I always enjoy reading him because his writing leads to action. It's a good segue into the book's main argument: human beings operate mainly on beliefs, and the real value of a belief isn't its truth, but its ability to prompt action in a given situation.
There is no truth
The first part of the book deconstructs the idea of truth in our words or beliefs.
Most of what we say or believe are interpretations of events and facts rather than truths, which are universally, objectively, and necessarily valid.
When we say 'this is too expensive' or 'this country is mismanaged', it feels true to us, but it's a perspective. Hard facts are boring by themselves - what's interesting and what people bond over are interpretations.
Facts can be deceiving, as they can be presented in a way that promotes a certain perspective. Reporters at the same event can paint different realities by choosing which elements to include in their reporting. They often provide an angle, rather than the whole truth.
This is without accounting for our documented inaccuracies and bias. Our brains are designed to find causality and explanations even when there are none.
Similarly, our memories are distorted: we misremember even the most important events because we color everything through our interpretations and bend facts to fit them.
Choose your perspective
What do we do with that? One path is to train the mind to be right, become a better thinker.
The other is to take advantage of our beliefs and shift the perspective: instead of seeking truth, look for beliefs with good outcomes. Those most likely to make you take action in the right direction.
In bowling, the ball often leans on one side and goes off target. To correct the bias, aim in the other direction to compensate. The mind is similar - it strays in predictable ways and beliefs can course correct.
If you underestimate time things take, double your estimate. If you procrastinate, set fake deadlines. The new thought isn't meant to be correct - it's a correcting mechanism for the previous, equally incorrect, but less useful thought. Choose beliefs that correct your bias.
Pick beliefs for the actions they create. You can also work backwards - what belief leads to the action you need to take now?
Reframing
Reframing is generating different perspectives on a situation and choosing the most empowering one. It's hard to control feelings, but easier to control thoughts, which largely influence emotions.
The first method is to move past your initial thought. Something happens, a thought offers an interpretation, and you react. Now imagine adding a step: consider other ways to look at the event and pick one that feels empowering.
A second tool for controlling your thoughts is asking questions. Thoughts are answers. Control them by changing your question. Asking better questions leads to better thoughts. There's a great book about this: Change your questions, change your life.
Example questions:
How can I use my age to my advantage?
What's great about this?
How can I use this to my advantage?
Keep the first principle in mind: Your initial response to these questions may be discouraging. Push past the first answer.
Useful perspectives are direct, energising, self-reliant, balancing, lasting, and long-term.
Why would anyone use Farcaster for their social app?
To a large extent, I believe Farcaster's success as a protocol and ecosystem will be measured by another successful app outsourcing its social graph to the protocol. While Warpcast already uses it, being developed by the same team only proves it can be done, not that others want to. I wonder if given a second chance, they'd even use it themselves.
Success would be an application attracting non-Farcaster users without them realizing they now have a Farcaster profile. Many applications use Farcaster login to access quality daily active users. However, the real proof would be an application with a broader or different user base choosing Farcaster as their user datastore.
Creating an account on such an app would generate an FID in the background, without requiring a Warpcast account first (Supercast already offers this - try their account creation flow to see the future). The app would then choose how much of their social graph to outsource to Farcaster and what to keep in-house.
But why would others want to outsource their graph to Farcaster?
The main benefits I see:
• Faster shipping: Using the protocol saves time that would have been spent creating a backend for users and relationships. You can focus on app-level iteration and quickly find a resonating proposition (similar to Warpcast's approach with direct casts and channels).
I recently read Arthur Hayes' "The Easy Button" and wanted to articulate his thesis.
Arthur's macro methodology amounts to finding hidden or misunderstood mechanisms for printing dollars. He assumes Bitcoin is a leading indicator of global liquidity. An example of this modus operandi is his piece on the Bank Term Funding Program (BTFP) in March 2023.
In this recent piece, his thesis is that the Japanese yen to U.S. dollar exchange rate (USDJPY) is the most important macro indicator for crypto. His reasoning is that the most likely liquidity injection mechanism is a potential joint initiative between the U.S. Fed and the Japanese Ministry of Finance (MOF), and that USDJPY is the clearest metric to monitor the start of this program.
I always enjoy reading him because his writing leads to action. It's a good segue into the book's main argument: human beings operate mainly on beliefs, and the real value of a belief isn't its truth, but its ability to prompt action in a given situation.
There is no truth
The first part of the book deconstructs the idea of truth in our words or beliefs.
