The Billionaire Boy's Bank
Why are Jeff Bezos and Elon Musk interested in A.I. and rockets? And what do either have to do with banking?
Here’s the podcast link - The Billionaire Boy’s Bank
First question first. It’s easy to understand their interest in A.I., it is one of the technologies that will shape the 21st century. As far back as 2017 Vladimir Putin was clear that whoever controlled A.I. “…would be the ruler of the world.” You don’t have to like the man to recognise he was right. But why rockets? The usual answer is something flippant along the lines of ‘boys and their toys’ or men trying to prove theirs is bigger than yours. Neither works as an answer for me. But it is interesting that none of the boys involved have really gone out of their way to refute the image of the rich boy and his giant penis substitute.
Now the link between AI and rockets.
About 20 years ago I got very interested in space travel and asteroid mining as a likely intermediary step. I got a big name Hollywood agent and an A-list star interested. It was a great project - simple in its way - could we, with the science and technology we already had or were developing, using real science we already knew, (so no sci. fi. warp drives, or hibernation pods ) create a viable blue print for a space ship capable of carrying humans to an habitable planet around another star? I talked to a range of scientists from ESA, NASA, universities and companies and came to the conclusion that we could. Certainly there were parts of it we didn’t yet have such as a fusion reactor, but none of them required discovering some as yet unimagined, exotic basic science. Give the imagined project a 40 year time line and I thought we could tell a really engaging story that had a vision.
I wanted to recruit several groups of interested scientists and get each group to develop part of the plan. I thought it would be fun for them to let their imaginations lead their expertise. I had it mapped out. At its simplest it ran like this: Get an asteroid. Hollow it out for the raw materials thus limiting what had to be lifted from earth. The hollow asteroid then becomes a working habitat and eventually the hull of the craft. The craft will have to be a self sustaining habitat - an Arc Ship. I could see moments of proper drama when, for example, the biologists looking at viable populations told the engineers who had been planning the enormous craft, that it would need to be a lot bigger. Anyway, I won’t bore you with it all. But I really thought it would be a great project. I still do. Sadly it fell through and none of the broadcasters would back it.
But I kept thinking about it. And watched with interest when the boys began building their rockets. I kept an eye on companies interested in manufacturing in space and noted the various missions launched to sample passing asteroids. NASA launched the Psyche mission to sample the metallic asteroid Psyche 16 which it will reach in 2026. NASA estimated that the metals it contains are worth at current prices about $700 quintillion. Meanwhile a spectral analysis of the light reflected from a smaller much closer to earth asteroid called 1986DA indicated that it contains more Iron, Nickel and Cobalt than all earth’s reserves.
What was clear to me from the start was that mining asteroids - which I saw as the necessary first step towards proper space exploration or even properly creating an economy off planet - would have to be done remotely. It took too long to get to an asteroid and far too long to do anything with it, for people to be involved. People are heavy, expensive and fragile. It would have to be done with AI. They are light, cheap, and are not nearly so needy. So as AI got cleverer' and cleverer and the boys got interested in both rockets and AI, I got more and more interested.
That’s my link between A.I. and rockets.
Here were fantastically wealthy boys putting enormous amounts of money into exactly the two technologies you needed for getting properly, sustainably and profitably into space. So I had a look at the boys and their broader interests. Of course Jeff Bezos, in addition to his rocket, Blue Origin, wants to live forever hence his investment in Altos labs and its longevity research. Musk has his newest, and suggestively named ‘Starship’ rocket, and of course deep interest in AI which he on the one hand warns about but on the other funds.
And then there is Effective Altruism (EA) and Longtermism. I am not a fan of either. Especially not the former but a large number of the billionaire boys are. You can read a not bad introduction to both here in this article from Vox from 2022. Basically both EA and Longtermism say people, particularly the uber-rich, should think about and take actions to shape the long term not the short.
But from the start of my interest there was always a stumbling block. How do you get the move into space and the mining of asteroids started? Once it was going the thing sustained itself, but the lead times and the up-front funding were a problem. It required a Moon Mission or Manhattan project commitment both in terms of funding and vision. Who had that much money other than nation states but they seemed uninterested , with the exception of Luxembourg, who had set up in 2016 a part of the government specifically to look into asteroid mining. And since then Luxembourg have teamed up with OffWorld a company that builds what it calls autonomous mining robots. The new generation of which it says are AI controlled so they can mine on the moon. In 2023 Offworld opened its European HQ in Luxembourg.
