Overstock's Patrick Byrne on Bitcoin, Net Neutrality, and Mixed Martial Arts

Nick Gillespie and Alexis Garcia | 4.9.2015 9:00 AM

Patrick Byrne heads up Overstock.com, one of the world's largest online retailers, with over $1.3 billion in sales annually. An ardent proponent of Bitcoin and related blockchain technologies and a strong opponent of Net Neutrality and Internet sales taxes, Byrne is also a skydiver, a black belt in tae kwon do, and a protege of Warren Buffet.

Born in 1962, Byrne is an outspoken proponent of school choice and serves as chairman of the Friedman Foundation for Educational Choice. A libertarian who traces his interest in free markets to stumbling across old Newsweek columns by Milton Friedman while living in Thailand, Byrne earned a Ph.D. from Stanford with a dissertation on Robert Nozick's Anarchy, State, and Utopia.

Reason's Nick Gillespie sat down with Byrne at the 2015 Liberty Forum in New Hampshire to discuss libertarian philosophy, net neutrality, bitcoin, his relationship with Warren Buffett, and learning mixed martial arts from the Gracie family, widely credited with bringing the form to the United States.

About 80 minutes.

Produced by Alexis Garcia.

Cameras by Meredith Bragg and Jim Epstein. Edited by Alexis Garcia.

Scroll down for downloadable versions and subscribe to Reason TV's YouTube Channel to receive notifications when new material goes live.

Contents

Philosophy on school choice and meeting Milton Friedman (0:34)
Why it's important to fight the Internet sales tax (4:40)
Byrne's opinion on net neutrality laws (10:57)
Philosophical influences (22:40)
Byrne talks about love for sky diving, martial arts, and Buddhism (32:10)
Relationship with Warren Buffett (46:35)
Plans for block chain technology (54:30)
What makes Byrne optimistic and what innovations does he see in the future? (1:05:00)
Byrne's advice for millennials (1:08:00)

This is a rush transcript. Check for accuracy against video.

reason: We're going to get started now with the finale. An intimate interview with Patrick Byrne—who knows it is a Saturday night and I'm sure Patrick is loaded. I know all of you are— so we'll start talking. Patrick, my first question—I think you spoke eloquently and inarguably about not only the need for school choice, but the way to get it done. Here's a question for you, you talked about Milton and Rose Friedman. You're the chair of the Friedman Foundation for Education. How did you first encounter Milton and Rose's work? What was the context for that and were they your gateway into a libertarian worldview?

Patrick Byrne, Overstock.com Founder: It was oddly enough in 1984 I was living in the north of Thailand in a little house by a refugee camp that in the 60s and early 70s some people from the American military had lived there, and there wasn't much to do. But there was a stack of TIME or Newsweek or such in the garage. So I started reading through this stack and found these essays by Milton Friedman, who I had heard of in my college economics classes, but had not studied closely. And his essays made such impeccable sense to me and that's when I first really started getting exposed to his thinking, just these popular essays.

reason: So you were reading years old Newsweek columns?

BYRNE: Right.

reason: That's great.

BYRNE: And the I came back and I finished up and I did a minor in economics at Dartmouth. And I was also doing philosophy in the standard dose of philosophy. And it wasn't until I was well into my PhD program that I realized, "Gee, a lot of this stuff that I'm learning in political philosophy—John Rawl's stuff— is fundamentally inconsistent." I thought I was studying two different subjects. I gradually put it together that it was really quite inconsistent and I had to choose sides. And then I saw Milton on cable at Stanford he did what they call local access when you have local access TV. I saw him doing a talk on school choice in the Stanford community. And people came in loaded bear of course. If you ever saw Milton Friedman in a debate, it was like watching a little Aikido master flipping people around. And these folks would come in from a very statist intellectual community—in general—and try to debate him. And he was in invariably gentle and polite and ran circles around people. And I'll never forget my Pop and I watched that local access TV that night and I think we both decided then if there's one thing that would make an enormous difference for America it's fixing the educational system. So that's really where it got going. And then Ed Crane of Cato, came by one time around 2000, came by Utah, and met me and we had lunch and I told him about my great admiration for Milton Friedman. And he said, "Well, Milton and I are old friends, let me arrange a meeting" and we met and that's how our relationship started.

reason: Here's a harder question. And one of the earlier questions after your talk was from one of my fellow Reason colleagues and this one is from another one who's here tonight. Should the state be involved with education? Or is that a second best option? Or can you make the case that education is a public good or should be supplied by the state?

BYRNE: Well, Milton did speak of ideally someday maybe it is. We'd get more education at a lower cost if it ultimately was completely private and you bought education for your kids just like you buy shingles for your roof and it was completely private. I think it's the kind of thing that when in doubt you want to be a little bit cautious with. And rather than leaving things entirely up to the private market—it's a bit paternalistic to say, "No, you have to educate the children. You don't get a choice about that", but to leave the form of education up to the parents. I think that's a good healthy step. And if we took that step, let another 50 years go by and then start thinking about the next step.

reason: Well let's talk about Overstock.com your company. You've been on the cutting edge of a lot of different things including using bitcoin or taking bitcoin—and we'll talk about that. I'm also interested in—you're one of the last, if not the last big internet retailer who is really kind of balls out against internet sales tax, against collecting state taxes. Talk a little bit about where that is and what has happened in an industry where—one of the reasons why the internet flourished was because they didn't collect have to collect sales tax. And that gave the competitive advantage to the company, but also to the consumer. Where are you on that?