Most of what we say or believe are interpretations of events and facts rather than truths, which are universally, objectively, and necessarily valid.
When we say 'this is too expensive' or 'this country is mismanaged', it feels true to us, but it's a perspective. Hard facts are boring by themselves - what's interesting and what people bond over are interpretations.
Facts can be deceiving, as they can be presented in a way that promotes a certain perspective. Reporters at the same event can paint different realities by choosing which elements to include in their reporting. They often provide an angle, rather than the whole truth.
This is without accounting for our documented inaccuracies and bias. Our brains are designed to find causality and explanations even when there are none.
Similarly, our memories are distorted: we misremember even the most important events because we color everything through our interpretations and bend facts to fit them.
Choose your perspective
What do we do with that? One path is to train the mind to be right, become a better thinker.
The other is to take advantage of our beliefs and shift the perspective: instead of seeking truth, look for beliefs with good outcomes. Those most likely to make you take action in the right direction.
In bowling, the ball often leans on one side and goes off target. To correct the bias, aim in the other direction to compensate. The mind is similar - it strays in predictable ways and beliefs can course correct.
If you underestimate time things take, double your estimate. If you procrastinate, set fake deadlines. The new thought isn't meant to be correct - it's a correcting mechanism for the previous, equally incorrect, but less useful thought. Choose beliefs that correct your bias.
Pick beliefs for the actions they create. You can also work backwards - what belief leads to the action you need to take now?
Reframing
Reframing is generating different perspectives on a situation and choosing the most empowering one. It's hard to control feelings, but easier to control thoughts, which largely influence emotions.
The first method is to move past your initial thought. Something happens, a thought offers an interpretation, and you react. Now imagine adding a step: consider other ways to look at the event and pick one that feels empowering.
A second tool for controlling your thoughts is asking questions. Thoughts are answers. Control them by changing your question. Asking better questions leads to better thoughts. There's a great book about this: Change your questions, change your life.
Example questions:
How can I use my age to my advantage?
What's great about this?
How can I use this to my advantage?
Keep the first principle in mind: Your initial response to these questions may be discouraging. Push past the first answer.
Useful perspectives are direct, energising, self-reliant, balancing, lasting, and long-term.
Why would anyone use Farcaster for their social app?
To a large extent, I believe Farcaster's success as a protocol and ecosystem will be measured by another successful app outsourcing its social graph to the protocol. While Warpcast already uses it, being developed by the same team only proves it can be done, not that others want to. I wonder if given a second chance, they'd even use it themselves.
Success would be an application attracting non-Farcaster users without them realizing they now have a Farcaster profile. Many applications use Farcaster login to access quality daily active users. However, the real proof would be an application with a broader or different user base choosing Farcaster as their user datastore.
Creating an account on such an app would generate an FID in the background, without requiring a Warpcast account first (Supercast already offers this - try their account creation flow to see the future). The app would then choose how much of their social graph to outsource to Farcaster and what to keep in-house.
But why would others want to outsource their graph to Farcaster?
The main benefits I see:
• Faster shipping: Using the protocol saves time that would have been spent creating a backend for users and relationships. You can focus on app-level iteration and quickly find a resonating proposition (similar to Warpcast's approach with direct casts and channels).
I recently read Arthur Hayes' "The Easy Button" and wanted to articulate his thesis.
Arthur's macro methodology amounts to finding hidden or misunderstood mechanisms for printing dollars. He assumes Bitcoin is a leading indicator of global liquidity. An example of this modus operandi is his piece on the Bank Term Funding Program (BTFP) in March 2023.
In this recent piece, his thesis is that the Japanese yen to U.S. dollar exchange rate (USDJPY) is the most important macro indicator for crypto. His reasoning is that the most likely liquidity injection mechanism is a potential joint initiative between the U.S. Fed and the Japanese Ministry of Finance (MOF), and that USDJPY is the clearest metric to monitor the start of this program.
one small idea
weekly (mostly) publication. I write to learn, sharing ideas and notes for what I find interesting
one small idea
weekly (mostly) publication. I write to learn, sharing ideas and notes for what I find interesting
• Emerging behaviors: For early-stage companies, being at the technology and ideas frontier matters. The Farcaster team and ecosystem are arguably the closest thing we have to a frontier in crypto currently.
• Upside potential: Using Farcaster reduces friction for existing users, potentially benefiting from easier discovery and onboarding if large user inflows occur to Farcaster through Warpcast or any other successful apps using the protocol.
