consumption) or capital consumption (if consumption exceeds income). These concepts only make sense in a market with real prices.

• Competition: Competition in the market is fundamentally different from biological competition. In a market economy, competition is a peaceful process where participants benefit from voluntary exchange. Its purpose is to direct scarce resources toward those who can best satisfy the wants of consumers. The true barriers to competition are government interventions, not market conditions like high startup costs.

• Monopoly and Consumer Sovereignty: The sovereignty of the consumer is the idea that consumers ultimately direct production through their purchasing decisions. While a monopolist seller can restrict output to increase profits, this is a rare occurrence in a truly free market. Real monopolies and cartels are almost always established and protected by government privileges.

• Profit and Loss: Psychic profit is the subjective gain in happiness an individual experiences from an action. Monetary profit is the difference between an entrepreneur's revenue and costs. Entrepreneurial profit and loss are a result of the uncertainty of the future; an entrepreneur makes a profit by forecasting the future better than others. These profits are eventually absorbed by workers and owners of resources, demonstrating that the benefits of innovation are ultimately passed on to the public.

The Role of Money and Time

Money is a medium of exchange that emerged spontaneously from the varying marketability of different goods. Some goods are more "liquid" than others, meaning they can be more easily exchanged for a favorable price. Money evolved from this process as people sought the most marketable goods to use as a medium of exchange.

• The Purchasing Power of Money: The "price" of money is its purchasing power, which is its exchange value against all other goods and services. A change in the money supply will change its purchasing power, but not in a uniform way. Instead, new money is injected at specific points, causing some prices to rise before others and leading to a redistribution of wealth to those who receive the new money first.

• Time Preference: Human action is rooted in time preference, the universal tendency for people to prefer a given satisfaction sooner rather than later. This principle is fundamental to understanding savings, investment, and the structure of production. To achieve a higher level of future output, people must save and invest in processes that take longer to complete. This willingness to postpone immediate gratification for a greater future reward is a cornerstone of economic progress.

Part Five - Social Cooperation Without a Market

Mises argues that the ideal of a benevolent, all-powerful king—a concept used by classical liberals to illustrate the spontaneous order of the market—inadvertently laid the groundwork for the modern socialist movement. The socialist creed, based on the dogma that society is an omnipotent entity, believes that a central government can and should direct all productive activity.

At its core, the praxeological critique of socialism is not about the morality of its goals, but the feasibility of its methods. The central problem is not about the "what" but the "how."

• The Problem of Economic Calculation: Under a socialist system, all productive activities are controlled by a single will. The absence of private ownership of the means of production means there are no genuine market prices for capital goods and other resources. Without prices, there is no way for the central planners to perform economic calculation—that is, to compare the costs and benefits of different uses of scarce resources.

• A Fatal Flaw: This lack of economic calculation is a more fundamental problem than issues of incentives or corruption. A market economy relies on profit and loss as a feedback mechanism. When an entrepreneur makes a mistake, they suffer losses, which signals that their resources were misallocated. In a socialist system, however, the planners have no such feedback. They cannot know if their decisions are successful or if they are wasting resources, even from their own point of view.

• The Failure of "Market Socialism": Mises critiques the idea of "market socialism," where planners would tell managers to act "as if" they were in a market economy. This idea is a tacit admission that pure socialism is untenable. However, this approach fails because it overlooks the crucial roles of capital and money markets, which are driven by entrepreneurs who use their personal wealth to make speculative decisions and bear the risks of profit and loss. Without this real-world, profit-driven dynamic, there can be no genuine economic calculation.

Ultimately, Mises concludes that the paradox of "planning" is that it cannot genuinely plan. Without the essential tools of private property, market prices, and economic calculation, a socialist government is left without a rational means to allocate resources, leading to unavoidable waste and inefficiency.

Part Six - The Hampered Market Economy

Mises argues against the idea of a stable "third system" that is neither pure capitalism nor pure socialism, asserting that government interventions inevitably lead toward one of two outcomes. It classifies socialist systems into two main patterns: the Russian model, where the state directly owns all enterprises, and the German model, where private ownership is nominal, but all economic activity is controlled by a central authority.

Interventionism is a separate category where the government retains private property but selectively interferes with market outcomes through coercion.

The Flaws of Interventionism

The goal of government intervention, according to its proponents, is to correct perceived market failures. However, Mises argues that these policies often fail to achieve their stated objectives and can lead to unintended, negative consequences.

• Taxation: While necessary for funding government, every tax system is inherently non-neutral. It alters prices and behavior, making the goal of a perfectly "neutral" tax impossible. Mises warns that if tax burdens become too high, they can destroy the market economy rather than sustain it.

• Restrictions on Production: Government restrictions on production, while benefiting a small, privileged group in the short run, ultimately make the entire nation poorer. These measures hinder the market's ability to efficiently allocate resources and satisfy consumer demands.

• Price Controls: Setting maximum prices below market levels creates shortages, while minimum prices create surpluses. Mises argues that these policies defy the fundamental laws of economics. The only way to enforce them is through rationing, personal connections, or violence.

• Monetary Intervention: Governments have historically manipulated money to achieve goals like debt relief or encouraging exports. However, such policies are a failure in the long run. For example, currency devaluation provides only temporary benefits and can lead to a breakdown of the credit system if used repeatedly. Mises also argues that government-led credit expansion is the primary cause of the boom-bust business cycle.

Mises also addresses common criticisms of capitalism, such as poverty, inequality, and insecurity. It argues that poverty in developing nations is due to a lack of capital, which is a result of their failure to embrace capitalism. Inequality, though a feature of the market, is necessary to incentivize individuals to use their unique talents to serve consumers. Insecurity is not a flaw of capitalism but a natural result of consumer sovereignty, as producers must constantly innovate to satisfy changing demands.

Mises concludes that interventionism is an inherently unstable system. It cannot be a permanent "middle ground" because its policies inevitably fail, leading to more and more intervention until it either collapses or transforms into outright socialism. The choice, therefore, is not between "planning" and "no planning," but between the central planning of the government and the decentralized planning of millions of individuals within a free market. It emphasizes that sound economic theory is crucial for a prosperous society and that the success of such policies depends on the public's understanding and acceptance of them.

• A decision matrix can help you evaluate whether to stay single or continue dating by comparing options across factors like emotional well-being and time commitment, with scores converted to percentages totaling 100% to show relative preferences.

• The framework is flexible, allowing you to add more dating options (e.g., person C, D) based on your emotional capacity, ensuring the process remains manageable.

• It seems likely that using percentages makes it easier to compare options, though emotional factors in relationships may not be fully captured by numbers.

• Research suggests structured decision-making reduces bias, but balancing logic with intuition is key for personal decisions like dating.

Overview

Making major life decisions is not an easy task. This also applies to choosing a life partner or “soulmate,” where a wrong decision can often have serious consequences and not infrequently lead to negative outcomes that must be borne for a lifetime.

Choosing to remain single, continuing to date a specific person, or exploring other romantic options is a deeply personal decision that can benefit from a structured approach. I only realised this after years of experiencing confusion in making decisions among the many alternative choices of partners, caused by the emergence of dating apps. Dating apps make the “matchmaking economy” unrestricted by space and time, creating an illusion of limitless choices for those who actively use them. With the awareness that there may be others facing similar issues as I did, I decided to write a framework guide to simplify the analysis in choosing a life partner.

This framework uses a decision matrix to evaluate options—being single, dating person A, dating person B, and potentially others—based on factors like emotional well-being, time commitment, and future prospects. By incorporating percentage scoring that totals 100%, the framework highlights the relative value of each option, making it easier to compare preferences. The process is flexible, allowing you to add more dating options (e.g., person C, D) based on your mental and emotional capacity, ensuring the analysis remains manageable and aligned with your priorities.

Why Use a Decision Matrix with Percentages?

A decision matrix is a proven tool in decision-making science, used to compare multiple options across various criteria, reducing bias and clarifying preferences. In the context of dating, it helps weigh the costs (e.g., time, emotional energy) against benefits (e.g., happiness, compatibility). Converting total scores into percentages that sum to 100% provides a clear view of how much each option contributes to your overall preference, making the results more intuitive. For example, if dating person A has a 40% share, it indicates a stronger preference compared to other options. However, relationships involve emotions that numbers may not fully capture, so it’s wise to balance the matrix with your intuition.

Step-by-Step Framework

Step 1: Define Your Options

List all possible options you’re considering:

• Being Single: Focusing on personal growth, independence, or other priorities without a romantic partner.

• Dating Person A: Continuing or starting a relationship with person A.

• Dating Person B: Continuing or starting a relationship with person B.

• Additional Options: Add more dating prospects (e.g., person C, D) if you have the emotional bandwidth. Be cautious not to overwhelm yourself with too many options, as this can increase decision fatigue.

Step 2: Identify Key Factors

Select factors that reflect your priorities in a relationship or in staying single. These should be applicable to all options to ensure fair comparison. Below is a suggested list, but customize it based on your values:

• Emotional Well-being: How fulfilled or happy you feel emotionally.

• Social Life: Quality and frequency of social interactions with friends or family.

• Personal Time: Amount of time available for personal hobbies or self-care.

• Financial Stability: Financial impact of the option (e.g., dating expenses vs. saving money).

• Future Prospects: Potential for long-term happiness or relationship success.

• Communication Quality: Ease and effectiveness of communication (with yourself for single, or with the person for dating).

• Support and Encouragement: Level of mutual support for personal goals.

• Stress Levels: Emotional or mental strain associated with the option.

If specific factors (e.g., physical attraction) don’t apply to being single, reframe them (e.g., “freedom to meet new people”) or exclude them to maintain consistency. Start with 5–7 factors to keep the process manageable, adding more as needed.

Step 3: Rate Each Option for Each Factor

Rate each option on a scale of 1 to 10 for every factor, where 1 is the worst and 10 is the best. Be honest to ensure accurate results. For example:

• Emotional Well-being:

  • Single: 7 (enjoying independence but missing companionship)

  • Dating A: 8 (feels fulfilling)

  • Dating B: 6 (inconsistent connection)

• Personal Time:

  • Single: 9 (more free time)

  • Dating A: 6 (moderate time demands)

  • Dating B: 4 (high time demands)

Complete this for all factors and options.

Step 4: Assign Weights to Each Factor

Assign a weight to each factor based on its importance to you, using a scale of 1 to 5 (1 = least important, 5 = most important). For example:

• Emotional Well-being: 5

• Personal Time: 4

• Financial Stability: 2

• Future Prospects: 5

• Social Life: 3

Weights reflect your priorities, so adjust them to align with your values. For instance, if long-term potential is critical, give Future Prospects a higher weight.

Step 5: Calculate Weighted Scores

For each option, multiply the rating by the weight for each factor, then sum these products to get a total score. Here’s an example with five factors:

Step 6: Convert Scores to Percentages

To measure relative values, convert each option’s total score into a percentage of the sum of all total scores, ensuring the percentages add up to 100%:

1. Sum the total scores: 136 (Single) + 139 (Dating A) + 93 (Dating B) = 368

2. Calculate percentages:

   • Single: (136 / 368) * 100 ≈ 36.96%

   • Dating A: (139 / 368) * 100 ≈ 37.77%

   • Dating B: (93 / 368) * 100 ≈ 25.27%

3. Verify: 36.96% + 37.77% + 25.27% = 100%

These percentages show the relative preference for each option. In this example, Dating A has the highest percentage (37.77%), suggesting it’s the most preferred option.

Step 7: Interpret Results

The option with the highest percentage is likely the best choice based on the above criteria. In the example, Dating A (37.77%) slightly edges out Single (36.96%), while Dating B (25.27%) is less preferred. Consider:

• Close Percentages: If percentages are similar (e.g., 37.77% vs. 36.96%), the options may be equally viable, so revisit ratings or weights for clarity.

• Intuition Check: Ensure the results align with your feelings. If Dating A scores highest but feels wrong, re-evaluate your ratings or consider unquantified factors.

• Thresholds: Optionally, set a minimum percentage (e.g., 20%) to rule out low-scoring options, especially if considering multiple partners.

Step 8: Adjust for Additional Options

If you have the emotional bandwidth to consider more options (e.g., Dating Person C), add them to the matrix, re-rate, and recalculate scores and percentages. For example, if Person C’s total score is 120, the new sum becomes 136 + 139 + 93 + 120 = 488, and percentages are recalculated accordingly.

Additional Considerations

• Deal-Breakers: Identify non-negotiable factors (e.g., trust). If an option scores below a threshold (e.g., <3 on a critical factor), consider disqualifying it, regardless of its percentage.

• Mental and Emotional Bandwidth: Limit options or factors if you feel overwhelmed. Start with three options and 5–7 factors, expanding only if comfortable.

• Dynamic Analysis: Relationships evolve, so revisit the matrix as new information arises or feelings change.

• Qualitative Factors: Emotions like love or chemistry may not be fully quantifiable. Use the matrix as a guide, not a definitive answer.

• Visualization: The percentages can be visualized in a pie chart (as shown earlier) to make relative preferences clearer.

