One of Gertrude Stein’s most famous quotes – and she has many of them – is about Oakland, the other city by the bay in Northern California. She was born outside of Pittsburgh, but her father – wealthy and well-connected – moved the family to Oakland so he could run streetcar rail companies. Asked later about being from Oakland, she said in essence, why should I say I’m from there, because there is no there there.
The quote came to me vividly while listening to the pundit class – and many of my friends – talk about the collapse of FTX recently. What occurred to me is that all of the conversations have, at their core, a fundamental belief that there is something real, something something, at the core of cryptocurrencies. But there isn’t, and the more people behave as though there is, the more glaring the absence becomes.
Oakland, by the way, was always a town in search of a purpose. The problem, really, was that San Francisco was so perfectly situated for a pre-railroad era: a narrow peninsula that guarded the best anchorage on the west coast of a continent. As long as sail and steam ships were the supreme ways of communicating with the outside world – say, the way Santiago, Chile or Lima, Peru lived – then San Francisco was self-sufficient, even after gold was discovered at Sutters Mill. But then the world changed, railroads trumped all, and San Francisco was a pain in the ass: it was stuck on a narrow and difficult to access peninsula for iron horses. And so Oakland was invented: a convenient end point to the eastern rails, with decent (if not perfect) harbours, and a good spot to send ferries to the real place anyone really cared about, San Francisco.
Cryptocurrencies – we’ll call them “crypto” because it’s a pain in the ass to type the whole word – are much the same as Oakland. The real destination already exists: it’s called “the real economy”, which uses dollars and euros and pound sterling and yen. It’s the economy that most of the readers of The Essence of Water will recognise as “their economy”: a world where we trust contracts, and therefore trust the money denominator of those contracts, and on the basis of that trust, we innovate things like new semiconductors, and new derivative contracts, and new craft beers, and new brands, and new electric vehicles, and so on and so forth. What enables all of this clever innovation – some of which is real, some of which is just silly human imagination – is trust, not so much in the currency we use but in the social underpinnings of everything we use, namely contracts, agreements, and because of that, yes, the currency we use to denominate those contracts and agreements.
In the nineteenth century, contracts existed but if you wrote one in San Francisco – say, at the Carlton Hotel – you’d be hard pressed to know whether it would be honoured in Pittsburgh, which is where Gertrude Stein was born. Ideally you’d find some way to guarantee the contract – say, with gold, held in escrow by a trustworthy law firm in San Francisco or in Pittsburgh, who had a correspondent in the other city that could be used to vouch for the guarantee. In other words, you probably wouldn’t have trusted dollars back in the day – you would have trusted something else, but that something else wasn’t really what you trusted. You trusted the agents: law firms, banks, the Wells Fargo Company, or once the wires were up, the Western Union Telegraph. At no point did you really trust the units – those were just temporary proxies. What you trusted were the agents.
Today, you trust your bank, which is a lot like living in San Francisco back in the day. You probably have money back east, but you also have trusted agents – indeed, trusted agents make up much of your life, because you live remotely from the main sources of value exchange and creation. You and I don’t live closely to how value is defined – and, interestingly, no one does; value is defined in money markets whose only participants are insanely, incomprehensibly large institutions who exchange billions every minute and on the basis of those exchanges is how value is defined. We all live in San Francisco: a place where we depend on agents, on whom we trust – and against whom we hold contracts which protect us – to preserve and hold our value, even as the define it in their activity as banks, as brokers, as speculators on their own behalf even as they trade on our behalf.
In our brave new world of crypto, though, we give you an option of living in Oakland: a place where value only exists with relation to San Francisco, but isn’t really San Francisco at all. You can trust your agents – who, by the way, will only accept payment in the currency of Pittsburgh and San Francisco and, more importantly, Washington DC, to whom we all owe the burden of tax assessments – or alternatively, you can try your luck in Oakland’s currency, which is variously dollars, or community bank notes, or bad whiskey, or gold dust. Not so different from Tether – community bank notes, as it were – or Solana -bad whiskey – or gold dust – which, interestingly is the same thing as it always was, gold dust.
Crypto is a means of redefining society, where trust among agents and the power of enforcing agreements among them and us, to be on the basis of a fundamental lack of trust. Where the railroad ends, in other words, is where we fight and wrestle to redefine value which was obvious on the New York end of the iron trail. If you think trust is wrong, if you think trust is impossible, by all means, go to Oakland. There is no there there. There is nothing there. No trust, and by no means is there value. But crypto lives there and is traded actively. If you wish to turn your back on trust, on civil society, by all means, take the ferry. See you in Oakland. But if you want to enjoy the promise of a future, of a place which not only looks out towards the future represented by the Pacific horizon but also imagines new horizons on our shores, might I suggest you head to San Francisco. And keep your bank account denominated in the currency of the continent, which trusts Pittsburgh as much as anywhere else.