There are some tradeoffs, though:
• Restricted design freedom: Not fully controlling the backend might limit product design. However, the protocol is not very opinionated, allowing much logic to be implemented at the app level, and constraints are known to foster creativity.
• Protocol risk: As with any platform, you face execution and timing risks. While I'm not overly concerned about these for Farcaster given the team, I'd advise against using the protocol if you a) have important features dependent on future protocol changes, or b) rely on the protocol not building features unique to your product.
I think that for most applications building consumer products it makes a lot of sense to do it. I think the benefits outweighs the cons for most. I like how the Merkle Factory team has been relentlessly focusing on building a great consumer experience - my hope is that they keep making the protocol a great place for others to do so, because I'm of the opinion it's the fastest way for the ecosystem to grow and keep being the frontier.
The yen issue
Why would Japan and the US enter an agreement? Arthur believes the yen’s situation is a problem for Japan, the US, and China. Of these three, China is feeling the strongest pain, and he argues they have the leverage to pressure the US into resolving the yen crisis.
The weak yen makes China less competitive than Japan in exporting important goods like cars. This is problematic because China heavily relies on exports to escape its deflationary spiral. It also needs to print more money through credit. However, a deflationary economy makes it difficult and they can't print money due to potential capital flight, higher energy and food import prices, and ultimately possible social disorder.
China has political leverage on the US government fighting dearly for re-election. They can pressure on a sensitive issue: manufacturing jobs. By manipulating the dollar-yuan exchange rate, they can make it more or less competitive for US companies to manufacture abroad. In a tense electoral year where manufacturing-heavy states are crucial constituencies, the USG likely can’t ignore that threat.
As a result, Arthur believes China can pressure the US to instruct Japan to strengthen the yen. This raises the question, why is Japan so susceptible to influence?
Japan is also in a predicament: rates are too low, leading to capital flights to USD, but they cannot raise rates without destroying the value of Japanese Government Bonds (JGB), which the Bank of Japan (BOJ) holds the largest share of. If Japan were to match USTs yields, it would result in a $1.05 trillion mark-to-market loss for a bank that has $32.25 billion of equity capital (he estimates).
In turn, this also presents a challenge for the U.S. If Japan were to raise rates, it would compel domestic capital to sell USTs to raise dollars and buy JGBs. It's not in the US interest to see trillions of USTs and US equities being forcibly sold, so BOJ rate hikes are not a viable option.
So the yen situation is a headache for everyone, and rate hikes are out of the equation - what then is a good solution?
The USDJPY swap solution
Arthur expects an easy solution with an unlimited dollar-yen currency swap between the Fed and the BOJ.
Say Japan needs $1 trillion to strengthen the yen from 161 to 100. The Fed would swap that amount for the equivalent in Yen, in a transaction where the Fed prints dollars and the BOJ prints yen, costing them nothing. The dollars leave the BOJ balance sheet to buy yen in the open market, but the yen on the Fed balance sheet essentially leaves the system because the Fed has no use for yen.
The net result is that the dollar weakens as its supply has increased relative to other currencies. The yen appreciates from the BOJ's purchasing yen on open markets and the decreased effective overall supply (think of a % of the circulating supply as locked in the Fed balance sheet)
Arthur believes this is the most likely scenario because it benefits everyone:
China can print more yuan without affecting CNYUSD rates and battle deflation. The yuan becomes weaker relative to the yen, restoring their export competitiveness.
The U.S. eases China pressure. They also experience asset appreciation due to a weaker dollar, benefiting markets and taxes.
Japan's domestic inflation declines, but with lower export competitiveness as a consequence.
But more importantly, if crypto indeed reacts to market liquidity, we're going higher.
How to monitor the situation
The core indicator to monitor this thesis is the USDJPY . Arthur expects a point when JPY is too weak and the program rolls in (around 200, expected in fall). Once it rolls in, it would be visible on a website that tracks USD liquidity swaps. Anything in the billions is significant.
Two other things that could disprove this thesis:
A substantial rate hike by the BOJ (>2%)
China devalues yuan or pegs it to gold
And that's why USDJPY is important: it's a liquidity printing mechanism, and when the swap policy comes into play, Bitcoin ETFs are likely a great buy to hedge against fiat debasement.
• Emerging behaviors: For early-stage companies, being at the technology and ideas frontier matters. The Farcaster team and ecosystem are arguably the closest thing we have to a frontier in crypto currently.