• Alternative Approaches: Some frameworks, like the Relationship Decision Matrix, assess relationship states (e.g., Friend, Partner) based on care and attraction. You can use this to clarify your desired relationship state before applying the matrix. See the “Other Resources” section for more info about this.

Example Application

Suppose you’re deciding between staying single, dating Ina, and dating Susie. You prioritize emotional well-being and future prospects. After rating and weighting, you calculate total scores: Single (136), Dating Ina (139), Dating Susie (93). Converting to percentages gives Single (36.96%), Dating Ina (37.77%), and Dating Susie (25.27%). Since Dating Ina has the highest percentage, it may be the best choice, but the close score with Single suggests reflecting on whether dating is worth the effort. If you’re considering another person again, add them to the matrix and recalculate.

Tips for Success

• Be Honest: Accurate ratings and weights are essential for meaningful results.

• Start Simple: Begin with a few key factors to avoid overwhelm, especially if new to decision matrices.

• Use Tools: Create the matrix in a spreadsheet for easy calculations and percentage conversions.

• Seek Feedback: Discuss your factors or ratings with a trusted friend for perspective.

• Balance Logic and Emotion: Use percentages as a guide but trust your intuition for final decisions.

• Revisit Regularly: Update the matrix as relationships evolve or new options arise.

Benefits of Percentage Scoring

Converting scores to percentages offers several advantages:

• Relative Comparison: Percentages show how much each option contributes to your preference, making it easier to compare close scores.

• Intuitive Interpretation: A 40% preference for one option is easier to understand than a raw score of 139.

• Decision Allocation: Percentages can guide how much emotional energy to invest in each option, especially in early dating stages.

• Visual Clarity: Percentages can be visualized in charts, enhancing decision-making clarity.

Limitations

• Emotional Complexity: Percentages simplify complex emotions, so they may not capture nuances like chemistry or gut feelings.

• Subjectivity: Ratings and weights are subjective, so results depend on your honesty and self-awareness.

• Over-Simplification: Close percentages may suggest similar preferences, but small differences in ratings can shift outcomes significantly.

• Capacity Constraints: Adding too many options can overwhelm your emotional bandwidth, so prioritize quality over quantity.

Other Resources

• Asana: 7 Quick Steps to Create a Decision Matrix

• Medium: Should I Continue Dating Someone? Use the Relationship Decision Matrix to Decide

• Translate a 52-page legal document: 5 million Will

• Test a semiconductor tool: 2 million Will

• Conduct graduate interviews: 200,000 Will

• Process invoices: 80,000 Will

• Deliver a training seminar at a factory: 1.5 million Will

The engineer picks the legal document translation—it’s too lucrative to pass up. After his cigarette, he heads to the general administration department. At the entrance, he notices a small plush horse with a cartoon tear in its eye, a playful jab at his team’s poor performance at Disco Corp, the company where he works.

“Good morning,” he says to his team manager, who hasn’t assigned tasks in years. She offers him 15,000 Will to organise the year-end party, but he declines—it’s not worth it. Instead, he books a meeting room to discuss the translation with lawyers. Checking his app again, he sighs. His Will balance is now negative, down from 50,000 during his train commute. Everyday actions like storing his umbrella, using the smoking room, and booking a room all cost him Will.

This isn’t a sci-fi story—it’s a normal day at Disco Corp, an 87-year-old, £16 billion company that produces most of the world’s semiconductor cutting and grinding machines. This scene is based on real accounts from Disco employees.

Disco is no ordinary company. Since 2011, it has run on a unique system based on free-market principles. There are no bosses telling employees what to do. Workers choose their tasks daily and can switch teams whenever they like. Their decisions are guided by Will, Disco’s internal currency. Employees earn Will by completing tasks, bidding against colleagues to take them on, or lose Will for actions that might hurt the company’s productivity. Their Will balance determines their quarterly bonus.

This system was created by Disco’s CEO, Kazuma Sekiya, who believes it drives the company’s success. Since its launch, Disco’s profits, employee satisfaction, and market share have all grown. The Will app, now in its 100th update, is central to the system, and over 1,000 employees have only ever worked under it. Companies like Sony and Toyota have visited to study it, but none have dared to copy it. Sekiya thinks they’re scared to shake things up. “I just brought the real-world economy into the company,” he says. “It works.”

Sekiya, a detail-oriented engineer with a warm smile, still oversees Disco’s R&D division while leading as CEO. He first pitched the individual Will system in 2008, but it wasn’t until 2011 that he convinced his team to trial it in the application department, where technicians test machines for customers. Using paper “Will Accounting Slips” and an Excel spreadsheet, the trial boosted profits, convincing Sekiya to roll it out company-wide. His bold email to staff declared: “Bosses can’t order employees. You must pay Will to get things done.”

Here’s how it works: Disco’s machine sales generate Will—roughly 400 million Will for every £5.2 million in revenue. Sales staff distribute this to other teams, paying Will to manufacturing for building machines, to R&D for innovations, or to HR for payroll. Employees can also negotiate Will payments informally for tasks or bid for them in auctions, where rarer skills command higher Will. A team of eight manages the system, overseeing 772 penalties (like fines for wrong addresses) and 337 rewards.

At Disco, Will shapes everything. Employees start each month with a negative balance, reflecting their “cost” to the company. A mid-level worker might owe 10,400 Will per hour but earn 50,000 Will per task. Even Sekiya has a daily cost of 26,600 Will. New graduates must earn 20 million Will by optimising machines before finishing training.

This system makes Disco unique, blending freedom, competition, and accountability in a way that’s transformed how work gets done.

Many companies have tried to move away from traditional top-down management, like that of Apple, Ford, or Mitsubishi. Some, like Linux with its open-source system, Spotify with its self-organising “squads,” or Zappos with its “holacracy” approach, have embraced greater autonomy for teams and individuals. Before introducing its Will system, Disco Corp experimented with a version of holacracy, using Kyocera’s “amoeba” management model, where small, independent groups set their own goals and strategies.

Disco Corp’s headquarters sit in Omori, a southern Tokyo suburb, in a blocky, 1980s-style pinkish-grey building that blends into the retro neighbourhood. Step inside, though, and the atmosphere shifts. The sleek, charcoal entrance feels almost futuristic, with strict rules: visitors must sanitise their hands and wear masks throughout their stay. Upstairs, the energy is vibrant, like a start-up. Employees are engaged, eagerly sharing ideas and collaborating at their screens.

Kazuma Sekiya, Disco’s CEO, comes from a family of innovators. His grandfather, Mitsuo Sekiya, founded the company in 1937 in Kure, Hiroshima, after leaving a bureaucratic job in Manchuria. Initially, Mitsuo aimed to supply grinding wheels to Japan’s naval shipyards, but orders were scarce. He moved to Tokyo to find new markets, leaving his brother Kazu to run the Kure factory. In 1941, he acquired a company specialising in precision cutting wheels, which later cut fountain pen tips in the 1950s. As Disco grew, it developed ultra-thin blades, even used to slice moon rocks from the Apollo 11 mission. By the 1960s, Disco became a key player in the semiconductor industry, supplying machines to cut and grind components for computers, phones, and TVs.

When the dotcom bubble burst in the early 2000s, Disco suffered from falling semiconductor demand. Kazuma Sekiya identified two issues: employees weren’t focused enough on their department’s financial performance, and sales staff were losing money by offering free test cuts to customers who bought only one machine, rather than targeting those who might buy many. He likened it to a car dealer allowing endless test drives without sales. His solution was the Will system, an internal currency to encourage smarter decisions.

Initially, Will acted as a monthly “name-and-shame” system, highlighting departments like HR or PR that consistently lost Will. The lowest-performing team still faces the playful embarrassment of a weeping toy horse placed at their desk. Over time, Will evolved into a way for employees to earn significant virtual currency, which translates into real bonuses. About 40% of an employee’s bonus depends on their Will balance. In 2023, one 41-year-old employee earned over £300,000 by accumulating Will. Another joined Disco specifically because of his fascination with the system.

Toshio Naito, who now manages Disco’s Will Management Office, is a firm believer in the system. “If Will frustrates you, Disco might not be the right fit,” he says. He once lost 10 million Will for a simple file-naming mistake, which he initially resented. “But the next day, I saw it as a sign to work harder and earn more Will.”

Kazuma Sekiya, Disco Corp’s CEO, acts as the central figure overseeing the Will system, the company’s internal currency. Beyond generating Will through sales of semiconductor machines, Sekiya can create additional Will for special projects, effectively setting an unlimited internal budget. He must be cautious, however, to avoid flooding the system and devaluing Will.

In a 2019 study, Hiroshi Ono, a professor at Hitotsubashi Business School, examined Will as part of research on improving productivity in Japanese workplaces. He describes Will as a clever way to make employees aware that their time costs the company money. By controlling the supply of Will, Sekiya avoids micromanaging while still influencing employee behaviour, encouraging them to focus on tasks that align with company goals without relying on middle managers.

Does this make Sekiya more powerful than a typical CEO? He acknowledges it does, to an extent, but sees himself as both a visionary leader and a careful steward. He believes Will’s free-market approach helps protect Disco from poor decisions—his own or those of future leaders—by giving employees autonomy.

However, some question whether Will is truly a currency or more like a control mechanism, similar to China’s social credit system. Named after the “Gil” currency in Final Fantasy video games, Will aims to motivate employees the way games inspire players to keep levelling up. Sekiya wants workers to stay engaged, but former employees suggest he sometimes tweaks the rules to steer outcomes when the system doesn’t deliver his desired results. One described Sekiya’s dual role as company head and rule-setter as a potential path to autocratic tendencies. Another called it “chaos,” with Sekiya introducing new rules to guide the system, like a game of cat and mouse.

Sekiya avoids personal publicity, believing Will is about attracting talent to Disco, not about him. If his photo appears in media, the communications team loses Will—a penalty for negative exposure. He insists Will is more than a game, dividing motivation into internal (doing something you want) and external (doing something you must). He compares it to dating versus marriage: early on, you choose to go to dinner; later, it’s an obligation. “Money has a magic power to turn external motivation into internal,” he says, arguing that Will makes work feel more rewarding.

Sekiya acknowledges similarities to China’s social credit system but insists Will is built on trust, not surveillance. If someone does poor work or disputes a payment, they’re less likely to be chosen for future tasks. Ono calls this a “village community” dynamic, where trust and relationships matter. Unlike a true economy, where currency enables transactions between strangers, Will relies on personal connections. Employees might underbid on tasks to build ties with skilled colleagues, and the lowest bidder isn’t always chosen if they lack trust.

However, Disco’s structure limits the free-market ideal. Departments like HR hold monopolies over tasks such as recruitment or payroll, with no alternative options. A former employee noted, “HR can charge whatever they want—there’s no competition.” Will also isn’t a true currency: it can’t be saved, borrowed, or spent outside Disco. Economist Tony Yates, a former central banker, calls it “just a spreadsheet with a fancy name,” ultimately tied to yen payouts.

One former employee, trained in law, tried to bypass Disco’s Application University program to join the legal team but found it impossible without years of unrelated factory work. “They present themselves as flexible and progressive, but I kept hitting walls,” they said. “It felt like playing in a small sandbox with their toys.”

Over the past 15 years, Disco Corp has fostered a workforce deeply attuned to assigning monetary value to every action through its Will system. For many employees, this mindset extends beyond the workplace—some even create similar systems at home to manage their children’s behaviour. When approached for an interview, one former employee asked, “What’s in it for me if it’s free?” reflecting the pervasive influence of Will.

During the Covid-19 pandemic, Disco’s strict stance on remote work sparked mixed reactions. CEO Kazuma Sekiya strongly favours in-person work, viewing remote work as inefficient and distracting. Employees who chose to work from home faced steep Will penalties, with those fees helping to boost bonuses for factory workers who kept production lines running during the global surge in electronics demand.

Disco imposes no cap on overtime beyond legal requirements, believing Will encourages efficiency by penalising unnecessary activities. The company is upfront on its recruitment pages, warning that it’s not suited for those prioritising personal life. While overtime hours have dropped 9% since 2015, Disco employees average 42.8 hours of overtime per month, far above the 15-hour average for other Japanese manufacturers.

For Kate Hoch, a former field engineer in Oregon from 2014 to 2017, the demands were overwhelming. Tasked with 24/7 service contracts for Intel, she juggled multiple phones to stay on call. “Will just added more work to our work,” she said, leading her to leave the company.

A key risk of Will is its focus on immediate, sales-driven tasks, potentially undervaluing activities with long-term benefits. For instance, engineers working on next-generation machines generate little Will unless Sekiya funds them through special projects. One software engineer left Disco because their customer-focused work, which wasn’t immediately profitable, went unrewarded. They spent much of their time lobbying managers to add new Will-earning tasks to the app, feeling the system prioritised short-term gains over long-term innovation. “It encourages short-term thinking and hurts the company’s future,” they said.

