How Sports And Bitcoin Exemplify Low Time Preference And Efficient Energy Expenditure
Sports and Bitcoin both transform energy through low time preference into appreciable proof-of-work rewards.
Preface: All human action stems from the desire to increase our supply of accessible energy reserves. Humans act to transform energy from inaccessible to accessible. We seek to acquire energy reserves to provide security for an unpredictable future. The more energy reserves we have access to the higher the likelihood we are able to survive periods of stress or hardship.
If our main goal is increasing energy reserves then this can be the lens through which we view all human action. Knowing the end game provides clarity on the value of every action.
The simple question that needs to be asked before any action is the following:
If we commit “X” amount of energy to producing “Y” result, will we have access to more energy in the future or less?
The more energy output for the less energy input, the higher the value of an action to the individual and to the group.
With that basic understanding we can now direct our attention to professional sports and the question of why they exist in the first place.
Why Do Professional Sports Exist?
What is the baseline utility that professional sports provide to society at large?
Phrased another way: How do we increase our accessible energy reserves through the existence of professional sports?
It sounds simple enough at first but as always there is more to it than meets the eye.
The most common response you’ll hear if you ask the general public is that sports are entertainment (often criticized by intellectuals as the “circus” element of the Roman poet Juvenal’s now-famous ”bread and circuses” observation).
Let’s unpack that idea to get a better understanding of exactly what that idea is alluding to:
Entertainment, as defined by the Merriam-Webster Dictionary, is:
— “the action of providing or being provided with amusement or enjoyment.”
If sports exist to provide enjoyment than we need to be precise as to what enjoyment refers to:
— “the state or process of taking pleasure in something.”
If you have the patience to go through this process with a sports fan you will quickly discover that they themselves realize the power of sports without fully understanding “the why” behind it all. It is true that most fans experience pleasure via their relationship with a specific team or player. The nuance is that many don’t understand why exactly and just how important that “why” is.
The pleasure we experience from sports is directly linked to the utility it provides to society at large.
Fans are drawn to the pursuit of perfection by the athletes. They have an underlying desire to see low time-preference behavior manifest it’s positive outcomes in front of their eyes whether they realize it or not.
Sports produce value (accessible energy reserves) to the community by showcasing what can be achieved through hard work, dedication to a practice or skill, teamwork, specialization, division of labor, innovation, investment through energy spent on training, grit, resiliency, delayed gratification, organization, and mastery, all of which are contained in an easily digestible format lasting a few hours.
These are important concepts but they are not easily visible in the day-to-day activities of the modern world.
Sports provide an opportunity to display the positive benefits of harnessing a low time preference disguised as pure entertainment.
Excess energy reserves are made accessible by expanding the minds of fans, creating a community that fosters an appreciation for the above attributes, and if it all works properly, sports unlocks energy by showing individuals that they can achieve more with their minds and bodies than they thought possible.
Where Does Bitcoin Fit?
So what role does Bitcoin play in all of this and how can Bitcoin improve professional sports?
Again, another way to frame this question so as to maximize our time diving into this topic is:
How can Bitcoin help unlock more energy reserves via sports?
There are many ways that Bitcoin impacts the efficacy of sports and the goal of this series is to highlight some of the most important.
Let’s start by looking at one of the more basic concepts and the one I used most often when orange-pilling the Perth Heat baseball team (the world’s first team to fully embrace Bitcoin and operate on a Bitcoin standard).
At the start of this article I laid out how important understanding energy is in order to fully grasp Bitcoin and here I hope to expand on that further.
Energy is transformed from inaccessible to accessible through innovation and/or technology. Professional sports highlight the importance of competition to fuel innovation in a very real and tangible way.
Athletes (and teams) are rewarded for their risks (the opportunity cost of the energy spent perfecting a specific skill) based on how well they allocate their energy. In real terms this means that the more energy a team directs at improving specific aspects of their game, the better the results will be on the field. Each organization has the same number of hours in a day/week/month to prepare for a game so the outcome rests on how well they organize energy allocation to ensure preparedness across the board.
Any energy expenditure which is not directed towards improvement of skills, strategies, tactics, and the like is energy that is less productive than the alternative.
Professional athletes are a unique subset of the population. They are generally required to be young, capable of developing a high level of functional fitness (which requires low time-preference behavior to attune), and if successful will control abnormally large calls on accessible energy (aka wealth) in the future.
By the very nature of their chosen profession, athletes are among the most prepared to understand how Bitcoin operates and why it is important. This is, without a doubt, why we have seen so many athletes announce their interest in Bitcoin by either taking a portion/all of their salary in bitcoin or via select partnerships opportunities with companies in the space.