• Upside potential: Using Farcaster reduces friction for existing users, potentially benefiting from easier discovery and onboarding if large user inflows occur to Farcaster through Warpcast or any other successful apps using the protocol.
There are some tradeoffs, though:
• Restricted design freedom: Not fully controlling the backend might limit product design. However, the protocol is not very opinionated, allowing much logic to be implemented at the app level, and constraints are known to foster creativity.
• Protocol risk: As with any platform, you face execution and timing risks. While I'm not overly concerned about these for Farcaster given the team, I'd advise against using the protocol if you a) have important features dependent on future protocol changes, or b) rely on the protocol not building features unique to your product.
I think that for most applications building consumer products it makes a lot of sense to do it. I think the benefits outweighs the cons for most. I like how the Merkle Factory team has been relentlessly focusing on building a great consumer experience - my hope is that they keep making the protocol a great place for others to do so, because I'm of the opinion it's the fastest way for the ecosystem to grow and keep being the frontier.
The yen issue
Why would Japan and the US enter an agreement? Arthur believes the yen’s situation is a problem for Japan, the US, and China. Of these three, China is feeling the strongest pain, and he argues they have the leverage to pressure the US into resolving the yen crisis.
The weak yen makes China less competitive than Japan in exporting important goods like cars. This is problematic because China heavily relies on exports to escape its deflationary spiral. It also needs to print more money through credit. However, a deflationary economy makes it difficult and they can't print money due to potential capital flight, higher energy and food import prices, and ultimately possible social disorder.
China has political leverage on the US government fighting dearly for re-election. They can pressure on a sensitive issue: manufacturing jobs. By manipulating the dollar-yuan exchange rate, they can make it more or less competitive for US companies to manufacture abroad. In a tense electoral year where manufacturing-heavy states are crucial constituencies, the USG likely can’t ignore that threat.
As a result, Arthur believes China can pressure the US to instruct Japan to strengthen the yen. This raises the question, why is Japan so susceptible to influence?
Japan is also in a predicament: rates are too low, leading to capital flights to USD, but they cannot raise rates without destroying the value of Japanese Government Bonds (JGB), which the Bank of Japan (BOJ) holds the largest share of. If Japan were to match USTs yields, it would result in a $1.05 trillion mark-to-market loss for a bank that has $32.25 billion of equity capital (he estimates).
In turn, this also presents a challenge for the U.S. If Japan were to raise rates, it would compel domestic capital to sell USTs to raise dollars and buy JGBs. It's not in the US interest to see trillions of USTs and US equities being forcibly sold, so BOJ rate hikes are not a viable option.
So the yen situation is a headache for everyone, and rate hikes are out of the equation - what then is a good solution?
The USDJPY swap solution
Arthur expects an easy solution with an unlimited dollar-yen currency swap between the Fed and the BOJ.
Say Japan needs $1 trillion to strengthen the yen from 161 to 100. The Fed would swap that amount for the equivalent in Yen, in a transaction where the Fed prints dollars and the BOJ prints yen, costing them nothing. The dollars leave the BOJ balance sheet to buy yen in the open market, but the yen on the Fed balance sheet essentially leaves the system because the Fed has no use for yen.
The net result is that the dollar weakens as its supply has increased relative to other currencies. The yen appreciates from the BOJ's purchasing yen on open markets and the decreased effective overall supply (think of a % of the circulating supply as locked in the Fed balance sheet)
Arthur believes this is the most likely scenario because it benefits everyone:
China can print more yuan without affecting CNYUSD rates and battle deflation. The yuan becomes weaker relative to the yen, restoring their export competitiveness.
The U.S. eases China pressure. They also experience asset appreciation due to a weaker dollar, benefiting markets and taxes.
Japan's domestic inflation declines, but with lower export competitiveness as a consequence.
But more importantly, if crypto indeed reacts to market liquidity, we're going higher.
How to monitor the situation
The core indicator to monitor this thesis is the USDJPY . Arthur expects a point when JPY is too weak and the program rolls in (around 200, expected in fall). Once it rolls in, it would be visible on a website that tracks USD liquidity swaps. Anything in the billions is significant.
Two other things that could disprove this thesis:
A substantial rate hike by the BOJ (>2%)
China devalues yuan or pegs it to gold
And that's why USDJPY is important: it's a liquidity printing mechanism, and when the swap policy comes into play, Bitcoin ETFs are likely a great buy to hedge against fiat debasement.