BYRNE: Well, in 1991 or so there was a case—a North Dakota company that sold office supplies or something—Quinn [SIC]—was sued in Illinois because they weren't collecting taxes. It got to the U.S. Supreme Court—who decided in 1992— out-of-state retailers can't be forced to collect in-state taxes. And there were a number of arguments for that, not the least of which is the dormant commerce clause I think it's called. In the Constitution it says that Congress is empowered to regulate interstate commerce, which for two centuries was interpreted to mean—because the states were not able to—and taxation was one form of regulation. So that's how things stood. States got very hungry of course, they're always hungry for revenue. So about six or seven years ago, they got serious about collecting taxation on out-of-state retailers. It's quite an open question whether that's even constitutional, because what the U.S. Supreme Court said—it was the Quill decision—what they said in '92 was that a state can't do it individually, but Congress could. If Congress ever wants to revisit it, they could set up a system of how to tax out-of-state retail or shipping in-state. It's the political economy that has been hilarious, because there's Amazon who has built out a footprint in—last I heard in about 40 states—but say their Delaware warehouse—they historically took the position, "Well we don't own that. We put in a subsidiary called the Amazon Delaware Warehouse Corporation. So we don't really have any operations in Delaware, so we're not going to collect tax." And that's what they've done across the country, which was a very aggressive tax position for Amazon to take. That tax position crumbled beneath them in the last few years, and so now that they have warehouses in all these different states—and they have essentially become a big box retailer, only their big boxes aren't stores, they're warehouses. Given that it's now going to happen anyway—we meanwhile have been super careful about keeping our only employees are in Utah. And we've been very, very careful about that. I think we have some in Pennsylvania now. We have some in Chapel Hill as well—and we pay taxes in those states—and we thought Amazon's was an extraordinarily aggressive tax position. Well they reached the point that now have warehouses in say 40 states, that's kind of a laughable position. So they've switched sides. If they're switching sides it's really just to try to say, "Well since we're gonna have to pay tax, we want Overstock and eBay and them to pay taxes too." The states have gotten around the Quill decision by saying, "Well, if you have even a marketing relationship with what's called an affiliate marketer online, that counts as having an operation in our state, so now you have a physical nexus."

reason: So this is any type of blogger, which is an Overstock affiliate, where they get a percentage of sales through their site. That means you're in that state.

BYRNE: Correct. So every time a state passes those laws—we cut off, we fire—there's thousands of people around the country who make their living with these affiliate marketing programs. We and the other major retailers, we just fire them. And it's a shame. And every time they pass one of these laws, hundreds of people get fired in these different states. Colorado passed a law couple years ago that demands—at a constitutional level it's quite questionable. The New York Supreme Court has upheld New York's decision that they were going to do this. But of course, we ended by just ending our relationships with the people in their states who do that. And by the way, it's kind of specious because if somebody said if we take out an ad in the LA Times, does that mean we have physical nexus in California? Don't think so. But why is that if some blogger in California—we pay for him to put a link on his site for us, now we have physical nexus in California. But anyway, so any time a state does it, we end our relations. Colorado passed an interesting version of this called the notice, where they said we had to notify any Colorado consumer who buys from us—once a year we have to tell them, "Hey by the way—you Colorado consumer—you owe your state X amount of tax that you were supposed to pay because you bought from us." It's a huge tax. And we're supposed to give Colorado a list of everybody in Colorado who bought from us, and how much they bought. So now Colorado can make sure they ding them. Which I don't feel so comfortable providing any government a list of their citizens. Last week, the United States Supreme Court overturned the Colorado law. And Justice Kennedy, in his opinions, slipped in some language that more or less said it's time this all gets brought—either congress fixes it or we, the Supreme Court, are going to get in and straighten this out.

reason: What are the other regulatory issues that are bedeviling e-commerce?

BYRNE: Net neutrality—which we were just talking about. But I think the big issue is that the Obama administration has—unsurprisingly—just applied a law that was supposed to regulate the telephone industry from the 1930s. And so now the federal government is going to regulate-

reason: So last week, the FCC ruled to classify internet service providers under Title II, as a telecommunications service, which is—the laws that date back to the 30s that allowed or created the Bell telephone monopoly essentially. The Obama administration was very aggressive in that the FCC is supposed to be an independent agency, but the Obama administration laid out exactly what they wanted to happen and the Chairman—who had been against Title II—suddenly saw the light and flipped that way. So let's talk about a little bit about Overstock and your streaming services that you're talking about. You know, why aren't you in favor of net neutrality? Because it seems that everybody who has a big internet presence, they want net neutrality. But talk about the streaming first and then we'll talk about net neutrality.

BYRNE: Well, we announced a couple months ago down in Miami—there's a conference every year of all the people who produce content, television shows, and movies—especially television. And all the people who buy television shows, i.e. the networks, so on and so forth—meet once a year at Miami at a conference called NATPE, the North American Television Production Executive something or other. And they meet and handle and swindle each other and so forth. Great conference. A lot of fun. A lot of great people. The entertainment industry is new and foreign to me, but they're fun people to work with. And what's happened is a lot companies sprung up and got funding and created very interesting technology, but they're being shunted out by the big three—Amazon, Apple, and Google Android. So there's these wonderful technologies, but they can't get any traffic to their sites. And what we're finding is ways to integrate with them. So we'll have a content tab—I hope—sometime this summer, knock on wood—that will have TV shows and movies and books and music. And it will be device agnostic in a way that say the iTunes stuff and the other three are not. So that's our deal. But why don't you explain net neutrality to people.

reason: Many of you are probably familiar with it, but it's the idea that the internet should be maintained free and open through a set of rules that would be enforced by the government that wouldn't allow internet service providers to block access to legal sites or to throttle traffic on something like Netflix. There are no real instances of this happening, but it could happen. Or where you could pay extra to have your material get to somebody's web browser first. Things like that. And this is seen as a violation of the foundational principles of the web, so there should be a law against it.

BYRNE: And I just don't share that intuition. Now it is the case that Netflix, for example—I understand on a typical weekday evening, something like 40 percent of the traffic of the packets on the internet are Netflix. So arguably, if you're one of the internet service providers, what do you want to do? There's basically two ways to ration a scarce good. Either by making people wait or making people pay. And the natural order of things, allegedly, would be the ISPs would start saying, "You know what Netflix, we're gonna charge you a little more to carry your packets because we have these finite pipes and we've gotta do something to throttle you." And then that cost Netflix would have to pass on or it would eat into the profit margins and so forth. So that's what the gods of economics want to see happen. But that differential pricing—net neutrality says, "You can't do that, ISP." Well, I think that if you enable them to do it—you ought to enable them to do it and then you know what there would be other technologies. There would be innovation.

reason: When we were talking about streaming and what not, the fact that you're ready to go with a platform of streaming, it's an example of where monopolies really crumble almost as soon as they seem to have market dominance. Talk a little about that principle. It seems kind of obvious that monopolies don't last very long if they start stiffing their customers or they can't be enforced by the government. So why are we constantly motivated to pass laws to prevent monopolies that only exist because of laws.