In Disco’s Tokyo office, near the Oi Racecourse, the eighth-floor “Coliseum” hosts a weekly competition resembling a gambler’s arena. Employees pitch ideas to improve work processes in 60 seconds, using a single PowerPoint slide, with “red” and “blue” teams competing. Colleagues vote with Will, and the winning team’s idea is implemented, earning them the currency. Those who bet on the winner also gain a Will dividend. Sekiya rarely misses these sessions, asking sharp questions and casting a decisive vote, much like a modern-day Caesar. This “Performance Innovation Management” system, similar to Toyota’s Kaizen, hosts around 4,800 contests annually.

One Coliseum idea addressed excessive smoking breaks. HR noticed smokers lingered too long, so they introduced one-minute videos to signal time passing. When that didn’t work, they changed the videos’ background colours to make the passage of time clearer, successfully shortening breaks.

What is Futarchy?

Futarchy is a governance concept introduced by economist Robin Hanson in 2000, blending democratic values with the power of prediction markets. In simple terms, futarchy lets people vote on what they want—like higher GDP or better healthcare—then uses markets to “bet” on which policies will best achieve those goals. A prediction market is like a stock market, but instead of buying shares in companies, people buy shares in outcomes—essentially betting on whether a policy will succeed or fail. The policy with the highest predicted chance of success, as determined by the market, is the one that gets implemented.

Think of it like choosing a restaurant: you decide you want Italian food (that’s your goal), then check reviews to find the best spot (that’s the market’s job). In futarchy, the community votes on their goal, then bets on the best way to get there. For example, a community might want to reduce traffic congestion. They’d vote to agree that less traffic is the goal, then propose two policies: building a new highway or increasing public transport funding. People would bet in a prediction market on which policy would better reduce congestion. If the market shows public transport funding has a higher chance of success, that policy would be chosen. Those who bet correctly might earn a reward, while those who bet on the losing policy wouldn’t lose money since their policy wasn’t implemented (Four Pillars, 2024).

Hanson’s idea came from his observation that democracies often struggle to make effective decisions because they don’t fully use the information available. In traditional democracy, people vote for leaders or policies based on promises, but those promises don’t always lead to the best outcomes. Futarchy aims to fix this by separating the “what” (the goal) from the “how” (the policy), letting markets figure out the best path forward (Hanson, 2014).

How Does Futarchy Work?

Futarchy operates in a few clear steps, making it a structured yet innovative way to govern. Imagine a sports team aiming to win a championship. The team agrees on the goal (winning), then debates strategies—like training harder or hiring a new coach. Here’s how futarchy works:

1. Set the Goal: The community or organisation votes on what they value most. This could be something measurable like national GDP, unemployment rates, or even community happiness scores. For example, a company might decide its goal is to increase profits by 10% in a year.

2. Propose Policies: Different ideas to achieve the goal are put forward. In the company example, one policy might be to launch a new product, while another could be to cut costs by reducing staff.

3. Open a Prediction Market: People bet on which policy will best achieve the goal. They buy shares in the outcome they believe in—if they think the new product will increase profits more, they bet on that. The market price of each policy reflects how confident people are in its success.

4. Choose the Winning Policy: The policy with the highest market-predicted chance of success is selected and implemented. If the new product policy has a higher market value, it’s chosen over cost-cutting.

5. Reward Accurate Predictions: After the policy is implemented, its success is measured against the goal. If profits do rise by 10% with the new product, those who bet on that policy might get a payout. If it fails, those who bet against it would win instead (Four Pillars, 2024).

This process leverages the “wisdom of the crowd”—the idea that a group of people, when betting with real stakes, can often predict outcomes better than a single expert. Prediction markets have been used successfully in other areas, like forecasting election results or box office earnings, and futarchy applies this logic to governance (Umbra Research, 2023).

Why Consider Futarchy? Benefits for Better Decision-Making

Futarchy offers several advantages that make it appealing, especially for those frustrated with traditional governance systems like democracy. First, it tackles a major problem in democracy: the lack of accountability. In many democracies, politicians make promises to win votes, but they’re often not held responsible for long-term outcomes, especially after their term ends. For example, a politician might increase government spending to gain popularity, leaving future generations to deal with the debt. Futarchy counters this by tying decisions to measurable results and incentivising better predictions through market bets (Four Pillars, 2024).

Second, futarchy can lead to more informed decisions. Prediction markets encourage people to research and think critically because their bets have real consequences. If you’re betting on a policy’s success, you’re motivated to dig into data, expert opinions, and potential risks, rather than just voting based on emotions or charisma. Studies have shown that prediction markets often outperform expert forecasts because they aggregate diverse perspectives (Umbra Research, 2023).

Third, futarchy aligns incentives. In traditional systems, leaders might prioritise short-term popularity over long-term benefits. In futarchy, participants have a financial stake in the outcome, so they’re more likely to focus on what will actually work. This can reduce the “populist” policies that sound good but don’t deliver results (Four Pillars, 2024).

Finally, futarchy is gaining traction in the blockchain world because it fits well with decentralised systems. Blockchain-based prediction markets, like Polymarket, allow for transparent, tamper-proof betting, making futarchy easier to test in a digital environment. Projects like MetaDAO on Solana are experimenting with futarchy to govern decentralised autonomous organisations (DAOs), showing how it can work in practice (Helius, 2024).

Challenges and Criticisms of Futarchy

Despite its promise, futarchy isn’t without challenges. One major concern is accessibility. Not everyone understands prediction markets or has the resources to participate, which could lead to a system where only the wealthy or well-informed have influence—a risk of “plutarchy” (rule by the rich). Hasu from Flashbots has warned that mass adoption of prediction markets might undermine democracy by amplifying the power of those with more money to bet (Four Pillars, 2024).

Another issue is manipulation. Prediction markets can be gamed if someone with enough money bets heavily to sway the outcome, even if their prediction isn’t accurate. This “self-dealing” problem could distort decisions, especially in smaller markets with less participation. There’s also a risk that those in power could tweak the system’s rules—like how success is measured—to favour their interests (Hanson, n.d.).

Additionally, futarchy relies on clear, measurable goals, but not all outcomes are easy to measure. For example, how do you quantify “happiness” or “social justice”? If the goal isn’t well-defined, the system might prioritise the wrong things or lead to unintended consequences (Lim, 2021).

Finally, futarchy is still largely untested at scale. While small experiments, like MetaDAO’s use of futarchy on Solana, have shown promise—with over 200 trades in three hours for its first decision market—scaling to a national level is a different challenge. Some argue it needs “one great success” to prove its worth, as seen with MetaDAO aiming to become a default governance platform for Solana projects within 18 months (Helius, 2024).

Futarchy in Action: The Blockchain Testing Ground

Blockchain technology has become a natural testing ground for futarchy because it offers a digital space where new governance ideas can be tried with less risk. Decentralised autonomous organisations (DAOs), which are community-run groups on the blockchain, are using futarchy to make decisions without traditional hierarchies. A DAO is like a club run by computer code, where members vote on how to spend the group’s money or resources. Futarchy helps DAOs make better decisions by using bets instead of just votes.

For instance, MetaDAO on Solana uses futarchy to decide on proposals, letting members bet on outcomes like whether a new feature will increase user adoption or boost the value of its $META token. In its first decision market, MetaDAO saw over 200 trades in just three hours, showing strong community interest (Helius, 2024). This has drawn attention from projects like Sanctum, which adopted MetaDAO’s futarchy model for its governance. MetaDAO’s structure involves submitting proposals via platforms like Discord, trading conditional tokens in “pass” or “fail” markets, and using a Time-Weighted Average Price (TWAP) oracle to decide outcomes after 10 days of trading (Helius, 2024).

Blockchain also solves some of futarchy’s practical challenges. Its transparency ensures bets are recorded fairly, and smart contracts can automate payouts, reducing the risk of manipulation. Platforms like Polymarket show how blockchain can make futarchy scalable and secure, encouraging more experimentation (Four Pillars, 2024). Ethereum’s early exploration of futarchy, as discussed by Vitalik Buterin, highlighted its potential for DAOs, where decentralised governance is crucial. In DAOs, where there’s no central authority, futarchy provides a way to make decisions that everyone can trust, since the markets are open and transparent (Buterin, 2014).

However, blockchain-based futarchy isn’t perfect. Participation rates can be low—MetaDAO sees 20 to 60 people trading a few hundred thousand dollars per proposal, which might not reflect a broad consensus (Helius, 2024). There are also concerns about market sentiment noise or reliance on TWAP oracles, which could be improved with better incentives for participation (Helius, 2024). Still, these experiments are a starting point, showing how futarchy might evolve as more people join in.

The Future of Futarchy: A New Path Forward?

Futarchy offers a bold vision for governance, one that prioritises results over rhetoric. By combining democratic values with market-driven predictions, it aims to make decisions more effective and accountable. For beginners, the key takeaway is simple: futarchy is about using bets to choose the best path to a goal, rather than relying on votes alone. While it’s not a perfect system—facing challenges like accessibility, manipulation, and scalability—it’s a promising idea, especially in the blockchain space where it’s being tested in real time.

As futarchy gains traction, it could inspire new ways to govern, not just for DAOs but for larger systems too. Imagine a city using futarchy to decide on public projects, or a company betting on strategies to boost growth. Hanson himself has speculated about dramatic scenarios, like a world government adopting futarchy to prevent civilisation collapse by tying decisions to widely shared goals (Hanson, n.d.). In organisations, futarchy could be particularly valuable for high-stakes decisions, where speculators can gather relevant information, or in dysfunctional systems like governments or charities (Hanson, n.d.).

The possibilities are vast, but so are the questions. Will futarchy truly fix the flaws of democracy, or will it create new problems? Some, like Hasu from Flashbots, see it as a potential threat to democracy, possibly leading to a system where wealth trumps votes (Four Pillars, 2024). Others, like MetaDAO’s Kollan House, argue it surfaces the best information, outperforming expert-driven systems (Four Pillars, 2024). Only time—and more experiments—will tell. For now, futarchy stands as a fascinating example of how innovation can rethink the way we make decisions, offering a glimpse into a future where governance is driven by data, not just votes.

If you’re curious to learn more, check out MetaDAO’s experiments or explore prediction markets like Polymarket to see futarchy’s building blocks in action.

References

Four Pillars. (2024, August 8). [Opinion] Can futarchy be the future of governance? X. https://x.com/FourPillarsFP/status/1821464139279294502

HackerNoon. (2020, November 16). Futarchy fixes democracy, or does it? https://hackernoon.com/futarchy-fixes-democracy-or-does-it-482l35s6

Hanson, R. (2014, August 21). Introduction to futarchy. Ethereum Blog. https://blog.ethereum.org/2014/08/21/introduction-futarchy

Hanson, R. (n.d.-a). Futarchy and self-dealing governance. Overcoming Bias.
https://www.overcomingbias.com/p/futarchy-and-self-dealing-governance

Helius. (2024, February 3). Futarchy and governance: Prediction markets meet DAOs on Solana. https://www.helius.dev/blog/futarchy-and-governance-prediction-markets-meet-daos-on-solana

Umbra Research. (2023, September 15). Futarchy: A deep dive into prediction markets for governance. https://www.umbraresearch.xyz/writings/futarchy

This invisible government consists of leaders who leverage their natural authority, ability to provide ideas, and key positions in society to govern. Bernays noted that only a small fraction of individuals—those who grasp the psychology and social behaviours of the masses—wield this influence, shaping public thought and action. The public, in turn, accepts ideas, issues, and social norms from leaders, media, or prevailing ethical voices, often conforming to these standards unconsciously. While the tools of public opinion can be misused, Bernays argued that organising and focusing public sentiment is essential for an orderly society, whether in politics, finance, charity, or education.

Propaganda, in Bernays’ view, is the executive arm of this invisible government, a legitimate mechanism for spreading beliefs or doctrines. Its moral value depends on the cause it promotes and the accuracy of the information it disseminates. Truth, he believed, is powerful, and those who discover valuable truths have a duty to share them through organised efforts, such as press or public platforms. However, propaganda turns harmful when it deliberately spreads lies or pursues outcomes that harm the public good. Modern propaganda, as Bernays described, is a consistent effort to shape events and influence public attitudes toward an idea, enterprise, or group, creating mental images that align with its goals.

Unlike earlier forms, this "new propaganda" considers not just individuals or the collective mind but the intricate structure of society, with its interlocking groups and loyalties. It views individuals as part of social units, where stimulating one sensitive point can trigger automatic responses from specific group members. Only through the efforts of an intelligent few can new ideas reach and mobilise the broader public. These invisible rulers, operating behind the scenes, hold immense power, as their actions and words often dictate the behaviour of influential public figures.

The concentration of propaganda in the hands of specialists stems from the high cost of manipulating public opinion on a large scale. Reaching millions through media or persuading group leaders is expensive, leading to the rise of public relations counsels. These professionals interpret ideas and enterprises to the public while helping clients understand public sentiment. Their role has grown due to the complexity of modern life and the increasing reliance of organisations on public approval. From businesses to educational movements, success hinges on public opinion, making the public relations counsel a critical intermediary.

The counsel’s process begins with analysing the client’s offerings to ensure they are viable and acceptable to the public. Next, they study the target audience, identifying key groups—social, economic, geographic, or cultural—and the leaders who influence them. Only after this dual analysis are policies formulated to align the client’s practices with public expectations. Continuous engagement is often necessary to maintain public trust, counter misinformation, and address rumours that could damage reputations or finances. A counsel must act ethically, avoiding conflicts of interest and ensuring their work is transparent, as deception undermines their credibility.