And their certainly not alone. Take a look at at AMC (Asteroid Mining Corporation) a British company developing in partnership with Tohoku University Space Robotics Lab (SRL) in Japan, autonomous robots specifically for working in the microgravity of asteroid mining. AMC is backed by the UK Space Agency and has a partnership with PwC aiming to raise funding.
All of which says I’m not the only one taking mining off-world seriously. Luxembourg is serious about it. AMC is very serious about it. And Offworld lists the worlds biggest mining companies as well as NASA, the US Airforce and the United States Space Force as its customers.
So finally, where oh where does banking figure in all this?
Obviously a nation state like China or the USA could fund asteroid mining on its own. So could a political union like the EU. But what about a person or group of people? What if you were a billionaire who saw himself as blessed with a vision not given to others and was already attracted to the Longtermism idea that visionaries should think BIG? Could you and perhaps a few fellow visionary billionaires find a way to move humanity (and capitalism of course) into space and reap multi-trillion dollar rewards? Not to mention the global power such wealth would bring with it. For the visionary tech. billionaire who already had everything it sounds like fun.
What sort of private enterprise could stand behind such a venture? I don’t think anyone could simply launch a company that said, ‘Hey, invest in us, we’re going to make a fortune mining asteroids.’ But I do think, for reasons I will get to, that a bank could. In fact I think there is a weird synergy between the right sort of bank and mining asteroids. All it requires is setting up a kind of bank that doesn’t exist yet.
Of course even a new kind of bank needs to start somewhere and offer people something they already want.
So what can a new bank offer that isn’t already being offered? The banks we currently have, handle the money for every type of depositor, investor, bond holder, government, drug cartel, money launderer and every three letter organisation that needs to fund off-the-books, arms length and completely deniable foreign policy operations.
Nevertheless there is money to be made by handling other people’s money and both Elon Musk and Mark Zuckerberg have made it clear they would like their social media platforms to be able to handle money and transactions. So start by creating a bank that looks, at the beginning at least, like an ordinary sort of bank that simply offers what people want from a bank. Both Musk and Zuckerberg have applied for and got money transfer licenses from various American states. Musk only began applying for licenses last year, is applying to every state and already has 15, the most recent beingUtah. This brings him and ‘X’ to a point where it can do some of what Paypal does in terms of handling transactions and payments.
So far so ordinary. Begin ordinary, offering something people recognise and can be attracted to. But that’s just to get it launched. That’s the foundation not the vision. Why stop there? Why indeed. Why create just another bookshop among many bookshops when you can create Amazon instead? The Billionaire boys think big and ‘longterm’. And so should we when trying to guess what they’re planning. So here’s my guess. It has several parts so don’t waste any more of your time reading on if you think this is nutty. But if you’re curious you might find it fun even if, in the end, you’re not convinced.
The Verge reported that at an ‘X’ employees meeting in October 2023 Musk declared,
"If it involves money, it’ll be on our platform. Money or securities or whatever. So, it’s not just like send $20 to my friend. I’m talking about, like, you won’t need a bank account."
If he is to be believed ( and the report was picked up and reported by an outfit as mainstream and heavyweight as Forbes) he clearly has plans to make ‘X’ into much more than a paypal rival. According to the Verge report, Musk sees ‘X’ as handling any digital financial transaction: Loan, credit card, broker, trading house, bank, payment service.
“When I say payments, I actually mean someone’s entire financial life.” He said he would roll it out by the end of 2024.
On the other hand according to the Forbes piece Musk denied he was seeking to turn ‘X’ into a financial data giant and also mentioned that Musk said ‘X’ would never launch its own cryptocurrency to rival BitCoin etc. What should we decipher from those reports? I think Musk is being honest but economical with the truth. I think ‘X’ is indeed not going to be a financial data giant - it’s going to be much more. And I think he would much rather acquire or come to agreement with one or more established cryptocurrencies than make the mistake Zuckerberg did coming too late to the party to launch his own.
Bottom line - I think Musk is thinking big and longterm. I think Musk acquired Twitter, not on a rich boy’s whim, nor just to piss-off America’s liberal mainstream, but precisely because he has a big vision, part of which needs a bank. Not just a local or regional bank but one with national and eventually international reach. What better foundation for a financial app/bank, than an established social media platform?
Now to the long delayed connection to all that asteroid mining, rockets and A.I..
As I said the stumbling block to asteroid mining is its up front costs and time scale before you see a return. I think Musk sees a bank as the solution. Not just any bank but his bank and a new kind of bank. Here’s how.