BYRNE: You're right. A lot of the monopolistic practices exist because somebody gets big enough that they buy their own regulators to help protect their monopoly. And so the government has a very mixed record in terms of whether they actually break monopolies or encourage monopolies. I'll give you an example. When I was a kid, there was a fight going on with IBM. Went on for 18 years, because the Justice Department had decided that IBM had—by the mid-70s—a lock on the computer industry. No one was ever going to ever be able to innovate in the computer industry because IBM had this lock. And of course IBM made this wonderful decision. In 1984, IBM did this deal with Microsoft when they introduced the new PC and Microsoft—everyone knows the story of DOS and QDOS and such. And IBM owned 35 percent of Microsoft as part of that deal. And then when Microsoft went public in around '86 or '87, some genius at IBM decided they were going to sell all their shares into the IPO. Why? Because they wanted to stay in that business of screwing the boards together, and they thought that's where the real money was going to be. They don't want to be in this icky software business. So they sold their third stake in Microsoft. And of course that turned out—it turns out all this sautering of the motherboards and the frame and stuff, you do that in Malaysia at two bucks an hour. And that wasn't a good business decision of the executive at IBM. But that icky software business turned out to have a pretty good run. So eventually, the Justice Department dropped the case against IBM in the 90s—went after Microsoft to say, "Well, clearly Microsoft has a lock on the computer business. And no one's ever going to be able to touch Microsoft. It's got a stranglehold. It's embedded." Well, Microsoft missed one turn. They missed search. And a couple guys—grad students at Stanford—figured out how to search, and thus came Google. And so now some people think that Google—or certainly a few years ago people were saying, "Well, Google has this unbelievable lock. No one's ever going to be able to dislodge Google.

reason: One of the weird things about antitrust actions too is that all of the laws are written where it's supposed to be about the consumer. Like does this help or hurt the consumer? But it always ends up being about what company has market share and it's always a fight among companies. What's an educational process so that people understand that, like empires, companies rise and fall. I mean IBM had a great 70 year run or 100 year run. GM same thing. Ford. What do we do to get people to start understanding that market forces actually are the greatest enemy of monopoly, they're not the conduit of it.

BYRNE: Something that I'm thinking of is George Orwell wrote an essay— I think it was called Notes on Burnham—about a guy named James Burnham. And I'm not familiar with his work, but he was an intellectual of whom Orwell wrote a story during World War II. And it was about how you could pick whatever the direction of things was at that time, Burnham would write saying, "Well, this is going to go on forever this way." Then history would take a turn this way, when we first started losing the war, evidently Burnham was writing, "Well it's obvious, Europe's going to fall. And everything's going to go this way." And at every turn. So Orwell thought that there was a natural tendency for intellectuals to take whatever's happening in the moment and project it out indefinitely into the future because it makes them feel better that they spotted a trend faster than their buddies or something. And I think that's part of what's going on. Remember that the legal profession is filled with intellectual-like people. And they just think that—they don't really seem to have at their fingertips—I've got a lot of friends in the legal profession and they have a complete lack of feeling in their fingertips about the way these things work. They're more like biological processes to me. Dynamics create counter-dynamics, and they don't have any sense of that. So I don't know how you get people to understand better. Richard Epstein, you've interviewed him haven't you?

reason: Yeah. Richard Epstein, the great libertarian legal thinker who had changed the way that takings are considered by the Supreme Court.

BYRNE: In fact, that was a seminal lecture in my life—seeing his lecture at Stanford on takings. He's done a lot in the law and economics movement to critique the standard classical theory that underlies the government's belief about the need for them to fight monopolies. But I look at this example I gave you of how IBM was on a good run, so the government said, "Oh my gosh. That's going to go on forever." Then they get totally disrupted by Microsoft. And then the government goes after them. Then Google totally breaks the back of Microsoft because of search. I'm surprised the government hasn't gone after Google. In Europe they have. They've gone after Google. I love Google. They're great guys. I know guys in the company. I've learned a lot from the folks at Google on how they organize. There's a lot to be studied there, but I don't think they have a lock on anything. Twitter—look at how much people get now from Twitter what you used to get through search. Amazon has now surpassed Google—as of last quarter for the first time in product searches. People are going to Amazon to search for products to find on the internet more than they go to Google to do it. But the folks in the legal professions, I think they're like this guy James Burnham whose work I don't know. They look at whatever's happening now and think that's got to go on forever.

reason: Straight line extrapolation.

BYRNE: Trees don't grow to the sky.

reason: I gained two pounds today, so by the end of the year I'll be 6,000 pounds if this continues. Which may actually true.

BYRNE: On Wall Street they say, trees don't grow to the sky.

reason: Ok so, here we promised an intimate discussion. Let's talk more about what drives you. Patrick is one of the most interesting characters in the business world.

BYRNE: This coming from an interesting character.

reason: But you wrote a PhD dissertation in philosophy on Robert Nozick. What was the subject if you can remember, and what drew you to Nozick?

BYRNE: Well, it was Nozick and Rawls. It was kind of dancing around the air. When I was doing my doctorate, the three pillars within which the discourse was held was Nozick, Rawls, and Sandel. And I had read Nozick over at Cambridge. What I was trying to do—I didn't really have the guts to say what I wanted to say, but I was deeply questioning—a guy John Rawls at Harvard in 1972 or so wrote A Theory of Justice, and whole forests have been denuded for the paper to write the books and papers and response to John Rawls. And John Rawls is sort of the intellectual underpinning—the conventional interpretation is—as the philosophical and intellectual underpinning of what we now think of as the social welfare state and the Swedish Model.

reason: He talked about a veil of ignorance where, if you do a thought experiment, and you imagine a system where things are randomly distributed—or just in very disparate ways— and if you didn't know where you would end up in that system, you would opt to equalize things as much as possible.

BYRNE: Right. If you got to choose the rules of society before you were born, and you're separated by this veil of ignorance and you don't know if you're going to be rich or poor, white or black, male or female, etcetera, what are the rules that you think society should run by? And whatever you would choose would be rational if you do choose there, those are the rule we should live by now. And the standard interpretation is that we would choose something like Sweden. And that's kind of the church in which most of the political philosophy, at least in my day, was done. You didn't stray too far from that. And there had been feminist and Marxist re-imaginings of this original position saying, "Well, Rawls is right. But if you knew everything we know now, the way male patrimony oppresses women, you'd add in these codicils that are extra feminist." So it would be like an extra feminist version of Sweden. And Marxists say, "Well, if you understood everything that we scientific Marxists have come to understand about society you'd go even further because you've got to do things to disrupt the instruments of oppression." I had learned two different things. I was studying all this philosophy, but I was also studying economics, development economics, and other economics. So I said, "Let's run this thing the same way." Suppose we get to run that original position but with the knowledge of economics, which is absent in Rawls' book. What you'd end up with is not a Swedish model, but I don't think that you could really get much beyond Nozick. Well, I don't think that you could get from a rights based perspective to anything like what John Rawls said, so I left it off saying, "If you believe in this stuff, it can only be from a utilitarian perspective. Not from a, people have rights to this that and the other thing." Well if you're a utilitarian, you might argue the Swedish model is that which creates the greatest amount of happiness. But you can't convince me that it's through people have a right to housing. Those aren't rights, they're goods. And I think it's good that people have them. There's been this whole effort, as we all know, to take what the left has fought for for decades, and end the fight by saying, "People have a right to this." And actually 1948—the Universal Declaration of Human Rights—to say, "These are all rights that people have." And I think that's a particularly pernicious to think of these things. They're not rights, they're goods. And if they're goods, we can talk about how to produce them and how to get people to have the most of them and the best of them at the lowest price and all that stuff. But once you come in and throw a blanket over all of them and say these are rights, to me the intelligent conversation ends.