Bernays also explored the psychology of groups, noting that collective behaviour differs from individual psychology. By understanding group motives, propagandists can subtly control public opinion, much like a driver adjusts a car’s speed. While not an exact science, propaganda can achieve results with reasonable accuracy by leveraging group dynamics, such as gregariousness or obedience to authority. The public often follows trusted leaders or relies on clichés and symbols to process complex ideas, allowing propagandists to sway emotions by manipulating these cues.

In business, propaganda has evolved into a sophisticated tool for creating demand. Rather than directly overcoming sales resistance, businesses use emotional currents to align products with public desires. This approach, rooted in enlightened self-interest, recognises that businesses must integrate into the public’s lives and customs, expressing their personality in ways that resonate. A sound public relations policy avoids exaggeration, instead focusing on vivid, truthful communication through every channel that reaches the public.

In politics, Bernays saw propaganda as essential for leadership in a democracy. Political campaigns, often filled with spectacle, should instead focus on studying public desires, crafting platforms based on this understanding, and using propaganda to sell these ideas effectively. Unlike businesses, which have adopted these methods, politics lags in applying systematic approaches to public engagement. A skilled leader uses propaganda not to follow public whims but to mould opinion in line with public welfare, creating circumstances and dramatising issues to focus attention.

Beyond business and politics, propaganda plays a role in education, social movements, and the arts. Educators, for instance, should engage the public as propagandists, raising awareness of their societal value. Museums can use propaganda to promote aesthetic standards, while social service organisations rely on it to secure support. Even the arts benefit, as businesses collaborate with artists to elevate public taste, injecting beauty into everyday products.

Ultimately, Bernays viewed propaganda as a neutral tool, akin to education, that can bring order to chaos when used wisely. Its effectiveness depends on aligning with public needs and presenting ideas intelligently. While it can be abused, propaganda’s enduring presence reflects its necessity in a complex, interconnected world. By understanding and harnessing it, leaders can guide society toward productive ends, ensuring ideas take root and resonate with the public they serve.

The core essence of Naval’s philosophy revolves around building personal wealth, wisdom, and happiness through intentional, authentic living. True success stems from developing specific knowledge, leveraging modern technologies, and focusing on ownership rather than trading time for money. Wealth creation requires understanding leverage, making smart career choices, and continuously learning, while happiness emerges from being present, minimizing external expectations, and cultivating inner peace. The fundamental principles emphasize personal growth, independent thinking, and maintaining a holistic approach to life that prioritizes health, meaningful relationships, and purposeful work. By valuing time, embracing continuous learning, practicing radical honesty, and staying true to one's unique talents and interests, individuals can create a life of meaningful success that transcends traditional metrics of achievement.

Summary Notes

Building Wealth

Understanding Wealth and Money

• Wealth is owning assets and businesses that earn while you sleep

• Money is a tool for transferring wealth - representing social credits

• Making money is a learnable skill, not just an activity

• Getting rich requires knowing what to do, who to do it with, and when

• True wealth comes from ownership, not from renting out your time

The Foundation: Specific Knowledge

• Cannot be taught but can be learned through experience

• Combines your unique traits, upbringing, and responses

• Often exists at the edge of knowledge

• Comes from genuine curiosity and hobbies

• Must be authentic to you and your interests

• Usually found where your natural talents meet market needs

Leveraging Your Work

• Modern wealth creation requires leverage

• Three main forms of leverage:

  • Labor (traditional, less effective now)

  • Capital (money multiplies decisions)

  • Code/Media (most democratic, no marginal cost to replicate)

• Focus on judgment over time invested

• The internet enables niche interests to scale globally

• Look for ways to disconnect input from output

Building and Selling Skills

• Learn to build: design, development, manufacturing, operations

• Learn to sell: marketing, communication, recruiting, inspiring

• Focus on strong foundations rather than deep specialization

• Become excellent at 1-2 things you're obsessed with

• Stay adaptable: learn new fields quickly

• Create products/services society wants but doesn't yet have

Making Smart Career Choices

• Optimize for independence over immediate pay

• Seek positions with leveraged output

• Work where early promotion is possible

• Choose companies with valuable alumni networks

• Build a strong reputation consistently

• Take accountability for your work

• Own equity rather than just selling time

The Power of Good Judgment

• Focus on the big three: location, relationships, career

• Avoid ruin at all costs

• Take rational optimistic bets with big upsides

• Value your time highly and outsource accordingly

• Play positive-sum games, avoid status games

• Make decisions that compound over time

Creating Long-term Success

• Build strong character and reputation

• Maintain high accountability

• Compound specific knowledge with leverage

• Focus on authentic work you enjoy

• Keep learning through direct experience

• Think in decades, not years

• Build in public and embrace accountability

Managing Wealth and Happiness

• Don't upgrade lifestyle with increasing wealth

• Seek freedom rather than endless goals

• Define success on your own terms

• Focus on what you can be best at

• Build valuable relationships

• Money solves money problems but doesn't create happiness

• True retirement is when today is complete in itself

Practical Wisdom

• You get rich by saving time to make money, not by saving money

• The best work comes from doing things for their own sake

• Success typically comes from being the best at what you do

• The internet enables independent work and niche scaling

• Avoid keeping score - focus on the long game

• Build your character and reputation purposefully

• Stay authentic to your values and principles

Building Judgment

Understanding Wisdom and Judgment

• Wisdom is knowing the long-term consequences of your actions

• Wisdom applied to external problems becomes judgment

• One correct decision can win everything in an age of leverage

• Hard work develops both judgment and leverage

• Direction matters more than speed, especially with leverage

• Smart thinkers are clear thinkers who understand fundamentals

Truth and Reality

• Suffering is a moment of truth that forces you to face reality

• Your ego can block you from seeing truth

• Desires cloud perception of reality

• Feelings tell you about your estimates, not facts

• Need space in your calendar to think clearly

• Great ideas often come after boredom

• To be honest, speak without identity

• The moment you lie to others, you lie to yourself

Independent Thinking

• A true contrarian reasons from ground up

• Question beliefs taken in packages (political, religious, national)

• Identities and labels prevent seeing truth

• Your most real beliefs may be those your tribe rejects

• Avoid permanent solutions in dynamic systems

• Discard memory and identity for important decisions

• Most biases are time-saving shortcuts

Making Better Decisions

• Being right 80% vs 70% of the time creates exponential returns

• The more you know, the less you diversify

• Focus on eliminating what won't work rather than predicting what will

• If you cannot decide, the answer is no

• Choose short-term pain for long-term gain

• Modern society offers too many choices

• Only say yes when very certain

• Ignore noise - let the market decide

Principal vs Agent Dynamics

• Principals (owners) care more than agents

• Do important things yourself

• Tie compensation to exact value creation

• Society overvalues the importance of agents

• Be wary of those acting on others' behalf

Mathematical Thinking

• Master basic math for money and investing

• Focus on multiplication, division, compounding, probability, statistics

• Understand calculus principles and measuring change

• Black swans are extreme probabilities

• Claims should have predictive power and be falsifiable

• Compound interest rules in intellectual domain

Reading and Learning

• Read science, math, philosophy one hour daily

• Read what you love until you love to read

• Quality over quantity - slow down for better books

• Focus on new concepts with predictive power

• Avoid books written purely for profit

• Teaching forces learning

• Build high-quality foundations through science basics

• Start with original sources

• Ancient wisdom exists in books

• Old problems often have old solutions

Critical Thinking Skills

• Understand basics at fundamental level

• Avoid memorizing without understanding

• Learn to re-derive advanced concepts

• Study logic and math to tackle any book

• Don't fear complex texts with strong foundations

• Avoid overvaluing math-backed opinions without understanding

Communication and Influence

• Charisma is projecting confidence and love simultaneously

• Honesty and positivity can usually coexist

• When critiquing, focus on approaches not people

• When praising, focus on specific people not generalities

• Avoid telling dishonest things that disconnect from reality

Problem-Solving Approach

• Understand fundamentals deeply

• Focus on eliminating wrong answers

• Look for predictive power in solutions

• Consider time-tested wisdom for old problems

• Build strong foundations before tackling complex issues

• Use clear thinking over complicated solutions

Learning Happiness

The Nature of True Happiness

• Happiness is not inherited but a learnable skill, like fitness or nutrition

• True happiness is the state when nothing is missing in your life

• Real happiness comes as a side-effect of peace, not from external changes

• A happy person isn't someone who's happy all the time, but someone who maintains their inner peace

• "What if this life is the paradise we were promised, and we're just squandering it?"

The Present Moment

• The more present you are, the happier and more content you will be

• Happiness comes from embracing the present moment and accepting reality as it is

• We crave experiences that make us present, but the cravings themselves take us from the present

• Being peaceful comes from having a mind clear of thoughts and staying in the present

External vs. Internal Happiness

• The fundamental delusion: believing something external will bring everlasting happiness

• Happiness is being satisfied with what you have; success comes from dissatisfaction

• We pursue wealth, health, and happiness in that order, but their importance is reverse

• The three most valuable things cannot be bought: a calm mind, a fit body, and a house full of love

Desire and Expectations

• Desire is a contract you make with yourself to be unhappy until you get what you want

• The enemy of peace of mind is expectations drilled into you by society

• Every time you desire something, ask: "Is it so important I'll be unhappy unless this goes my way?"

• Pick one big desire at any given time to give yourself purpose and motivation

Practical Wisdom for Daily Life

• You have three choices in any situation: change it, accept it, or leave it

• Don't hang around people who constantly engage in conflict

• When working, surround yourself with people more successful than you

• When playing, surround yourself with people happier than you

• You are a combination of your habits and the people you spend the most time with

Modern Life and Happiness

• All screen activities are linked to less happiness; non-screen activities to more happiness

• Recover time and happiness by minimizing use of phone, calendar, and alarm clock

• Hedonic adaptation is stronger for material things than natural experiences

• The more secrets you have, the less happy you're going to be

Personal Growth and Understanding

1. First, you know it

2. Then, you understand it

3. Then, you can explain it

4. Then, you can feel it

5. Finally, you are it

Peace of Mind

• The world reflects your own feelings back at you; reality is neutral

• Life is a single-player game - your interpretations and memories are yours alone

• You can increase your happiness over time, but you must believe it's possible

• Focus on what's in your control and cultivate indifference to what isn't

• Recognize that happiness, love, and passion are choices you make, not things you find

Saving Yourself

Your Authentic Self

• Do what you want to do, not what others want you to do

• Be yourself, with passionate intensity

• Every person is unique - no two humans are substitutable for each other

• Your goal is to find what needs you the most - people, business, project, or art

• To make an original contribution, be irrationally obsessed with something

• The hardest thing isn't doing what you want—it's knowing what you want

• Courage isn't charging into danger - it's not caring what others think

The Mind and Meditation

• The mind is a muscle that can be trained and conditioned

• Society has haphazardly conditioned our minds to be out of our control

• You can unpack and reconfigure your mind, emotions, thoughts, and reactions

• Meditation is turning off society and listening to yourself

• Practice accepting the moment without making judgments

• Watch your thoughts to recognize and release fears

• When your mind quiets, you stop taking things for granted

• When in bed, meditate - you'll either have a deep meditation or fall asleep

• Meditation is intermittent fasting for the mind

• Too many distractions lead to a heavy mind

• Time spent alone in self-examination resolves the unresolved

Physical Health

• Avoid combining sugar and fat together

• Dietary fat drives satiety; dietary sugar drives hunger

• Focus more on what you eat than how much

• World's simplest diet: The less processed the food, the better

• Fasting (from a low-carb/paleo base) is easier than portion control

• The harder the workout, the easier the day

• Do something every day - the best workout is one you'll do consistently

• To have peace of mind, you must first have peace of body

Growth and Change

• The greatest superpower is the ability to change yourself

• For self-improvement without self-discipline, update your self-image

• There is no endpoint to self-awareness and self-discovery

• You should always be internally ready for a complete change

• Habits are everything—everything we are

• Making easy choices now leads to a harder life overall

• Short-term sacrifice leads to long-term benefit

• The current environment programs the brain, but the clever brain can choose its upcoming environment

Time and Freedom

• Value your time - it is all you have

• If there's something you want to do later, do it now

• Impatience with actions, patience with results

• A busy mind accelerates the passage of subjective time

• People who live below their means enjoy unique freedom

• Once you've controlled your own fate, you'll never let others tell you what to do

• Don't spend time making others happy - that's their responsibility

Emotional Understanding

• An emotion is our evolved biology predicting future impact - usually exaggerated

• Most suffering comes from avoidance

• Anger is its own punishment

• You're born, you have sensory experiences, and then you die - how you interpret those experiences is up to you

Scientific Wisdom

• Science is the study of truth

• Mathematics is the language of science and nature

• Mathematics is us reverse engineering nature's language

• We have only scratched the surface of understanding

Naval’s Philosophy

Fundamental Truths

• The real truths are heresies - they can only be discovered, whispered, and read

• There is no intrinsic meaning to life or the Universe

• You have to create your own meaning

• The more complex systems we create, the more we accelerate toward unity

• Truth is that which has predictive power

• The older the question, the older the answers

The Nature of Time and Presence

• There is actually nothing but this moment

• No one has gone back in time or successfully predicted the future

• Every moment has to be complete in and of itself

• Enlightenment is the space between your thoughts

• Be present above all else

• Inspiration is perishable—act on it immediately

Personal Growth and Wisdom

• Everyone starts out innocent and becomes corrupted

• Wisdom is the discarding of vices and return to virtue through knowledge

• Try everything, test it yourself, be skeptical, keep what's useful

• Watch every thought (Ask "Why am I having this thought?")