Bitcoin can improve athletic performance by removing the need for athletes to expend energy outside of their chosen profession in maintaining their future value. The larger your reserves, the more apparent any leaks become in your value storage.
It is incredibly risky behavior to dedicate the amount of energy necessary to develop the skills required to excel in professional sports. The last thing athletes want to do is be rewarded for their input only to see it drained away via loose monetary policy and inflation.
In the fiat system it has been mandatory for successful athletes to make their money work for them by developing investment opportunities on the side so as to avoid becoming another statistic of failed wealth.
The Best Strategy – Set And Forget
For a number of years famed investor (aka “monetary energy allocator”) Warren Buffet has argued that for the vast majority of individuals, the most productive use of their stored energy is to invest the majority of it in broad-based index funds like the Vanguard 500 Index ETF (VOO).
The investments thesis behind this recommendation is that most people are better off not wasting their energy researching individual opportunities because they can be more productive by focusing on what they do best rather than splitting their precious time between work and a side hustle as an investor.
The investment into a basket of the top 500 companies is essentially betting that some of the companies will find ways to innovate and develop technology which will then allow for more energy reserves. There will be some winners and some losers but overall these companies will become more efficient over time.
Up until 2009 this was the best you could do from an investment standpoint if you wanted to expend the least amount of energy for the largest potential return.
The New World: I Win, You Win, We All Win
Bitcoin is the ultimate broad-based index fund. It is the VOO on steroids.
The credible enforcement of the fixed supply of 21 million units in combination with it’s decentralization, censorship resistance and permissionless attributes means for the first time ever the total supply of accessible energy in the world can be known and leveraged in real time by all market participants.
Each of the 21 million bitcoin represents a fixed percentage of the total accessible supply of energy reserves at any one time controlled by the network. The only way to own a portion of the T.A.S.O.E. (Total Accessible Supply Of Energy) is to exchange energy transformed in the real world with an entity that wishes to consume it. They get the energy you unlocked, you get ownership over a fixed percentage of the T.A.S.O.E.
Because anyone can join the network and offer energy to it, if you own a percentage of the T.A.S.O.E. you benefit from anyone, anywhere in the world innovating or developing a technology that allows them to be more efficient than before.
If they can unlock energy that was previously inaccessible, and if they plug it into the Bitcoin network, they win and you win.
You win because you decided to offer your energy to all the participants of the network and delayed personal consumption. As a reward you gain access to more energy reserves in the future. The longer you delay consumption the more that original energy you made available to the system is passed around and is able to provide the input that leads to innovation. Over time your reward increases as the capacity of the network grows.
With Bitcoin, you are investing in the idea that humans will continue to become more efficient. You are not limited to innovations made by the top 500 companies. Anyone, no matter how big or small, can benefit from the incentives Bitcoin provides and if they win, every participant in the network wins.
If a farmer in Kenya discovers a better way to harvest their crop, they can plug that newly transformed energy into the Bitcoin network. T.A.S.O.E. grows larger and all participants win. If Tesla develops fully-autonomous vehicles that unlock a tremendous amount of energy that is now required to drive a car, they can plug that excess energy (because they can’t consume it all in the moment it is transformed) into the Bitcoin network and all participants share in the upside.
Positive changes to energy controlled by the network are shared but at the same time, negative impacts are isolated.
This is the beauty of Bitcoin.
If someone sells their portion of T.A.S.O.E. in order to consume energy now and they don’t allocate it in a way that unlocks more energy reserves than before, then we know that the energy must have been distributed to other productive entities.
The original seller is then unable to buy back the same percentage control over the network.
Successful energy allocators are rewarded and poor energy allocators are punished.
Athletes & Energy Allocation
So for athletes, if they take the time to hold their energy reserves in bitcoin, they have completely removed the need to spend surplus energy on developing strategies to maintain value they have already unlocked. Their energy can now be hyper-focused on becoming the best athlete they can be because, in doing so, they are providing the maximum amount of utility to the world at large.
Athletic performance improves, fans enjoyment rises, all of the positive impacts sports are designed to create increase and the effects quicken. The flywheel of energy innovation spins faster and faster with each uptick in innovation.
The sports world can’t know how much efficiency they are missing out on by operating in the legacy fiat system.
In the end it is simple really; make athletes more productive by allowing their energy to be solely focused on maximizing their utility in their chosen field. In doing so you take the first steps to making the world a better place for everyone.
The Perth Heat are committed to operating on a Bitcoin standard. As the first professional sports team in the world to do so we are proud to act as an example for the many benefits doing so can have on the organization, the players, and the staff. Over the course of this year we will continue to publish articles like this to report back from the front lines. Hopefully you find this article engaging and thought provoking.
This is a guest post by Patrick. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.