reason: A couple of people today had quoted Nozick in talking about a utopia of utopias which is a great libertarian idea. It's almost applying freedom of religion to all aspects of human activity. You were talking about school choice. I think it's really interesting that one great argument that you're making for school choice is you don't have to get into issues about what should schools be teaching or what's the common curriculum or anything because you let all sorts of things happen. What do you do with the experiments in this that go horribly wrong?

BYRNE: By the way, I don't mean to give short shrift to Nozick. I love Nozick. Anarchy State and Utopia, which I read over at Cambridge—which my don over there a wonderful girl named Susan James—I think gave me to inoculate me against it. I read it and thought, "Gee, this is much more convincing than John Rawls." And it has the great advantage of being written—it's lucid and clear. And that's a common denominator—have you ever noticed the pro-freedom people like Milton or Nozick they write and it's crystal clear what it is they're trying to say as opposed to the people we're up against. They write and it's this crepuscular grammar and I think the obvious—you're first guess as to why they do it that way is the correct guess. It's all just to obfuscate. I'm sorry go back to your—

reason: Well, about the utopia of utopias in school choice. What do you do with the experiments in living that go horribly wrong?

BYRNE: I saw Milton and Rose—I sat with them while some New York paper interviewed them. And by the way, Milton wasn't just being polite. Rose was his intellectual equal and that may be understated. She was sharp and aggressive while he tried to be gentle with people. So if he was the Aikido master, she was the doberman. And so the journalist asked him a question about that. What do you do with the problem of madrasas if you have school choice? And Milton gave a very careful answer about that—went on for three or four minutes. And when it was all done Rose said, "By the way, this country can survive a few madrasas. It's that simple. You can survive a few madrasas." And theoretically, are you going to send your kid to a madrasa? If there is some madrasa—and I use that metaphorically for all kinds of ways—

reason: A school we don't like.

BYRNE: A school we don't like or teaching fascism or something. It's going to be hard for me to imagine them having good test scores. Whenever I taught about this in universities people say, "Well what about those Christian schools that teach human beings rode around on the back of dinosaurs? What do you do about them?" Well, I'm not actually sure there are such schools. Because I've looked for that example and I can't find it. I hear a lot of people asking that question and writing about those schools, I can't find the actual schools. But if they did, my guess is that their kids wouldn't be doing so well on SATs anyway. And so other parents are going to start saying, "Gee." Just like you're not going to give your patronage to a local restaurant which is serving bad food, those kind of schools are going to go bankrupt. In the school choice movement, there are those among the people that oppose it, there are those who say, "If you're going to let schools do this, they have to test their kids and publish the results of the tests in aggregate." Of course in principle I'm against any sort of government interference, but I could live with that. Just like I can live with that there is a government agency that says if you sell a can of peas you have to have a label on it describing the contents. I would certainly accept it as a compromise to say, "Okay, there can be these private schools taking vouchers, but they test their kids and they have to report each year their progress on tests and how much kids improve." Things like that. So it would help parents make informed choices and I could live with that. And I think if you have that, you're going to find that the madrasas and the schools that allegedly teach kids humans ride around on dinosaurs—

reason: As somebody who watched a lot of Flintstones reruns, I'm pretty sure that humans did ride around on dinosaurs. Let's talk about some of your particular great interests. You like skydiving. In a single month you jumped 55 times out of a plane. Obviously you survived each of them. How did you get into skydiving and what's the thrill of that?

BYRNE: 30 years ago I used to skydive and I used to drop out and go down to Zephyrhills, Florida and live in a rented school bus that was up on cinder blocks for 20 bucks a month. I was just part of that subculture that you see depicted in Point Break.

reason: So you're also a bank robber wearing a dead presidents mask? [LAUGHTER]

BYRNE: You can live there on franks and beans and be totally off the grid and spend a week at a time. It was great. So in between different things I did—business projects and other things—I would drop out and live there or camp in upstate New York and such and do that. Well the guy who taught me to skydive in the early 90s, I went back to jump with him and he taught me what's called a pro pack. It used to be your chute would open and it opens with a jolt and your straps dig into you and it really hurts. But once you got good, you could learn to pack your chute sort of open with a slow crumble. And it was called a pro pack and it gave you not such a jolt. So we packed our chutes next to each other that time and he showed me fold by fold how he packed his chute. And I was doing mine and we did it. We went up and jumped. My chute opened beautifully and his tangled up. And so I watched this guy from above and he got in a—I forget what they call it. It's like being in a carousel where you're spinning. And he finally cut away at about 800 feet, popped his reserve and he walked away from it. And I went and I jumped one more time just because you always have to get back on the horse and then I hung up my spurs. I didn't jump again. I didn't jump again until this year. Overstock's building a new campus and it will be open next August in 15 months, 16 months. And you folks will dig this. We have 900 people in each of two locations in Salt Lake, but 15 miles apart. So between the two we found a location that we're building a $100 million campus that's right on the approach path of 22 million passengers who come and land at Salt Lake. And what I love about it, from the side it's a corporate glass and steel version of the Roman Colosseum. But from above it's a giant peace sign. We're building a $100 million peace sign.

reason: And you said this is also near the NSA giant base.

BYRNE: Just a few miles north of there. You could fire a bullet from the NSA. We'll look right down three miles to this Bluffdale NSA facility. And who the heck knows what they're building there. So was the grand opening on October 10th—the groundbreaking and these poobahs from Utah came and all these politicians and such. A crowd of 1,500 people or more. They had already bulldozed out the footprint of this giant O—and of course, coincidentally, it's a giant O. But it's going to be an O peace sign and the central hub is going to be a central dining facility. It's going to be great, epic building. But with all these people there, I jumped in from 18,000 feet. It had been 20, 25 years since I had jumped. I had to go and get my B license and get tuned up for this. So that's why I went and jumped in September and early October about 55 times.

reason: The stocked would have really tanked if that went wrong. If you even missed the building, much less hurt yourself. You're also a black belt in Tae Kwon Do and something else as well.