• All greatness comes from suffering

• Read enough, and you become a connoisseur, naturally gravitating toward theory

• Reading is the ultimate meta-skill that can be traded for anything else

Relationships and Values

• Much of finding great relationships is finding people whose values line up

• "To find a worthy mate, be worthy of a worthy mate" - Charlie Munger

• Before you can lie to another, you must first lie to yourself

• Total honesty at all times - it's almost always possible to be honest and positive

• Praise specifically, criticize generally

• Love is given, not received

• If you can't see yourself working with someone for life, don't work with them for a day

The Formula for Life Success

• Health + Wealth + Good Relationships = Happiness

• Health = Exercise + Diet + Sleep

  • Exercise = High Intensity Training + Sports + Rest

  • Diet = Natural Foods + Intermittent Fasting + Plants

  • Sleep = No alarms + 8–9 hours + Circadian rhythms

• Wealth = Income + Wealth * (Return on Investment)

  • Income = Accountability + Leverage + Specific Knowledge

  • Accountability = Personal Branding + Platform + Risk-Taking

  • Leverage = Capital + People + Intellectual Property

  • Specific Knowledge = Skills that society cannot easily train others to do

  • ROI = "Buy-and-Hold" + Valuation + Margin of Safety

Core Principles for Living

• Health, love, and your mission, in that order - nothing else matters

• All real benefits in life come from compound interest

• Earn with your mind, not your time

• 99 percent of all effort is wasted

• Mathematics is the language of nature

• Desire is suffering

• Anger is a hot coal you hold while waiting to throw it at someone else

• The democratization of technology allows anyone to be a creator

• If you follow the "news" for eating, investing, and thinking, you'll end up nutritionally, financially, and morally bankrupt

Let me share with you why I found myself drawn to this fascinating book. You see, I've been grappling with a perplexing question about Indonesia's most recent former president, Joko Widodo – or "Jokowi" as we affectionately call him. I couldn't help but notice a stark contrast between his actions in the twilight of his second term and the promising beginnings of his first.

During his initial term, Jokowi was a man on a mission. He poured his energy into enhancing public infrastructure, boosting our economy, and fortifying the healthcare sector. Those were golden days, I tell you. Under Jokowi's leadership, it felt like everyone's quality of life was genuinely improving.

But then came his second term, and it was as if a switch had been flipped. To my dismay, I watched as he began to chip away at the foundations of our democracy and tighten restrictions on free speech. It was disheartening to see him seemingly focused on building a political dynasty for his family while simultaneously weakening state institutions – particularly those tasked with rooting out corruption.

I found his behavior utterly baffling. It was almost as if two different individuals had occupied the presidency – one in each term – with completely opposing characters and priorities.

Determined to make sense of this dramatic shift, I scoured the internet for answers. That's when I stumbled upon The Dictator’s Handbook by Bruce Bueno de Mesquita and Alastair Smith. Its purpose? To unravel the complex logic behind political survival and its far-reaching implications for governance.

As I delved into its pages, I felt a sense of revelation wash over me. Here, at last, were the insights I needed to understand Jokowi's perplexing behavior during his time in office. The book offered a satisfying explanation for the transformation I had observed, shedding light on the forces that shape a leader's actions as they navigate the treacherous waters of political power.

Key Takeaways

The Dictator's Handbook provides a framework for understanding the complex political dynamics that can drive dramatic shifts in a leader's behavior, as seen in the evolution of Jokowi's presidency. At the heart of this framework are the competing incentives that leaders face - between expanding their "winning coalition" to improve citizen welfare, and consolidating power to ensure their own political survival. The book suggests that leaders like Jokowi are more likely to restrict freedoms and focus on private goods when their coalition is small, whereas they tend to invest in public goods and democratic reforms when their coalition is large. However, windows of opportunity for meaningful change are often fleeting, as leaders actively resist alterations to the status quo that could threaten their grip on power. By recognizing these core dynamics, policymakers and citizens can better navigate the complex landscape of political reform and democratization.

Summary Notes

The Logic of Political Survival

The book's core message is clear: political behavior is driven by self-interest and the need to maintain power, not idealism.

It introduces three key groups:

1. "Interchangeables" (general population)

2. "Influentials" (those who actually select leaders)

3. "Essentials" (the critical supporters/winning coalition)

The authors argue that all governments, regardless of type, operate on the same principles - just with different sizes of these groups. They outline five rules for political survival:

1. Keep your winning coalition small

2. Maintain a large pool of potential supporters

3. Control the money

4. Pay just enough to keep key supporters loyal

5. Don't waste resources on public welfare at the expense of supporters

Seeing these rules, Jokowi's shift from a public goods focus to undermining democracy and building a political dynasty suddenly made sense. He wasn't a different person - he was just playing the political game to survive and thrive in power.

While it's somewhat disheartening to see how self-interest dominates, understanding these dynamics is crucial for anyone hoping to understand and navigate the political landscape effectively.

Power Transition in Politics

After delving into the power transition aspects of political dynamics, I gained crucial insights into how leaders rise, maintain, and potentially fall from power. This knowledge further illuminated Jokowi's actions.

The basics of power transition involve three key steps:

1. Remove the incumbent

2. Seize control of government apparatus

3. Form a sustainable coalition

What struck me was the emphasis on pragmatism over ethics. Political success, it seems, often requires putting strategic necessity before idealism. This explained a lot about Jokowi's later actions.

Resource control, especially financial, emerged as a critical factor. By controlling the treasury, a leader can ensure supporter loyalty.

The book also highlighted the unique challenges of democratic power:

• Large coalitions are needed but are less stable

• Competition centers on policies rather than physical resources

• Short-term appeal often trumps long-term benefits

This framework helped me understand why Jokowi might have shifted from broad public goods to more targeted benefits for his supporters. In a democracy, building and maintaining a large, stable coalition is a constant challenge.

The contrast between democratic and autocratic systems was particularly enlightening:

• Democracies rely on public goods; autocracies on private rewards

• Democratic competition is more cerebral, while autocratic is more physical

This perspective gave me a new appreciation for the complexities of political leadership, especially in a democracy like Indonesia. While some of Jokowi's actions were disappointing, I now see them as part of a larger pattern of political survival and power management.

Corporate Power Dynamics

Exploring corporate power dynamics revealed striking parallels to political systems, offering further insight into leadership behaviors like Jokowi's.

In corporations, we see three key groups:

1. Interchangeables: Millions of shareholders

2. Influentials: Major shareholders

3. Essentials: 10-15 people (senior management & board)

The core principles of power retention in this setting are eye-opening:

1. Loyalty trumps competence. Leaders often prefer loyal incompetents over competent rivals.

2. Coalition management is crucial. Keep it small and members uncertain about their position.

3. Strategic incompetence is used. Leaders may choose advisers who can't threaten their position.

Key strategies include:

• Post-power consolidation: Replace early backers with more reliable supporters

• Control mechanisms: Use rigged processes as warnings and maintain uncertainty

• Broader applications: These principles apply in various organizational contexts

This corporate lens helped me understand Jokowi's actions from a different perspective. His shift towards building a political dynasty and weakening state institutions suddenly seemed less about personal change and more about standard power retention tactics.

The similarities between corporate and political power dynamics reinforced the idea that these behaviors are less about individual leaders and more about systemic pressures and strategies for survival in leadership positions.

This framework doesn't justify disappointing actions, but it does explain them, highlighting the challenges of maintaining ethical leadership in systems that often reward self-serving behaviors.

Political Economics

The economic aspects of political power provided another crucial piece in understanding leaders' behavior, including Jokowi's transformation.

Leaders have three main ways to generate revenue:

1. Taxation

• Larger coalitions usually mean lower tax rates

• Has dual purpose: enriches supporters while burdening others

• Must balance productivity impact with supporter needs

1. Resource Extraction

• Bypasses need for citizen productivity

• Often leads to the "resource curse" - worse growth and more autocracy

• Indonesia's resource wealth likely influenced Jokowi's governance style

1. Borrowing

• Leaders prefer debt over fiscal responsibility

• Debt can constrain future challengers

• Market access determines borrowing limits

The differences between systems are telling:

Autocracies:

• Use high taxation to emphasize in/out group differences

• Employ corruption as a political tool

• Keep wealth under government control

Democracies:

• Must balance revenue needs with popular support

• Need productive citizens for tax revenue

• Face more constraints on taxation

Key insights that helped explain Jokowi's actions:

• Resource wealth often leads to worse governance

• Leaders may keep people poor to prevent coordination

• Reform typically only happens under financial pressure

This economic perspective helped me understand why Jokowi's governance changed when Indonesia faced different economic pressures and opportunities. The shift from public goods to more controlled resource distribution followed a common pattern in political economics.

Political Leadership and Resource Allocation

This section of the book really hit home in explaining Jokowi's transformation through resource allocation patterns.

Leaders have three main ways to distribute resources:

1. Public goods (infrastructure, education, healthcare)

2. Private rewards to coalition members

3. Personal projects or savings

The key to survival is balance:

• Keep coalition members happy

• Provide enough for the public to prevent revolt

• Interestingly, neither the very poor nor the privileged typically start revolutions

Democratic vs. Autocratic approaches reveal stark differences:

Democratic Systems:

• Must serve a larger population

• More likely to implement real reforms in crises

• Focus on public goods like education and healthcare

• Protect freedoms (speech, assembly, press)

Autocratic Systems:

• Focus on smaller coalition satisfaction

• Use economic bailouts for political survival

• Limit education and strategic infrastructure

• Restrict freedoms as threats to power

This framework perfectly explained Jokowi's shift:

• First term: Democratic approach with broad public goods

• Second term: More autocratic with focused benefits

• His restriction of freedoms followed classic small-coalition behavior

The economic implications were clear:

• Small coalitions use corruption to maintain power

• Large coalitions find corruption politically costly

• Small-coalition systems sacrifice long-term growth for short-term stability

This helped me understand why Jokowi's governance style changed so dramatically - it wasn't personal transformation but a shift in coalition management strategy.

Corruption in Political Systems

This section was particularly enlightening about why leaders like Jokowi might shift their approach to corruption over time.

The harsh reality of power:

• Successful leaders often use repression and eliminate rivals

• Those unwilling to take harsh actions get replaced

• "Be corrupt" is seen as practical advice for survival

Coalition size dramatically affects corruption patterns:

Small Coalitions (like Jokowi's later term):

• Higher proportion of corruption relative to GDP

• Big rewards for key backers

• More obvious corruption (bribes, favoritism)

• Leaders keep significant discretionary funds

Large Coalitions (like Jokowi's early term):

• Lower proportional corruption but possibly higher total revenue

• Benefits spread thinner across more supporters

• Corruption hidden in policy decisions

• "Pork barrel" projects common

The corporate world shows similar patterns:

• Mirrors small-coalition systems

• Leadership survival depends on rewarding key supporters

• Financial distress increases likelihood of fraud

Why traditional anti-corruption efforts often fail:

• New laws can become tools for enforcing discipline

• Reformers and whistleblowers get targeted

• Real change requires expanding coalition size

This framework explained Jokowi's trajectory perfectly:

• Early term: Broader coalition, less obvious corruption

• Later term: Smaller coalition, more direct corruption

• Weakening anti-corruption institutions followed this pattern

The key insight: Corruption isn't just about morality - it's a structural tool for political survival. This doesn't justify corruption but explains why even initially reformist leaders might shift their approach over time.

Foreign Aid and International Politics

This section revealed how international politics and aid can influence domestic leadership behavior, offering another perspective on Jokowi's transformation.

The Democratic Foreign Policy Paradox:

• Leaders must "do right" at home but often exploit foreign nations

• Short election cycles encourage short-term thinking

• Focus on next election over long-term outcomes

Aid as a Political Tool:

• Primary goal: Improve donor country's welfare

• Not mainly for poverty reduction

• Used to buy policy concessions

How Aid Affects Recipients:

• Often misappropriated

• Helps leaders maintain power

• Enables restriction of freedoms

• Donors overlook corruption when seeking favors

Key Differences in Recipients:

• Democracies: Expensive to influence, must compensate many

• Autocracies: Cheaper to influence, smaller coalition to satisfy

This helped explain Indonesia's situation:

• Foreign aid and investment influenced governance

• International relationships affected domestic policies

• Pressure for policy concessions might have encouraged Jokowi's shift

Problems with Aid Implementation:

• Bureaucracy hinders economic activity

• Recipients convert aid to preferred rewards

• Can actually incentivize maintaining problems

• Suggestion: Use escrow funds until objectives met

Military Interventions:

• Often reduce democracy in target nations

• Easier to deal with autocrats for policy compliance

This framework shows how international pressures and aid dynamics might have influenced Jokowi's governance shift from democratic ideals to more autocratic practices.

