The Myth of Frictionless Finance
The Great Simplification #113 with Lyn Alden
Over the last few years - mostly as a results of increasing geopolitical turbulence - more people seem to be becoming aware of energy’s foundational role in our global systems. Yet, this critical understanding is still widely overlooked, especially among those working in finance. This is why I invited this week’s guest, Lyn Alden, whose biophysically rooted analysis of macroeconomic patterns reveals hidden insights into the macro risks of today’s global economy. In this episode, we discuss how energy and technology have shaped our monetary system and current financial trends and what that might mean for the coming decade.
Lyn Alden is an independent analyst and founder of Lyn Alden Investment Strategy with a background in engineering management. Her work provides institutional-level research in plain English, so that both institutional investors and retail investors can benefit from it. Lyn also serves as an independent director on the board of Swan.com and as a general partner at the venture capital firm Ego Death Capital. She is the author of the 2023 best-selling book Broken Money about the past, present, and future of money through the lens of technology. Lyn worked for over a decade as an electrical engineer at the Federal Aviation Administration’s William J. Hughes Technical Center.
How has increasing energy availability and productivity offset the inflationary nature of fiat currencies - and what happens if this trend were to slow or reverse? What assumptions and biases have led most analysts to mis-read long term trends, leaving us with vulnerable economies? Is it possible to rejigger our systems and innovate more biophysically aligned tools to enable a smoother transition into a future with a lower energy throughput?
In case you missed it…
Last week, I offered my perspective on the new all-time high in oil production in the context of AI’s growing influence in the financial markets and technology space. While ‘all liquids’ just hit an all time high, the varying categories of what is considered oil obfuscates a long plateau that is starting to decline. However, given AI’s expanding reach, it may not only invent ways of getting a higher percentage of Original Oil In Place to our economies, but also increase demand for energy worldwide. In similar fashion to shale fracking, MMT, and debt, AI will increasingly widen the resource extraction/ecosystem damage “straw”. Artificial intelligence is potentially a wonderful tool, but it is lower down the hierarchy than money/power maximization and thus will accelerate, not diminish climate change and other environmental damages.
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I appreciated last week on AI and oil. Gave me a much better understanding of how it is a wildcard in positive and negative ways, looping back over each other! Thanks
The conversation revolved around bitcoin, and only mentioned one other blockchain currency once in passing. I'd like to better understand Lyn's position on the plethora of blockchain currencies out there vs. bitcoin. Bitcoin is the only proof of work digital currency as far as I know. I don't know how many of them are "open source." Also, there are many "open source" kinds of licensing - Gnu, creative commons, MIT, ATT, Berkeley, etc. We need to hear more about that. As for blockchain servers soaking up energetic excess and waste heat from under-utilized generators, what happens when the fossil world shifts around and those same generators either become over-utilized or under resourced?
Personally, I think that land ownership is going to trump any kind of currency, digital or otherwise, at some point in the future, when people realize they need it to eat. You can't eat gold. You can't eat paper. And you certainly can't eat bits.