BYRNE: I did a lot of hapkido and Brazilian jiu jitsu.

reason: What got you into that and what's the thrill of that?

BYRNE: I'm the youngest and smallest of three sons. I grew up playing tennis and golf and things like that. But I basically grew up getting my butt whipped by my big brothers. They thought they were toughening me up, boy named Sue kind of stuff. So all I ever wanted to do since I was a kid—my sports were wrestling, boxing, karate. Wherever we lived those were the only sports and they come very natural to me. To be honest, I don't know why. Everything else feels learned, but I can close my eyes and just wrestle forever. I just love wrestling and grappling and so forth. And then this funny thing happened. You want me to tell a funny story?

reason: Yes.

BYRNE: Mind if I tell a little digression here? I was a student in Cambridge in '88 to '90. And this is the kind of thing that somebody would pick up on the internet and write these blogs. There's two guys who have written over 10,000 blogs about what a bad guy [INAUDIBLE]. And they both are sponsored by Wall Street. And there's a reason Wall Street has it. I mean it's kind of an odd hobby to write 10,000 blogs about a guy. So, one of them will be writing about this I'm sure. I was a student at Cambridge and there was a Playboy article about this martial artist in America who was challenging all comers. And I had heard about him and I think it's the only time in my life I ever bought a Playboy. But I bought a Playboy to read this article. His name was Rorian Gracie. And the martial arts community in America was really ticked off that this guy had showed up from Brazil and was saying, "Look, I can fight anybody. And I can beat anybody. Any boxer. Anything." But he had choreographed the movie Lethal Weapon and I had seen Lethal Weapon and was particularly impressed because fights never actually go like they do in the movies where somebody does a beautiful spinning butterfly kick. That never happens. Fights are always two guys who end up on the ground pounding each other. I knew that much by then. So I read this article and it was an interview with him. And he was very matter of fact about it. He could beat anyone in the world. So I wrote him a letter. I said, "No disrespect, Mr. Gracie, but I'm a wrestler and a boxer and I'd love to challenge you."

reason: So you were really trying to do anything but you're graduate work. Right? You're like writing letters to wrestlers.

BYRNE: There's only so much Rawls and Sandel—I could read Nozick all day. So I wrote him this letter and he wrote me this very polite,respectful—it was like please, it would be my honor. He wrote me back and was like, "Oh, that's very nice. Be sure if you're ever in Los Angeles to look me up." So a couple years later I found myself at a teaching fellowship at Stanford, but I finished my class work and I moved down to Torrance, California. I call this guy and said, "So remember me from two years ago?" "Oh yeah, come on in on Tuesday afternoon at three and we'll fight, we'll roll." I say, "Oh, that's great." I go in—I guess it was 1990. Actually, I tried to get into the Army and I got rejected at the meps for medical reasons. But I had already withdrawn from Stanford and was trying to figure out what to do and I just needed someplace to go and write my dissertation. I drove down California and I go and they said, "Oh, come in on Tuesday at 3:00, we'll roll." So it turns out that these guys—there were four brothers and they were like carbon copies of each other. Similar, but reduced. So one was about 220. And then there was one about 200. And then there was one that was about 170. And then there was one that was about 130. And their names were Rickson Gracie, Rorian Gracie, Royce Gracie, and Royler Gracie. And if those names mean anything to now, no one had ever heard of these people back then. And I go in and just little 130 pound guy was there. And at the time I was bigger than I was—about 230, solid as heck. I had 100 pounds on this. And I go in and the little 130 pound guy is there he says, "Oh, yeah. My brother told me you'd be coming in. He said we were to go in and go." I said, "You know, I don't mean any disrespect Royler, but I think I got 100 pounds on you. I don't want to hurt you or anything." And he said, "Oh, that's funny. Yeah, we go in and you try not to hurt me." [LAUGHTER] We go in and there's like this padded room with wrestling mats on the walls. I've never seen a dojo like this. We go in and I found out why there were padded mats on the walls because I spent an hour getting thrown upside down. And I immediately—I moved up the street to some little flea bag motel on Crenshaw Avenue and spent the next two months just two or three months with them. And I trained with them for about three years any moment I could. I would go back to L.A. and train with them. And we became great friends. And the last time I saw this guy—Royce Gracie tested me. And we had become great friends. And he said, "If you can last three minutes with me, I'll give you a black belt." And I would have been their first black belt. And I said, "If I can last three minutes with you? What if I can beat you?" And he said, "Oh buddy, that's funny. Yeah, if you beat me—you see this black belt, buddy? You win you can take this home with you." So we went and of course I lasted about two minutes. But the last time I was there some guy came in with a business plan for a new league he was going to create. See, we were doing all this fighting and SEALS would come, Marines, the L.A. County Sheriffs. And they'd want to be trained. It was like Fight Club. But it was all being videotaped, but you had to hide the videotapes. It was widely illegal. It was certainly undefined in some states, but it was like Fight Club. But it was hilarious. Some guy would come in, some black belt in kung fu—come in with 20 students being real jerks about it. Big guy saying, "We're here to challenge you." And the two little Gracie guys would be like, "Oh man, you got to fight last time. Let me take them this time." And if anyone could last 30 seconds with these cats it was unbelievable. So some guy had this business plan and said let's create a league, but it would be like a boxing league. But it would be martial arts, but you go into a ring and there's not rules and stuff like that. And they call it UFC. And I read this and I said, "Gee, this sounds like a pretty good idea, Rorian." And of course UFC went on to become this big thing. And I don't really follow it, but I understand Royce Gracie has become this sort of mythical figure.

reason: Yeah, mixed martial arts is replacing boxing really. UFC is replacing boxing really as the premiere fighting sport. To switch gears a little bit though, you're also a Buddhist, right? So you're a warrior. You're a Buddhist. You're a skydiver. You're a businessman. I know I'm in love. I don't know about the rest of you. So what is the appeal of Buddhism and how did you get into that?

BYRNE: I grew up a devout Catholic. I was an altar boy and all that stuff. Around age 15, 16—I mean I was an altar boy until I was about 14 which is quite old to be an altar boy.

reason: I mean even Menudo has a younger cut off age, right? Than altar boys.