Revolutionary Dynamics and Political Survival

Triggers of Revolution

1. Tipping Points

   • Requirements for rebellion:

     • Expectation of sufficiently bad future

     • Belief in potential success

     • Promise of better life

   • Common catalysts:

     • Natural disasters

     • Succession crises

     • Economic downturns

     • Rigged elections

2. Revolutionary Promises

   • Always begin with democratic reform promises

   • Aim to mobilize masses

   • Often lead to petty dictatorships once successful

   • People hope for:

     • Enlarged winning coalition

     • Inclusion in new power structure

Leadership Responses to Revolutionary Threats

1. Two Main Approaches

   • Increase democracy:

     • Improve conditions to prevent revolt

   • Increase dictatorship:

     • Make rebellion chances minimal

     • Intensify oppression

2. Suppression Tactics

   • Prevent free assembly

   • Require loyal supporters for dirty work

   • "Prudent dictators nip rebellion in the bud"

   • Only the ruthless survive as dictators

Democratic vs. Autocratic Protest Dynamics

1. Democratic Protests

   • Relatively cheap and easy

   • Protected right to assemble

   • Aimed at policy changes

   • Leaders respond with concessions

2. Autocratic Protests

   • Aimed at systemic change

   • Higher risks and costs

   • Success depends on coalition support failure

   • Often triggered by resource limitations

Economic Factors in Political Change

1. Resource Dependence

   • Tax-dependent regimes are less oppressive

   • Natural resources enable greater oppression

   • Economic crises are political crises for autocrats

2. Public Goods Provision

   • Determines people's desire to rebel

   • Freedom determines ability to act on desires

   • Economic necessity may force democratization

Natural Disasters and Political Survival

1. Impact on Different Regimes

   • Democracies:

     • Leaders removed for high death tolls

   • Autocracies:

     • Leaders benefit from high casualties

     • Dead citizens can't protest

   • Refugee camps inadvertently facilitate organizing

2. Strategic Responses

   • Autocrats more concerned about urban disasters

   • Selective assistance based on threat level

   • May exploit disasters for international aid

Conditions for Successful Democratization

1. Economic Factors

   • Limited natural resources often favor democracy

   • Need for productive citizens encourages freedom

2. International Support

   • Debt forgiveness tied to actual reforms

   • Aid conditional on genuine political change

   • Freedom expansion signals potential democratization

War and Political Systems

Fundamental Differences in War Approach

1. Decision to Fight

   • Democratic leaders:

     • Fight when victory is nearly certain

     • Seek peaceful resolutions when possible

     • Highly sensitive to war outcomes

   • Autocratic leaders:

     • Will fight despite unfavorable odds

     • Less affected by military defeats

     • Quit easily if initial effort fails

2. Military Functions

   • Autocracies:

     • Military serves dual role: domestic control and foreign threats

     • Elite units primarily for crushing internal opposition

   • Democracies:

     • Focus primarily on external threats

     • Invest in better training and equipment

Treatment of Soldiers

1. Value of Military Lives

   • Democratic approach:

     • Soldiers are politically important

     • Emphasis on minimizing casualties

     • Better equipment to leverage impact

   • Autocratic approach:

     • Foot soldiers politically insignificant

     • Less concern for troop protection

     • Resources not "squandered" on battlefield

2. Impact on Strategy

   • Democrats:

     • May lose power even in victory if casualties are high

     • Use technology to minimize risk

   • Autocrats:

     • Can survive high casualties

     • Prioritize keeping power over military success

War Objectives and Outcomes

1. Motivations

   • Democrats:

     • Fight for policy concessions

     • Engage in far-flung conflicts

     • More likely to be "bullies" to weaker states

   • Autocrats:

     • Fight for land, slaves, and treasure

     • Prioritize job security over conquest

2. Post-War Behavior

   • Democrats:

     • Enforce policy settlements

     • Impose puppet regimes

     • Maintain occupation

   • Autocrats:

     • Take valuable resources and leave

     • Less concerned with policy enforcement

Democratic vs. Democratic Conflict

1. Interaction Dynamics

   • Rarely fight each other

   • Larger democracies may target smaller ones

   • Crucial factor: certainty of victory

2. Puppet Regime Installation

   • Democrats often install puppet leaders

   • Reduce coalition size in conquered states

   • Makes policy compliance cheaper and easier

Strategic Considerations

1. Escalation Patterns

   • Democrats:

     • Gradual escalation

     • Willing to negotiate if victory uncertain

   • Autocrats:

     • More willing to take risks

     • Less strategic in approach

2. Resource Allocation

   • Democrats:

     • Invest heavily if fighting proves necessary

   • Autocrats:

     • Limit resource use to preserve private rewards for supporters

Conclusion

Core Concepts

1. Political dynamics revolve around three key groups:

   • Interchangeables (general population)

   • Influentials (those with some political voice)

   • Essentials (key supporters needed for leadership)

2. Coalition size fundamentally shapes governance:

   • Small coalitions foster autocratic, private-goods focused rule

   • Large coalitions encourage democratic, public-goods oriented governance

Leadership Dynamics

1. Leaders resist change when:

   • It threatens their power or resources

   • The status quo benefits their essential supporters

2. Change becomes possible during specific windows:

   • Economic crises when leaders lack funds to buy loyalty

   • Transitions of power (new leaders or dying incumbents)

   • When coalition members fear purges

Reform Mechanisms

1. Internal factors:

   • Technology (internet, cell phones) enables coordination

   • Economic strain can force liberalization

   • Tourism-dependent economies may be more susceptible to reform

2. External interventions:

   • Most effective during leadership transitions

   • Should focus on expanding coalition size

   • Can leverage economic incentives

Corporate Parallels

1. Similar dynamics apply to business governance:

   • Small coalitions (boards) may prioritize private benefits

   • Larger coalitions (shareholders) tend to improve corporate responsibility

   • Social networking can mobilize corporate change

Practical Implications

1. For promoting democracy:

   • Elections should follow expanded freedom, not precede it

   • Economic success may delay but not replace democratization

   • External pressure works best when leaders are vulnerable

2. Policy recommendations:

   • Use escrow accounts for conditional aid

   • Offer amnesty to encourage peaceful transitions

   • Focus on expanding coalition sizes

Challenges and Contradictions

1. Self-interest often trumps idealism:

   • Democracies may prefer cooperative dictators to hostile democracies

   • People support freedom abroad only when it aligns with their interests

2. Reform obstacles:

   • Gerrymandering reduces accountability

   • Non-citizen immigrants expand disenfranchised populations

Final Observations

1. All small-coalition systems eventually face efficiency crises

2. Change opportunities arise when bad governance becomes unsustainable

3. Targeted sanctions on leaders are more effective than broad penalties on countries

Write anything - from your smallest paragraph to your grandest masterpiece - and publish it online or send it as email newsletters directly to your readers.

Your Paragraph publication is blazing-fast, SEO optimized, and combines the best parts of both web2 and web3 to help you create content and grow your community better than ever.

Getting started

What you're looking at right now is the Paragraph editor. We support markdown, callouts, code, and rich media embeds like Twitter and YouTube.

paragraph.xyz

@paragraph_xyz

On http://paragraph.xyz, all posts are stored on @ArweaveTeam. This means they're immutable, uncensorable, permanent, and composable ✨

8

05:12 PM • Aug 18, 2022

When you publish a post, you'll have the option of sending it as a newsletter or storing it in the permanent & uncensorable Arweave.

Helpful links

Here's a few helpful pointers to customize your publication & get the most out of Paragraph:

• Theming & customization. Change your publication's font & colors; truly make this space your own.

• Set up a welcome email. This is the email your readers receive when they subscribe to your newsletter.

• Configure your publication's settings. Add links to your homepage, set up a custom domain, configure Google Analytics & more.

Need help or have feedback?

We've put together some documentation here, but if you still have questions you'd like answered we’d love to hear from you.

You can reach us via email at hello@paragraph.xyz or subscribe to our newsletter here. We're also pretty active on Discord.

This early October, we are greeted by a brand new — yet another — version of Joker, Batman’s most iconic villain. Everyone were so excited and pumped by this new Joker, played by Joaquin Phoenix, including me. Before the movie came out, I watched the trailer over and over again, saw Joaquin’s performance and had high expectation for the movie. It’s been awhile, we haven’t seen any Joker since Heath Ledger’s Joker in The Dark Knight. (Don’t even think about mentioning Jared Leto here!).

I, myself, started to know and admire Joker as a villain when I watched The Dark Knight, the second movie of Batman trilogies directed by Christopher Nolan. In the movie, Heath Ledger portrayed Joker as a villain who didn’t have any motives; neither money, vengeance, love, or anything; for every crimes, chaos, and destruction he brings. He simply just want to watch the world burn and bring chaos to order of society.

I personally have never seen nor read any villain character concept this unique in my entire childhood. It blows my mind when I think about a villain who has no ulterior motives whatsoever for his crimes. It’s hard to imagine such a person exists, while at the same time, the idea that this person probably exists somewhere in this world intrigues me.

Now, what I want to talk about is the actual Joker movie of this year. To be honest, even though I’m amazed by Joaquin performance throughout the whole movie, overall it didn’t meet my expectation and I’m quite disappointed. Sure, some of you probably want to say, “But this is the best DC movie we have so far!” Well, yes, I agree with that. At last, DC dared to show their true colors, which is good and bring new flavor in this modern movies industry. But, it doesn’t justify the predictable plot plaguing this movie.

It seems like Joker draws its references from Taxi Driver and The King of Comedy, both a classic directed by Martin Scorsese. A person’s psychological transformation from good to what considered to be evil by society, but not for the person undergo the transformation itself. A disappointment that kickstarts and turns a person life for the best, or rather for the worst in this case. An alternate scenes between reality and fantasy, truth and delusion. The cast for the main protagonist in those two movies, Robert De Niro, even makes his appearance in the Joker movie as Murray Franklin, the show host.

In my opinion, the movie simply don’t work, because the plot is so predictable that it’s actually undermines the concept of villain Joker in its essence. In my point of view, Joker supposed to be unpredictable, as he didn’t have any motives and only driven by his instincts. The movie plot should mirror this value. Instead, we got someone who ignored by society, received a weapon somewhere along the road, and started to seek vengeance and kill people who have hurt him. It’s lame!

But despite that, I still like the movie, thanks to Joaquin’s performance throughout the movie. I was frozen in the cinema (both figuratively and literally speaking, as the temperature in the cinema was so cold!) I believe it’s hard to play a movie character who has mental illnesses, yet Joaquin managed to pull that off! I also feel the cinematography and the sound design was good and on point with the message the movie wants to tell us.

In conclusion, this year Joker movie is not bad, but it’s certainly not a blockbuster. It’s a very violent and aggressive movie. It’s an exploration of a character who have mental illnesses and ignored by society. Despite having numerous backlashes and controversies, it’s worth seeing for once. Go watch it if you’re curious, but beware of its psychological effects and don’t bring your kids!

“I used to think that my life was a tragedy, but now I realize, it’s a f**king comedy.” — Arthur Fleck, Joker (2019)

Several days ago, I decided to watch a lot of movies from Studio Ghibli. The first film I watched was Spirited Away, one of the most famous movie from the studio. It tells a story of a ten year old girl named Chihiro, who ventured in what-seemed-to-be a spirit world to find a way to save her parents who had been turned to pigs. It was a brave and courageous story about love, family, and friendship; with dazzling, enchanting, and gorgeously drawn world setting.

It left me with a feeling of wanting more. I started to watch other Studio Ghibli’s movies; such as Castle in The Sky, Princess Mononoke, Grave of the Fireflies, The Secret World of Arrietty, and my personal favorite, My Neighbor Totoro.

My Neighbor Totoro was directed by Hayao Miyazaki, co-founder of Studio Ghibli. Miyazaki has been known for his heart-warming themes revolving around family and friendship, humanity’s relationship with nature and technology, and child-like atmosphere. All of these story elements can be seen in most of his movies, including My Neighbor Totoro.

The story starts with a university professor named Tatsuo Kusakabe and his two daughters, Satsuki and Mei, who is currently moving into a new house in the countryside, located near a forest. Their mother is sick and currently being treated in a hospital near their new home. The empty house was inhabited by tiny creatures called susuwatari — a small, dark, dust-like house spirits — who left to find another empty house.

One day, Mei — the youngest of the two — discovers two small spirits who lead her into the hollow of a large camphor tree. She befriends a larger spirit, which identifies itself by a series of roars that she interprets as “Totoro”. She falls asleep atop Totoro, but when Satsuki finds her, she is on the ground. Despite many attempts, Mei is unable to show her family Totoro’s tree.

