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136. Max Hillebrand on Free Software Entrepreneurship with Bitcoin

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Entrepreneurs are developing a new world of innovative business models far from regulated markets, crony capitalism, and corporate control. It’s a new world of cyber security, free software, value-for-value exchange, integrated with bitcoin. Max Hillebrand operates in this new world, and he shares both his vision and his expertise on the Economics For Business podcast.

Key Takeaways and Actionable Insights

The praxeology of cyberspace.

Praxeology is timeless, with equal application in this era of cyberspace and the internet as in any other era. Individuals are in a state of unease, and they can perceive a better future in which their unease is relieved. They allocate resources to achieve that end.

Those resources can be scarce or non-scarce. Non-scarce goods are non-rivalrous; I can share them with you and not give them up for myself. Information goods are non-scarce. They are patterns of words and symbols that can be shared. This is the world of free software.

It’s also the world of cyber security. Cryptography is just a math formula. If I wish to express myself freely to one other person or a small group of people, I can enable my non-scarce expression for only that small group, giving them the private key to decrypt the message.

The value of free software: scratch your own itch.

A growing cadre and movement of internet entrepreneurs is engaged in the preparation and distribution of free software. Free doesn’t mean it’s not valuable. New technologies and new free software are created to solve customer problems more efficiently and more effectively. One of the beautiful attributes of free software is that it is open to user contribution — anyone who can read the software can change the software and publish those changes, so that future users can enjoy an even better experience. Everyone in the free software community — producers and consumers — is incentivized to ensure that the tools that they all use are running at their best.

This is sometimes referred to as the “scratch your own itch” ethos. The creators of the software are also the users of the software. Customers know the problems that they want to have solved, and give the ultimate feedback of fixing it themselves.

Free software in business.

Producers of free software create the highest quality technology tools. Entrepreneurs looking for the best technology have an incentive to seek out these producers and their products. There is no lack of demand. How do the producers get paid for their development efforts?

One way is via a service exchange. Users of free software often like to add customization, personalization and locally specific integration features to free software that they use. Producers can be contracted and compensated for these customization services. Red Hat followed this business model of servicing Linux users all the way to a $US34 billion valuation in an acquisition transaction with IBM.

Value-for-value exchange: a new business model?

The second way to get revenue from free software production is via donations — users recognize the value of the experience of using the product and voluntarily send payment to the producer, even though no “price” was asked.

This emergent concept of voluntary payments made for freely distributed valuable content and products is beginning to bloom into a new form of exchange, which has been given the name of the value-for-value (VFV) model. It’s especially prevalent on the blockchain and on bitcoin networks.

Take a freely distributed podcast as an example. The producer can put a Bitcoin lightning network public key in the RSS feed and listeners can voluntarily send any amount of bitcoin back for every minute they are listening to the podcast. This happens automatically in the background when the listener hits Play and stops when he or she hits Pause or Stop. One-time payments can be made as well, if preferred. Payment can be boosted if the listener here’s something they deem especially valuable to them and wish to extend an extra reward. It’s the ultimate market feedback mechanism.

Bitcoin as free software

Bitcoin is another tool of cyberspace, engineered and designed to solve the problem of money. Many innovators over time have made attempts to create digital money to make internet transactions fast, infinitely cheap, stable and private. But none of the attempt, until bitcoin, were able to solve the problem of verification of transactions and enforcement of rules without a trusted third party. Bitcoin solves the important problems, not just of verification but of “who verifies?”

Verification is always and ultimately human. Bitcoin entrains entrepreneurs who download the bitcoin software and confirm they are running the agreed monetary rules on their own hardware. When another entrepreneur connects and asks for rules-based verifications of valid transactions, bitcoin merchants on the network are running the software and checking the transactions of others. They are entrepreneurs producing verification according to established and agreed rules. It’s an entrepreneurial merchant network.

Get paid in bitcoin, hold bitcoin, invest with bitcoin.

Max emphasizes 3 aspects of the bitcoin enabled life that can insulate and protect entrepreneurs from the inflationary fiat future.

Get paid in bitcoin

To get paid in bitcoin means to have a “censorship resistant” method of receiving payment from customers. People who do not have access to a bank account can become entrepreneurs. People whose bank accounts might get shut down can remain entrepreneurs. Anyone who fears for the future of the fiat system can insulate themselves against future payment system uncertainty.

Hold cash reserves in bitcoin

Saving should mean holding an asset without counterparty risk. Bitcoin serves that purpose — it’s counterparty risk-free money. Holding a reserve without counterparty risk frees the individual to make a trade with an entrepreneur at any time in the future. There I no risk of inflation. Your saving can’t be diluted.

Denominate your contracts in bitcoin

When more and more entrepreneurs denominate their contracts in bitcoin, a stable monetary asset that cannot be inflated, the detrimental cycles identified by Austrian Business Cycle Theory can be eliminated. This is the exciting long term prospect of bitcoin.