BYRNE: I became convinced when I was about eight years old that I was the reincarnation of a Shaolin monk. Nick picked right away—I was watching too many episodes of kung fu. To be honest, I'm sure my instincts owe a lot to my Catholic upbringing. My instincts about my duties to the world and such. But my spiritual instincts are really more in tune with the Eastern. You're asking me about religion, so you're risking that offend somebody. I don't mean to offend anybody's religion. But the Western dualist view that you're here and God's there and if you follow these rules you might get to go there and meet him and stuff. That just doesn't strike any chord with me. But the Eastern approach—that it's about self-cultivation—that's the spiritual path that appealed to me more and seemed more natural to me. And so I start off with Buddhism and then I got into Taoism. And those of you that know your Eastern history know that the outer trappings of Buddhism were brought over from India and they mixed with this philosophy of Taoism. It may have been incidentally the first libertarian. You ever read the Tao de Ching—the ruler who does the least is the best ruler and all that stuff. And they mixed and they formed a religion called Chan. And Chan in Chinese got taken to Japan where Chan is pronounced Zen. The real philosophical core of Zen is Taoism and the outer form is Buddhism. So that's just the tradition that my sense of how the world works comes from that. My sense of what my duties are in the world probably owes more to that Catholic upbringing.

reason: Talk a little bit about your relationship with Warren Buffett. How did he kind of form your business sense or also a sense of duty to the world. I know at Reason we beat up Warren Buffett. He at various times is pushing for certain things, certain government policies that will help his businesses and whatnot. But talk a little bit about what he taught.

BYRNE: Buffett's friend once said to me, "Patrick, most people go through life trying to win the lottery once and you won two lotteries the day you were born. You got your father who was the Connecticut state lottery and you got your mother who was the Irish sweepstakes." And that fellow was correct. My father was an Air Force ROTC guy. He was an actuary. He moved around. And he got passed over for a job at Travelers. And he was real ticked off.

reason: Traveler's Insurance?

BYRNE: And he quit when I was about 14 years old. So my family lived the Horatio Alger dream. My parents were just poor grad students, but by the time I was 14 or about the time I was 10 or 11 my pop was an insurance executive and he got passed over for a job when I was 13 I guess. He left Travelers. He got offered taking a company through bankruptcy. This little broken Southern insurance company that had gone from $60 a share to one dollar a share. And he was hired to take it through bankruptcy. It was called GEICO. We moved down to Maryland and he was there about a month before he figured there was a way to save this company. He needed to recapitalize it and such. He started and it was about a month into it and we had never had a new car in our family's history. We had not had a new car, but we put our order in for our first new car—a station wagon. My father got a call one day saying there's some guy in Nebraska that's buying up stock in the company and wants to meet you. So that guy flew in and my father went down to meet him and they sat up all night talking—this story is recounted in a lot of different books and such. And Buffett has told this story. They sat talking until dawn and in the morning Buffett went out and sank half his net worth into GEICO at a couple of dollars a share. My father came home and canceled the order for this new $6,000 station wagon and put it into Berkshire Hathaway at about $70 a share. And it worked out quite well for both of them. The Byrne family and the Buffett family. And Buffett started staying with us and really is my rabbi. After my parents, he's my rabbi. In fact, I'll get calls from him, "Oh Patrick, rabbi's calling." And he's been my rabbi for my whole life. And he taught an awful lot about—what he taught me about business is a thimble in the bucket of what he's taught me about life. Which isn't to say he agrees with everything I do and I think he's probably figured out—we both figured out along the way we have some different DNA. He's a gentle guy. I will never outgrow my working class Irish—I don't like bullies. And I find myself in various fights like with Wall Street. I figured out what Wall Street was It's funny. Fortune magazine went through a story about how crazy I was and they had this big quote from me. This was November 2005—what a jerk this guy is. Because I said in 2005 in front of a big business school class at Columbia, "Somewhere in America there's grandmas eating dog food for dinner tonight so some asshole on Wall Street can drive a Porsche." Fortune ran that like, "What a nut job! That goes in the bucket saying SEC is in bed with Wall Street, how can that be?" Well it's become fairly obvious that these guys are predators. And they had figured out ways to dilute the savings of America. So I tend to do some things that Buffett wouldn't. I'm more bare knuckle than he would be. But he's got to a place in life where he doesn't—and I know he gets a bad rap from some people in our community. Buffett broke with the Republican party. His father was a senator from Nebraska of the Robert Taft senator, Howard Buffett. And he was a real isolationist, John Birch senator. And in the early '60s, Buffett broke with the Republican party over civil rights. Now, I pointed out to Mr. Buffett that the 1964 Civil Rights Act was passed with a liberal Democrat, Hubert Humphrey working with the Republican party. And it was the Democrats who were against it. And he says, "Yeah, yeah. But the champions of civil rights were the Democrats." But anyway, it was civil rights that broke him away from the Republicans. I just saw a week or two ago, Buffett for the first time saying in an interview I think on CNBC—and I don't know why he goes on there. I wish he wouldn't go on CNBC. CNBC by the way has a fax machine and they get fax instructions from—they're pets of a small certain number of hedge funds and the hedge funds were the crooked ones who have been indicted like Steven Cohen. They take their instructions about what to say over fax machine from these hedge funds.

reason: Have you seen that fax machine?

BYRNE: I've seen the fax machine and I have a very highly placed source in CNBC who has told me this. As a journalist, I can't reveal who it is.

reason: But you can.

BYRNE: But I won't.

reason: Magicians don't tell their tricks, but journalists tell everything.

BYRNE: Yeah, they do. But, it reminds me of Buffett says if you ever sit down at a poker table and in 15 minutes you haven't figured out who the pigeon is, you're the pigeon. Well, if you're getting your information from CNBC you're just getting information that hedge funds have told them to push out there so they can then [INAUDIBLE]. Jim Cramer's a crook. I digress. Any one here see that Comedy Central takedown of Jim Cramer where Jon Stewart did that thing? I supplied them that video. And Jim Cramer knows it. I've been banned for life on CNBC. In fact, I used to go on all the time, but I was banned for life. I wrote an article about Jim Cramer—I have a site called Deep Capture which is all about Wall Street and my investigations into Wall Street. I had a bunch of professional journalists and hackers and people like that who work and we won all these awards in '08 as the best investigative journalism in America on business, the best blog on business. All kinds of stuff. But I wrote a long story on Jim Cramer explaining both that he's a crook and his ties to organized crime. I'm quite proud of the day his producer called me up and said, "The story you wrote on Jim Cramer is the single meanest thing I have ever read in my life and you're banned for life on CNBC." And it's funny because about a year ago Becky Quick and those other guys on television challenged me. "Oh, we want Patrick Byrne on to [INAUDIBLE]." I accept anytime, anywhere I'll come on. Live show only. I'll come on. And they won't even respond. And I ran into Becky Quick recently. They will not have me on CNBC. I'm on FOX.

reason: So is it safe to say that CNBC won't be on the content tab at Overstock.com.