One rainy night, the girls are waiting for Tatsuo’s bus, which is late. Totoro appears beside them, allowing Satsuki to see him for the first time. Totoro has only a leaf on his head for protection against the rain, so Satsuki offers him the umbrella she had taken for her father. Totoro is delighted and gives her a bundle of nuts and seeds in return. Shortly after, a bus seems to have arrived from the distance, but instead of Tatsuo’s bus; it appears to be a giant, bus-shaped cat. Totoro boards it and leaves, and not long after that, Tatsuo’s bus arrives.

There is one of the film’s most iconic scenes that I love the most. It’s a scene where the two girls are waiting for their dad at a bus stop in the rain. The scene clocks in at almost seven minutes, which is a significant amount of time in a movie that’s just under an hour and a half long. It’s an especially long time to spend on a scene with minimal dialogue. The length communicates the scene’s importance to the audience. The tense silence, combining with the pouring rain, the increasing darkness, and the loss of hope as vehicles pass by without their dad; add up to a sinking sense of dread. It’s just as if the scene tries to communicate Satsuki and Mei’s fear of uncertainty, as their dad is missing in action and their mom is sick.

But suddenly, Totoro appears near them. His friendly, whimsical presence — add to that the scene’s quirky BGM — immediately lightens the mood. Here, he turns the scary rain into something fun and worthy of a big, silly grin.

The ending scenes are worth noted too. These scenes are a rejection of everything Totoro represents in the whole duration of the movie. I no longer feel like I am in a kids’ fantasy, but in a gritty reality of life. This scenes try to give a message about how to handle problems at hand. When we’re at the most terrifying situations, giving into despair will make us unable to solve the problems. The most constructive thing to do is to summon that inner hope, ingenuity, and resourcefulness inside one self.

There’s a reason why My Neighbor Totoro can be enjoyed by audiences from almost all range of age. For children, it feels like diving deep into the world of fantasy and imagination. For adults, it brings this nostalgic feeling of childhood and its innocence. However for me personally, it acts as a reminder about nature — a new perspective of countryside living — how to live in harmony between nature and the creatures living inside, how to not give into despair, and how to be patient as well as hopeful when things didn’t go the way we want. A reminder that it’s okay to be like a child sometimes, to be loud and let our feelings out, and to not suffer in silence like a grown-up would.

If you haven’t watched this movie yet, I don’t know what you’re doing with your life. So, I encourage you (yes, you who are reading this article right now!) to go check out My Neighbor Totoro. Watch the trailer, be interested, and buy/rent/borrow the movie from your friends. It’s an old movie, but the setting and message it has surely won’t get old. It will remind us about what matters most in our life and give us the power to survive in the struggle.

“Everybody, try laughing. Then whatever scares you will go away!” — Tatsuo Kusakabe, My Neighbor Totoro (1988)

Truth is, it takes a while to get to that expertise of DMing, and even then the DM is likely flying by the seat of their pants. Even the more experienced DM is still learning in the process of their session.

However, a novice DM can be just as good as one who has been running games for decades. I’ve attempted to compile all of my own DMing advice I’ve picked up along the way so as to make your foray into DMing hopefully less intimidating. I am still relatively new to DMing myself, so if you have another advices or disagree with some points in this article, please feel free to comment or give a response.

Have Fun: This first piece should go without saying. Too often the DM gets wrapped up (understandably) ensuring all of the players at the table have fun. It’s incredibly important to remember that in reality you are a player yourself and if you’re not having fun, the table also suffers.

You Don’t Need To Know ALL The Rules…: Seriously, you really don’t. And who ever does? If this was a necessity to being a good DM we would have a serious lack of tables to play at. The most important thing about the rules is that you know where to find them and how to look for answers when you encounter an issue during game play. (Resources like D&D Beyond, 5e Spellbook Phone App, Complete 5e Reference Phone App, and Roll20 SRD Compendium are fantastic for quick look-ups. I also highly recommend tabbing your Monster Manuals, Dungeon Master Guides, and other relevant books during prep for that session).

…But Know Enough To Get By: You should still definitely have a working knowledge of gameplay before you dive into DMing. Like stated above it doesn’t need to be extensive but it needs to be enough to keep the game running smoothly (how combat operates, appropriate uses for skill checks or saving throws, how PC and NPC interactions can mechanically go, etc.)

NPC/Location Cheat Sheet: Before play, set up a list of random NPC names (with one or two attributes describing them/what they do), and have it in case you need it on the fly. As for locations, I have a bunch of random village/city names, descriptions, and a couple shop names/descriptions always ready at hand.

Filling The Silence: Sometimes during game play, out of combat, silence can envelope the table when the group is struggling to roleplay a scenario or perhaps make a choice on a path. As a DM, I think it’s vital to gently fill some (not all) of these silences with descriptions of the NPCs that may be involved, the environment around the PCs, how the air feels around them, the general mood that is set amongst the party at the moment, etc. This will help the players get into their character more which also assists in making those decisions.

Position Yourself As a Player: Everyone is there to have fun. You want to make it enjoyable. The best way to do this is by thinking as a player when preparing a session.

The PCs Are the Heroes: Not the NPCs. The NPCs should help the PCs stand out and evolve.

Use the Player’s Backstories: Take time to read and truly understand your players and their backstories. Then, figure out ways you can subtly add this into the campaign.

Find a Balance: Between combat and role playing. Nobody wants to play a D&D session which is strictly run off of diplomacy. Nobody wants to play a session where all they do is hack and slash. You need to find the balance between the two.

Bad Guys Can Run Away: I know, it’s such a novel idea, but not all bad guys fight to the death. Cowardly or highly intelligent bad guys often would, in character, flee upon realising their demise was certain.

Challenge Your Players: If every combat take at most 1/5th of my hit points and everything around me is easy to hit, I won’t be enjoying myself. The point is, the more challenging combat is, the more rewarding the success.

Be Wary of TPKs: On a similar note, try not to TPK your party unless they bring it upon themselves. Sometimes, a group of level 1 wizards will run into a cavern and straight for a dragon. This scenario deserves a TPK and as a DM even you cannot save them from this stupidity. However, during more difficult combats, even if the PCs are losing, always allow them a way out (through settling the combat via diplomacy or fleeing the battle altogether). It’s not fun to play in a campaign where everyone dies three levels in and then has to restart.

Critical Failures: A lot of players are upset when they roll critical failures. These can be some defining moments. Add flavour to these low rolls, add comedy, or something about the environment that would cause the character to be so distracted.

Don’t Be Too Open-Ended: The players should have options to choose from and explore, not just one path to follow, nor should they have infinite ones. Having an infinite amount of paths/options can actually cause the players to stall a fair bit and become lost in the campaign (in a negative way).

Include Players: Sometimes more dominant players can take over the table. When this happens, try to direct yourself at the other players every so often to stimulate their role in the game. But, keep in mind some players (or characters) prefer to take a backseat, which is okay, too. The important thing is to read the table and your players to ensure everyone is having fun.

Seriously, HAVE FUN: It’s the most important part of D&D. Make friends, kill dragons, and have fun! Don’t obsess over the rules, the regulations, the little bumps in the road, the slip-ups, etc.

Say Yes To Everything: Players will ask to attempt some ridiculous stuff. Often I will allow this. However, you are allowed to say no to some things. This does not make you a bad DM and saying yes to everything can be a recipe for chaos.

Encourage PvP: Only under very specific circumstances have I witnessed PvP turn out in a positive manner. Encouraging any type of PvP behaviour can cause a hostile environment at the table. And most of the time, it will break the mood entirely.

Let Someone Rules Lawyer You: This does not include Adventurer’s League play where the rules are more important than in homebrew. While playing at home or in unofficial play, you are the DM (don’t let it get to your head), and you can bend and twist some of the rules but I recommend only doing so for player’s enjoyment.

Try To Be Someone You’re Not: You are your own person and in turn your own DM. You don’t have to be Matt Mercer to be good. You don’t have to do voices or maps if you’re not comfortable doing them. You are you and you bring something unique to the table that other DMs don’t. Spend some time figuring out what your DMing style is and work with what you’ve got.

“For a lot of people, ‘Dungeons & Dragons’ has been a hard thing to describe. I can’t tell you how many social environments I’ve been in where I say, ‘I play ‘D&D,’’ and a bunch of normies will be like, ‘How does the game even work? What’s that like?’ I didn’t have anything to really describe it that didn’t make me sound like a crazy person.” — Matthew Mercer

It’s been quite long since I’ve found a game so beautiful and enchanting as Journey. Not only visually stunning, but the game also feels therapeutic. I used to spare an hour or two every day to dive into the wonderful world of Journey when I was still in college to relieve my stress.

But nowadays, I barely have any time to turn on my laptop, let alone play a game on it. That’s when I started to embrace mobile gaming and in turn, found this hidden gem titled Sky: Children of The Light.

Everything about this exploration-focused game, from the evocative visual style and soaring musical score to the intimate moments of subtle interaction with other nameless, speechless players, is pure bliss. After I heard that it’s the latest game from thatgamecompany — the visionary studio behind low-key, critically-acclaimed game, Journey — I already have a good idea about what Sky is all about. Sky isn’t a direct sequel to Journey, but it might as well be: the characters move with that same elegant grace as their capes flutter behind them and it features an expanded and more engaging multiplayer component.

Sky takes you as one of the children of the light, who seeks out lingering spirits — which are suspended as translucent silhouettes across various worlds — in order to relieve them and bring them back to the lights. It’s a charming story about healing and restoration that’s almost meditative to play. The tutorials teach you how to move, jump, and fly though the clouds to reach your destination. But the thing is, Sky is a game about discovery in more ways than just its beautiful world.

Similar to Journey, Sky offers an almost unrivaled sense of freedom, specifically because of its simplicity. Detailed guidance on where to go or what to do generally isn’t needed because exploring the open and inviting worlds and intuitively finding things on your own is basically the entire game, but naturally it can also be a bit unclear where to go at times.

Sky is as complex as you want it to be. There are seven realms to explore with their own distinctive landscape and theme, from the ethereal and cloud-heavy worlds full of floating islands to those covered in dense, green grass inviting you to skate across the prairies, or even forests drenched in rain that evoke a somber yet comforting atmosphere. The entire game can be completed by going solo, but there are several hidden doors and secret areas that can be unlocked with the help of other players.

And arguably, meeting and playing with others is just as important as finding your way. Interactions with other players is limited to a collection of quaint and frankly heartwarming gestures— even though you can do some talk n’chat when you sit together at times — but this limitation is what makes the game’s community feels so positive and supportive. And this is what put Sky over the top. You can hold out a candle to greet and add a player to your friend list and then assign them a custom nickname (since you can’t see their actual name). You can play music together, exchange glowing butterflies, and even hold hands to go exploring as a team. Technically, you can invite friends directly to play with people you know, but much like Sky as a whole, the unspoken communication in its multiplayer is a big part of the magic and is best with a stranger.

In some regards, Sky’s focus on deeper gameplay robs it of a bit of the charm that made Journey’s elegant simplicity so special the first time around, but that’s often the case with follow-ups and spiritual successors. Instead of trying to replicate its predecessor, thatgamecompany has instead iterated and expanded upon what came before to craft an adventure that’s strange, meditative, and memorable. The ending invites repeat playthroughs and the dynamic multiplayer encounters ensure no two runs will ever be the same.

Sky: Children of the Light is a breathtaking follow-up to thatgamecompany’s previous hit, Journey, that surprised and delighted me from start to finish with its subtle story of exploration and healing. Visually, it’s breathtaking to behold on a mobile device and it delivers one of the most memorable and purely joyous multiplayer experiences I’ve had in recent memory. This is an adventure for anyone and everyone, and a healing potion for every lost soul who come to search the light.

“When fears are grounded, dreams take flight.”

Today, nearly six years after its launch, the Ethereum blockchain hosts an over $42 billion ecosystem of decentralized applications that provide wide-ranging services previously available only to wealthy or institutional investors.

DeFi is an open and global financial system built for the internet age — an alternative to a system that’s opaque, tightly controlled, and held together by decades-old infrastructure and processes. Decentralized Finance is a blockchain-based form of finance that does not rely on central financial intermediaries such as brokerages, exchanges, or banks to offer traditional financial instruments, and instead utilizes smart contracts on blockchains, the most common being Ethereum.

DeFi platforms allow people to lend or borrow funds from others, speculate on price movements on a range of assets using derivatives, trade cryptocurrencies, insure against risks, and earn interest in savings-like accounts. DeFi uses a layered architecture and highly composable building blocks. Some DeFi applications promote high interest rates but are subject to high risk.

By October 2020, over $11 billion (worth in cryptocurrency) was deposited in various decentralized finance protocols, which represented more than a tenfold growth during the course of 2020. As of January 2021, approximately $20.5 billion was invested in DeFi.

• Non-Custodial

These distributed networks allow people to have control over their own assets and data and for value to be transferred from one person to another, without the need to use intermediaries like banks and other financial institutions. Users are the only ones who hold the keys to their wallets and control their funds. The term used to describe this feature is that DeFi apps are “non-custodial,” as they don’t have custody of your assets — you do.