It may be a long path, and it will take time and courage to complete the journey, but it is possible. There are entrepreneurs today (Max is one) who get paid exclusively in bitcoin and hold their cash reserve in bitcoin.

Additional Resources

Max’s website: TowardsLiberty.com

Some examples of free software tools:

Professor Mohammad Keyhani’s Entrepreneur Tools: Visit The Site

Cryptoeconomics: Fundamental Principles of Bitcoin by Eric Voskuil: Buy It On Amazon

132. Saifedean Ammous on Knowledge Entrepreneurship

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Saifedean Ammous is a knowledge entrepreneur. He creates new knowledge that’s valued by his customers, because it helps them to think better and better informs their actions. He carefully appraises the knowledge provided by great thinkers of the past, and re-presents in a newly compelling fashion. He develops effective memes and ideas. He innovates in channels and distribution. He demonstrates how knowledge entrepreneurship can work in the 21st Century’s globally-connected and digitally-connected economy. He joins the Economics For Business podcast to share some of his learnings and experiences

Download The Episode Resource “Knowledge Entrepreneurship” (PDF) – Download

Key Takeaways and Actionable Insights.

Collect available knowledge then develop a new perspective.

Saifedean took degrees in economics and engineering, at bachelor’s, master’s and Ph.D. levels. His accumulated knowledge was valid for the university professor track. Then his spontaneous knowledge accumulation efforts took him to Austrian economics and a new perspective: that the economics he had learned to date didn’t make any sense, and that regime higher education was best understood as just another malinvestment. Most importantly, regime higher education was customer-less: it did not provide value for customers, because that was not its purpose. From that point on, Saifedean followed the path of customer sovereignty and of exploring what customers identified as valuable.

Teaching is value generation.

Saifedean’s first customers were students in his university classes. He was able to generate value for his students by teaching them the economics they wanted to learn, along with giving them the optionality of seeing the knowledge through his distinctive perspective. When students engage and say thank you, it’s a signal of value.

A transformative event precipitated a shift into independent knowledge entrepreneurship.

In Saifedean’s case, the transformative event was Bitcoin, the study of which opened up a deeper understanding of hard money and low time preference. He “upgraded” to the Bitcoin Standard by exiting academic teaching and switching to entrepreneurial knowledge sharing. The first step was writing and publishing a book called the Bitcoin Standard (conventionally published by Wiley) and then leaving academia for the joys of hard money.

He switched his platform for teaching from the university to the internet, and now is able to reach many more customers — citizens of the world who want to learn more about Austrian economics and to understand Bitcoin and hard money. How did he know they were out there? They self-selected via Saifedean’s twitter feed.

The “factory” for knowledge production and distribution is a website.

A fairly basic website (i.e., not requiring any technological expertise or gear that is not available to everyone) is the platform for the new level of knowledge entrepreneurship. At saifedean.com, customers have been able to:

  • Receive and read book chapters as they are written;
  • Access video and audio online courses in Austrian economics;
  • Buy books;
  • Subscribe to podcasts (which he runs like a seminar);
  • Find a “complete central bank replacement pack”.

Saifedean told us he is just getting started, and there are more knowledge innovations in the pipeline.

The Entrepreneurial Method.

This unfolding timeline is an excellent example of the entrepreneurial method at work.

  • Start with what you know.
  • Find motivation in what you are passionate about.
  • Utilize available resources.
  • Let collaborators and customers self-select in.
  • Use networking and influencers rather than conventional advertising and marketing to drive expansion.
  • Let spontaneous order unfold.

In addition, Saifedean associates the Austrian concept of lowering time preference with entrepreneurial success. Low time preference — willingness to save/sacrifice in the short terms for benefit in the longer term — is an essential part of the entrepreneurial method. One of the entrepreneur’s “bird-in-the-hand” resources is their individual utilization and allocation of their personal time and effort.

A new age of entrepreneurship is emerging and surging.

In The Bitcoin Standard, Saifedean looks back to the nineteenth and early twentieth century as a period of technological innovation by entrepreneurs under the gold standard, bringing us indoor plumbing, electricity, the internal combustion engine, airplanes and elevators, among many more. Entrepreneurs were able to accumulate capital in the form of wealth stored in hard money to finance their innovations.

He believes that the emerging Bitcoin Standard era will precipitate a new entrepreneurial flourishing, further accelerated by free software, network access, blockchain and hard money savings.

Additional Resources

“Knowledge Entrepreneurship” — our E4B Process Map (PDF): Download PDF

Saifedean.com

The Bitcoin Standard (in over 20 language translations) 

The Principles Of Economics 

The Fiat Standard 

“Austrian School vs. Neoclassical School” (PDF): Download PDF

Twitter for Saifedean.com: @Saifedean

Twitter for Saifedean Ammous: @SaifedeanAmmou6