BYRNE: No. That is safe to say.

reason: Why don't we open it up for a couple of questions from the audience if people have questions for Patrick?

AUDIENCE QUESTION: So I know it's still early in the game for your plans, but I did read that you did have plans for block chain technology and trying to use it to do stock market like things with the block chain. And I wonder if you had any comments on it or if it's too early to comment on—maybe even just the ideas because I don't know if you'd even be developing an alpha at this point but it's mainly about how to do it and you're ideas on that.

reason: Yeah, that'd be great. And also talk a little bit about why—Overstock was a real early adopter of bitcoin. What's the appeal of that and of block chain technology.

BYRNE: The great appeal—and I heard Jeffrey talking about the big change that's coming. I don't know if he's going to be talking about it tomorrow. I don't know if it's the same thing. For five, six thousand years of human history we've always faced a choice—we could have peer-to-peer exchange or peer-to-peer exchange, but then trust becomes a factor. I'm trading you a camel for this gold coin, but how do I know you haven't debased the gold coin. Or we can have a centralized institution where we all don't have to trust each other, but each of us just has to trust it and we have centralized institutions that we trust. And that's always been the fundamental choice we make in how society gets organized. And of course agoreans—some of us are called—think that actually the peer-to-peer is a better way to go. And the real problem with centralized institutions is that they get captured. An example of a centralized institution is on the oasis whoever can—in the town or the empire—who has the monopoly on police power can say you know I'll have a business model that says we'll put out a gold coin, we'll stamp some guy's face on it and anybody who debased it or cheats it, we'll kill him. That's just a business model. That's a way of monetizing your monopoly on the police powers. A way of extracting the rent. So that's always the fundamental choice in organization design of society. For the first time in 6,000 years of human history we can have peer-to-peer exchange where trust is not a problem anymore. And it's through the technology that underlies bitcoin. It's called the block chain. That's the great innovation. And I see the historical and political ramifications of this invention as—it's like 6,000 years up to this point and then there's this. I think it's going to change everything because we have all these legacy, centralized institutions that are in one way or another that have business models that are involved with saying, "Well, I'll solve the problem of trust among all you people, but in return for which I expect to get paid." And they've got various kinds of monopolies. Whether you're talking about central banking or—at the heart of Wall Street there's a centralized institution you never heard of called the DTCC. It's the central clearing and settlement system of Wall Street. And what I got tuned into about 10 years ago was that they had figured out ways—organized crime has infiltrated the settlement system and by the way, you can go and look up—look up the godfather of Russian organized crime. He's a guy named is Semion Mogilevich. He's into slavery, gun running and all the worst things in the world. But the thing that actually got him on the FBI Most Wanted list his involvement in a market rigging scheme in a Philadelphia company called YBM Magnets. Look up Operation Uptick, the largest FBI sweep of the mafia of U.S. history. They rounded up 120 mafiosas in one day, all scattered around Wall Street. For some reason it still doesn't click with people. Organized crime has infiltrated Wall Street. If you've seen the movie Wolf of Wall Street, there's a dimension of that left out which is called the boiler room with the guy was running Wolf of Wall Street. Every boiler room in the world is organized crime. The Gambinos and Genoveses figured this out in the '90s and organized crime deeply infiltrated Wall Street. And the Genoveses brought Russian organized crime into the United States. They sponsored it like you might sponsor a family from Laos. They brought the Russian OC in. In 2009, after Dennis Blair, the director of national intelligence, said his greatest fear was there seem to be all these signs that organized crime has infiltrated the financial system—

reason: So can I ask and you're saying it's in the settlement—well it's in the boiler rooms so there's kind of hump and dump schemes where they're building stocks and then selling them before they crash at a peak. But then you're also saying that in the clearinghouse of Wall Street at the end of the day when they're settling trades what is going on? What are they rigging or how are they—

BYRNE: It gets very technical. I've spoken a lot about this. You can look on YouTube. Look up my name and transnational organized crime. It's clear to me from reading the government cases they understand pieces. They understand pieces, but they didn't put all the pieces together. But basically, think of it this way. We laugh at the Soviet Union for trying to run a society without property rights. But who here owns any stock in any publicly traded company? Raise your hand. Everyone with your hand up is wrong. None of your own any stock. All the stock in America is owned by a company you've never heard of called Sedian Corporation. You're going to have to stop me if I back up too much. This system was invented in 1973. Until 1973, there were guys running around Wall Street with sacks—they were called runners—with sacks of stock. And they ran among the brokerage houses, okay? You had a client that sold 1,000—it did this. They got behind starting at about 1968. Created something called the paperwork crisis. The Wall Street paperwork crisis. Got to about the early '70s Wall Street was only open four days a week and five hours a day or something because the guys on the bicycles couldn't keep up with the volume. So the SEC and the industry got together and created a new system which said, "Okay, all the stock is going to get moved into this corporation you've never heard of called the DTCC." And all that's going to trade are entitlements—share IOUs and IOUs against that stock. So there's about 400 brokers who have—and if you read your broker's statement carefully you'll discover this. That fine print that nobody reads, it's in there. And then there's another few thousand brokerages who have relations with those 400. So if you think you own stock, if you're in one of those brokerages what you really have is a contractual right to your broker who has a contractual right to another broker who has a contractual right to the DTCC who has a contractual right against this company called Sedian who actually has the property rights. And my theory that I started putting together 10 or 11 years ago was these daisy chains of property rights, these daisy chains of contractual rights, turn out to have much more slop in them than you would ever imagine. The slop was designed into the system such that it wouldn't vapor lock. There were allowed to be loopholes. It wouldn't vapor lock if there was a mistake. What happened was the bad guys, by the late '90s, organized crime figured out how to use that slop to manipulate the market. To manipulate prices. To rig markets. And just to give you an idea, one of those loopholes, the option market maker exemption—and what these mean technically you can go on Deep Capture and learn about this and so forth. It's called the Madoff exemption because a guy named Bernie Madoff when he was the chairman of NASDAQ went and got the SEC to put one of these loopholes in there. So what started happening by about 15 years ago—and it's incontrovertible—was that slop let people start selling—let the system start selling—if you have an account with let's say Merrill Lynch and you think you have 100 shares of something in it, it may be that they have 100 shares and they're telling five different people you own. To each of them they're saying you own it. So this problem underlies so many of the scandals that you've heard about in the last six years. It happened in the stock market was called naked short selling. But philosophically the same problem was a big part of the mortgage-backed security crisis. So in '08 the crisis there, they were selling mortgage-backed security—which just means they take a thousand mortgages and stuff it into one sausage. Stuff it into a sausage and sell that mortgage-backed security. But as the lawyers would do paperwork and get ready, when that date came to sell it, they might not have had all thousand mortgages. And what they would do is put in some IOUs and say, "We'll catch up with the paperwork later." And later and later. Well the American Banking Association, when all this Chernobyled in '08, they came out and said somewhere between 18 and 30 percent of the stuff in these securities doesn't actually exist. Which is why you may have heard about these weird bankruptcy cases in Florida where the guys who owned the bonds were showing up in court trying to foreclose on some homes—it would be the foreclosure hearing and three different groups would show up thinking they owned the mortgages on the bonds. That's the back story. That's what was going on. It went on—if you remember—the MF Global—the brokerage that melted down and two billion dollars of securities had been hypothecated and re-hypothecated to London because of a tax arbitrage scheme. And no one could tell anymore who really owned it. U.S. Treasury instruments and re-hypothecated on average three times which means for every actual U.S. Treasury bond, there's three to four insurance companies and pension funds who think they own it. On most days, none of this makes a difference. But when the system comes under stress it's going to make a big difference.