• Open

These networks are also global, which means there are no borders in this parallel financial system, and everyone can access it. It’s like the internet, but instead of information being transferred globally, seamlessly and creatively, the same is happening with money. It’s an internet of value.

• Transparent

The code for these financial applications is open for anyone to see and inspect. This is important because anyone is able to verify how the applications and protocols work, and track exactly where their money is.

• Composable

Open-source code also enables developers to build on top of others’ applications, accelerating innovation and allowing these applications to become like lego pieces, leveraging each others’ value — hence the term, “money legos.” And if users don’t like how one application is being built, they can copy the code and build a new app.

• Decentralized

DeFi protocols are built on public blockchains like Ethereum. These blockchains, the rails to this new financial system, are run by thousands of nodes — computers running the blockchain’s software — spread out across the globe, so that it’s almost impossible to censor or stop them.

On top of this base layer of decentralization, DeFi platforms are built to be managed by a community of users, and not centrally controlled. Users become owners of their financial applications; they’re able to participate in major decisions, including by proposing changes themselves, and benefit from their growth and success. No centralized party can unilaterally take control of funds or change the rules of the game.

Please look at infographic provided below to better understand the difference between DeFi, Traditional Finance, and FinTech.

One could argue that DeFi started with Bitcoin in 2009. BTC was the first-ever peer-to-peer digital money; the first financial applications built on blockchain technology.

But the turning point for financial applications allowing users to do more with their money than send it from point A to point B happened in December 2017, when MakerDAO launched.

MakerDAO is an Ethereum-based protocol that allows users to issue a cryptocurrency that’s pegged at 1-to-1 to the value of the U.S. dollar by using digital assets as collateral. This mechanism effectively allowed anyone to borrow the Dai stablecoin against Ether (Ethereum’s native cryptocurrency). It created a way for anyone to take out a loan without relying on a centralized entity. It also created a dollar-pegged digital asset, which didn’t rely on holding dollars in a bank, like USDC, USDT and other stablecoins.

The MakerDAO lending protocol and its Dai stablecoin provided the first building blocks for a new, open, permissionless financial system. From there, other financial protocols launched, creating an increasingly vibrant and interconnected ecosystem. Compound Finance, released in September 2018, created a market for borrowers taking out collateralized loans, and lenders to rake in interest rates paid by those borrowers. Uniswap, launched in November 2018, allowed users to seamlessly and permissionlessly swap any token on Ethereum.

Less than three years after MakerDAO placed the first money lego, there are now dozens of DeFi applications, from basic use-cases like enabling lending, borrowing, trading, to crazier ones like creating synthetic assets, streaming payments and playing in a lottery where you can always get your money back.

Assets held in these platforms’ smart contracts climbed to surpass $1 billion, then quickly $2, $3 and $4 billion just this year. It’s clear we’re just getting started.

‍DeFi uses cryptocurrencies and smart contracts to provide services that don’t need intermediaries. In today’s financial world, financial institutions act as guarantors of transactions. This gives these institutions immense power because your money flows through them. Plus billions of people around the world can’t even access a bank account.

In DeFi, a smart contract replaces the financial institution in the transaction. A smart contract is a type of Ethereum account that can hold funds and can send/refund them based on certain conditions. No one can alter that smart contract when it’s live — it will always run as programmed.

A contract that’s designed to hand out an allowance or pocket money could be programmed to send money from Account A to Account B every Friday. And it will only ever do that as long as Account A has the required funds. No one can change the contract and add Account C as a recipient to steal funds.

Contracts are also public for anyone to inspect and audit. This means bad contracts will often come under community scrutiny pretty quickly.

This does mean there’s currently a need to trust the more technical members of the Ethereum community who can read code. The open-source based community helps keep developers in check, but this need will diminish over time as smart contracts become easier to read and other ways to prove trustworthiness of code are developed.

When talking about DeFi, these 3 words will eventually pop up in my head — cryptography, decentralization, and blockchain. It is a financial system concept which has several value propositions:

• No single authority can disrupt the market. This reduces the chance of fraud or injustice done by bad actors in the financial system (such as the famous GameStop and WallStreetBets case)

• Interest rates adjusted automatically based on supply, demand, and risk parameters.

• Accounting becomes super easy, most likely will be completely automated in the future. This will reduces operating cost significantly.

Personally, I believe in DeFi. I believe that this concept will become the main financial system in the future, or at least supplement the current one. I also agree with Vitalik Buterin’s statement at Ethereal Summit 2020. Everyone should have equal access to financial system and the services it provides, no matter who they are and where they are.

”I’m very excited about the potential DeFi offers in principle. The idea that just anyone, anywhere in the world, can have access to a system that lets them pay each other, and choose their own financial exposure, is a really powerful thing. It’s something that a lot of people don’t have access to.” — Vitalik Buterin, Co-founder of Ethereum

While the world faced uncertainty in the midst of pandemic, Bitcoin community stood strong despite the occasional changes in its price. But what led to this monumental rise and fall in its price and how did Bitcoin grow over the past decade?

Bitcoin has existed since 2009 and the technology it is built on has roots going back even further. In fact if you had invested just $1,000 in Bitcoin the year it was first publicly available, you would now be richer to the tune of £36.7 million.

Bitcoin rallied and crashed multiple times since its existence, while at the same time paving the road towards turning finance completely decentralized. Everything begins with a mysterious creator who suddenly emerged on the internet, here is how he created a revolutionary piece of technology that will disrupt the system for decades to come.

The idea of having a digital currency is not a new one. Prior to cryptocurrencies, many attempts at creating one have taken place. The main issue most of them were facing, was the double spending problem. A digital asset somehow needs to be usable only once to prevent copying it and effectively counterfeiting it.

Over 10 years before cryptocurrencies, the concept had been introduced by computer engineer Wei Dai. In 1998, he published a paper where he discussed “B-money”. He discussed the idea of a digital currency, which could be sent along a group of untraceable digital pseudonyms. That same year, another attempt by the name of Bit Gold was drafted by blockchain pioneer Nick Szabo. Bit Gold equally looked into creating a decentralized digital currency. Szabo’s idea was spurred by inefficiencies within the traditional financial system, such as requiring metal to create coins and to reduce the amount of trust needed to create transactions. While both were never officially launched, they were part of the inspiration behind Bitcoin.

2008 was a year of catastrophic economic turmoil that influenced the entire world for several years, if not even today. Coincidentally, 2008 marks the same year in which an anonymous and mysterious individual published a paper that introduces ‘blockchain technology.’

Called ‘Bitcoin: A Peer-to-Peer Electronic Cash System,’ an individual who calls himself Satoshi Nakamoto published the original Bitcoin whitepaper on October 31, 2008. Initially, Nakamoto shared the paper on a cryptography mailing list. Soon enough the paper spread to almost all parts of the internet, especially to the main circles of cryptography researchers.

Within the paper, Satoshi Nakamoto showcased blockchain networks and explained how they could massively improve the financial system, especially on the internet. Comparing it to a digital ledger, the creator explained blockchain as a decentralized peer-to-peer network that does not require trust. Moreover, he focused on how blockchains require no intermediary.

The Bitcoin whitepaper has been one of the most influential documents published in recent history. It spawned the entire cryptocurrency community.

The very first sentences from the paper read:

“Commerce on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments. While the system works well enough for most transactions, it still suffers from the inherent weaknesses of the trust-based model.”

Blockchain technology, at least the first network to be created, would offer potential users the ability to transfer monetary value through Bitcoin. With irreversible transactions which are cryptographically secured, Bitcoin would become the first viable digital currency in the history of mankind.

On January 3, 2009, Satoshi Nakamoto launched the blockchain network which spawned the first block to be mined, the genesis block. Users were free to participate in the network as miners and earn Bitcoin in return, but it had no value at the time.

But in just a year, we had the chance to see the first (public) economic transaction that exchanged value. On the Bitcointalk forum, a resident from Florida revealed that he spent 10,000 Bitcoins on two pizzas from Papa John’s. The transaction was made on May 22 and based on the price of the goods, was valued at $25.

But if we take a look at the current price, we see that the same transaction now costs $170 million. It appears that BTC was incredibly undervalued at the time, but who would have known?

After the birth of Bitcoin as the first cryptocurrency, solutions had to be found in order to trade them. In March 2010, the first cryptocurrency exchange appeared in the name of bitcoinmarket.com (now defunct).

Bitcoin Market — The first market for Bitcoin.

As Bitcoin increases in popularity and the idea of decentralized and encrypted currencies catch on, the first alternative cryptocurrencies appear. These are sometimes known as altcoin and generally try to improve on the original Bitcoin design by offering greater speed, anonymity or some other advantage. Among the first to emerge were Namecoin and Litecoin. Currently there are over 1,000 cryptocurrencies in circulation with new ones frequently appearing.

In the beginning, a single Bitcoin was valued at only $0.003. If time travelers were ever to exist, they would certainly return to this point in time to stack up on cryptocurrencies.

Shortly after the price of one Bitcoin reaches $1,000 for the first time, the price quickly begins to decline. Many who invested money at this point will have suffered losses as the price plummeted to around $300 — it would be more than two years before it reached $1,000 again.

At a similar time, the market saw the rise of a new Bitcoin exchange that would become the biggest one in the history of crypto.

In 2011, developer Jeb McCaleb converted his old website called Mt.Gox, designed as a marketplace for card game Magic: The Gathering, into an online Bitcoin exchange. Later on, McCaleb sold the exchange to another developer, Mark Karpeles.

Jeb McCaleb — Creator of Mt. Gox.

Unfortunately in 2014, Mt.Gox became the first major cryptocurrency exchange hack, having 850,000 BTC stolen from it. This is the largest theft of BTC in Bitcoin history, which was valued at $460,000,000 at the time (current date value around $9,5 billion).

After this unprecedented situation, the Bitcoin price plummeted by 50% and did not recover to its initial value till late 2016. Cryptocurrency exchange hacks have remained ever-present since, though rarely of Mt.Gox’s caliber.

On July 30th 2015, The Ethereum network was launched. Currently the second crypto asset in terms of market capitalization, it brought smart contracts to the cryptocurrency world. These allow the Ethereum blockchain to run an entire ecosystem on its blockchain while also hosting its own native currency: Ether (ETH) to facilitate blockchain-based smart contracts and apps.

Ethereum’s arrival was marked by the emergence of Initial Coin Offerings (ICOs). These are fundraising platforms which offer investors the chance to trade what are often essentially stocks or shares in startup ventures, in the same manner that they can invest and trade cryptocurrencies. In the US the SEC warned investors that due to the lack of oversight ICOs could easily be scams or ponzi schemes disguised as legitimate investments. The Chinese government went one further, by banning them outright.

The cryptocurrency amassed a wide following that came with developers, miners, technology enthusiasts, and many other groups. As a digital currency that brought decentralization to the traditional financial system, Bitcoin was set to disrupt the world for the first time.

After years of turbulent price action, investors started a rally that would completely faze everyone, especially Bitcoin holders. In August 2015, the price reached a bottom which we would never see again. With strong support at $200, we saw the asset slowly rise in value over time. By June 2016, Bitcoin already came close to its previous all-time high and was valued at $770.

In March 2017, bullish investors led to an all-time high of $1345, slightly above the previous one. Giving absolutely zero chances for bears to recover, Bitcoin dropped only to $945 before bouncing radically in a short time.

We all know what happened next! Bitcoin entered a parabolic phase through which it successfully increased in value many times over. On December 11, 2017, Bitcoin reached its final ATH at $20,000.

Afterward, investors decided to utilize all the newly gained returns to invest in altcoins, the other cryptocurrencies in the market. Just like Bitcoin, these mostly Ethereum-based altcoins tremendously increased in price during January 2018. Some of them grew 20 times in value in the course of a single day.

Aside from prices, Bitcoin reached an ATH for all its other aspects as well. Retail buyers became interested in the ‘official internet currency.’ Many of them used their entire savings, sold possessions, and even houses to be ‘early adopters’ of a new disruptive asset. With many new investors buying at the very top, the story ended badly.

Bitcoin revealed to the entire world that, apart from having an investment value, it can also be reliably used for payments. Forked projects and altcoins also helped contribute to this factor by introducing a variety of use cases in almost all fields of life.

Smart contracts, a separate and new piece of blockchain technology, also gained traction as they were popularized by Ethereum. Its gigantic ecosystem supported a majority of the new cryptocurrencies. More than that, Ethereum has shown that blockchain technology can not only disrupt markets and banks but other institutions as well.

Despite several dramatic events since the major crash in 2017, Bitcoin and the overall cryptocurrency market are alive and well. As a matter of fact, the crypto assets market experienced a complete revival in 2020 by rising to the same highs seen three years before. Although in the midst of 2021, cryptocurrencies’ price suddenly plummeted just like in 2017.

The world has changed a lot in the past decade and blockchain technology surely had a big influence on shaping the world. From a niche digital currency known only by cryptographers to an investment and currency with a price higher than any other asset, what does the future hold for Bitcoin and all other cryptocurrencies? Will they exist side-by-side with fiat currencies or will they completely replace them? With that in mind, can we expect blockchain technology to influence other aspects of our everyday lives and if so, what will decentralized networks disrupt next?