I think Musk and maybe Bezos as well arew contemplating creating the first off-world bank. It would exist essentially on Musk’s network of satellites. After all if you have satellites transferring the data of people’s purchase you already have, in a sense, their actual money. Or at least with a small tweak of the software you could have. Money is mostly just data. Why not house that data, at least in part ( a large enough part, at least, to hold up any lawyers sent by governments and regulators) in a network of satellites? Of course the US treasury or the ECB might have something to say about their currencies in your bank. The solution to that is to have the money your satellites are handling be cryptocurrency. Or better a bunch of the most established ones. In fact if you handled it right and got agreements with just a few key ones the tie-up with your bank could be attractive to them by making them the in-crowd of cryptos.
The decentralised nature of crypto accounting, is based on what is called a ‘distributed ledger.’ Which means among many things, that the record of who owns what, a record which is in fact the money itself, is not housed in a single place. It is distributed across lots of ‘nodes’. Those nodes can be computers, they could also be hardware in satellites. Now I am not an expert either on the intricacies of crypto nor satellite design, but I know a bit about both. And more importantly I don’t think the law has caught up with either crypto or its ledger. Where is your money when it is crypto? It will be in your ‘wallet’, but that could be on a USB stick in your house or it could be on someone’s server. And records of your money are on lots of servers. This is part of why crypto worries nations, because it’s not at all clear when or even if it is ever provably in any given jurisdiction.
There is, I think, enough legal uncertainty and wiggle room that Musk could say your money and his bank are in his satellites and therefore off-world. And if that’s the case then neither bank nor money is under any nation’s jurisdiction. If he was feeling particularly bold, Musk could, I suggest, declare his bank to be not only off-world and outside national or even global jurisdiction, but he could claim it to be a sovereign entity of its own, a landless sovereign. As such it would be like founding a new nation. Much as America was. A fun precedent.
Of course he would need at least one ordinary bank here on earth to be what is called a correspondent bank. That would be the portal in and out of his satellite bank so that us ordinary earth dwellers could get our money in and out of the satellites and convert it from cryto. to the money we can spend here. And of course ‘X’ could perhaps be all that.
So that would be his bank. Being sovereign is important. It means he would set his own tax rate which would be zero or close it, thus undercutting any of the low tax havens. Seismic bad news for countries like Ireland, and ironically, Luxembourg. Not to mention all the islands. Because unlike any other sovereign his doesn’t have to pay for people’s health, welfare, education, or infrastructure.
Would any nation allow him to do this? Good question. All I can say is that all of them would say, IF such a bank came into being, whichever terrestrial nation was first to strike an agreement with it, would benefit. Money would flow in and out via that nation’s banks. And politically this new entity would have a diplomatic and financial tie with that nation. There would be a first mover advantage. So if you thought someone might do it then you should do it first and cut a good deal. I think the U.S.A. would make sure it was them.
So what money would this bank have? Well if Musk’s plans for ‘X” come to fruition then it will have a lot of money flowing through it. That flow, plus charges, would be a good start. And a reasonably dependable one. Then there are Musk’s and Bezos’s personal fortunes. If the two of them did team up that would be a chunk of change and brilliant Pr. I haven’t said anything so far about Google but Google is of course deeply interested (if you’ll pardon the terrible pun) in AI and supports space robots with at least one research prize. Which it recently awarded to the Tohoku robotics lab which works with AMC. If Google got seriously interested, which I think it would for reasons I go into below, that would be another chunk of change.
If.. if I’m right about being outside national jurisdictions that means outside of their tax regimes which means the bank could offer low to zero tax rates. So instead of Apple and many others declaring their global profits in Ireland and benefiting from Ireland’s 12% tax rate Apple and every other global, tax minimising (lawyers get upset if one says evading) corporation might take an interest. So I could see at least some of those vast piles of cash being attracted to a zero tax rate, sovereign bank.
And then the bank - the sovereign bank - might think about issuing some long dated bonds. I will talk more about why such bonds might be attractive and how they might work plus one other really important element of the bank which explains how the asteroid mining helps the bank as much as the bank helps the mining. But I’m going to do it in an update in a couple of weeks.
I realise all I have done here is to give the barest sketch of how it might all work. I know I have left lots of big questions unanswered about the finance, the bank and about the mining. I will offer my answers to some of them in the follow-up. If it turns out enough people are interested in this topic then we can do more and maybe get a few of the players to come on and talk to us.
This is a huge topic with lots of good questions that need to be answered. And even though it might sound far fetched I don’t think it is. I think you will see some, perhaps even all of this gathering pace rapidly in the next few years.