reason: This is like the plot of the Mel Brook's movie The Producers, where they've oversold the production. And it's good as long as long you don't actually have to pay off.

BYRNE: You're not just another pretty face, Gillespie.

reason: Not even that. Maybe we'll end on this note. So you're talking about this deep capture, this dark hypothesis conspiracy and at the same time you're incredibly optimistic about the future and you're talking about block chain technology as a way around these sorts of problems. Where are the things block chain technology, bitcoin, things like that, peer-to-peer communication that doesn't have a trust problem—

BYRNE: Doesn't have any slop.

reason: So it can scale up infinitely. What are the other places you're optimistic about? You've had serious health issues. Is medical care—are we about to take off in the same way that block chain technology is? Are we at a positive and optimistic vision of the singularity or something? Do you see unfettered progress or are we on the precipice?

BYRNE: Just on the health care I'll give an example, or I'll give you some stats. I've had cancer three times. I've had eight heart surgeries, 29 general surgeries, 106 time put to sleep, and last Tuesday they stopped my heart for the 51st time. So I've had about 150, 160 times looking for the light. I won't tell you if I saw a light, but I'll tell you I was looking for the light. And I think that the health care—there are areas—it's going to take off if the FDA gets out of the way. And I think 3D printing is—and there's going to be a point in not too many years where they can 3D print you a new knee. And maybe even 3D printing you individualized molecules and drugs and just tying back to the block chain—the reason I'm such a proponent of the block chain because it takes all this slop out of these settlement systems. That's on the economic and financial problem. And on the medical—I think if the FDA would get out of the way—and you probably need a way—how do you deal with a snake oil salesman? But I'm not sure the FDA has especially given other means to accomplish the same things that the FDA tries to do whether they're actually saving more people than they're killing at this point. And I think the big innovations are going to come—3D printing is huge. They are really within years of being able to print individualized molecules, drugs, take a PET scan or a CAT scan of your hip and 3D print you an individual hip to build it back into and such. So it's remarkable, but my guess is the FDA is at this point probably be counterproductive.

reason: Okay, we've got one more question. This is it, so make it a good one. The men's room—I just want to tell you—is that way if that's what you're asking. [LAUGHTER] Okay, lay it on us.

AUDIENCE QUESTION: Thank you. So a lot of us struggle with the contrasting impulses to be practical in our lives and stick to ideology. You're doing both, in a way. I mean you've got a large and successful company and you're making certain decisions that could be difficult or put you at some risk. But still, hue closer to our ideology. But I just wonder if you could share your thoughts about when's the time to just be practical and go out there and be a success and make money and work on yourself versus the times to stick your neck out there and make a stand?

reason: It's a great question, too. And you know particularly among millennials—I think we're basically the same age and it sounds like your father obviously or your parents worked well and successfully. I come from—on my Irish side as well as my Italian side on my mother's—I mean work was drudgery. You went through it so you had some money to spend on stuff you like. Among millennials, it seems that there is a rebirth of the idea that your work should be expressive of who you are and of your values and of the world you want to live in. And you really are, I think, Mike was right. You're embodying that. So talk a bit about—is that an inborn thing? How do we cultivate that? And how do you make sure that you don't go too far off in one direction either where you're just being pragmatic or you're being ideological?

BYRNE: Well, it's funny. Buffett would say I'm probably the last guy in the world you should ask that because Buffett picks his fights. I don't pick my fights. I fight anyone who wants to fight. Hedge fund broker, if they're crooks, I just fight them. Teacher's unions. And it's just my instinct. And he's proud, but you're right, it's kind of a defect in my genes. I get in every fight somebody wants to pick with me. And that's the irony.

reason: Well maybe a 3D printer they'll be able to fix that gene in a couple years.

BYRNE: First of all, when you get out of college, everyone gets out of college and business school trying to start their own company. You probably don't want to. You want to go—there's a good five to 10 year apprenticeship where you have to learn—we're talking about business—you go learn on somebody else's nickel. It's probably a mistake to get out of school and jump in right away. Learn on someone else's nickel. Also you probably want to put away—try to put away ten to 20, 25 thousand dollars before you get married because it's very difficult to start saving once you get married. But if you can put aside a nest egg—and this is just the advice Buffett gives young folks—get the nest egg put aside before you get married. Because when you get married you live off that income and you can turn this 20 30 thousand dollar savings is what you use to turn into a fortune if that's what you're after. I've heard a lot of advice from him over the years on this stuff. In terms of sticking your neck out, Buffett says think of life this way—that you're standing at the plate and somebody's throwing you pitches. And it's a very special baseball game. Best piece of advice he ever gave me. You're standing at the plate, somebody's throwing pitches and there's no umpire calling balls or strikes. You can stand there for years with the bat on your shoulder. You have to have a temperament that let's you—now there's still a crowd behind you saying, "Swing, you bum!" You got to be able to ignore them. And a lot of people go through life trying to bunt at every third pitch. But instead you need to have a temperament that says I'm just going to stand here with the bat on my shoulders for years if I have to. Every once in a while—say someone throws you a pitch and it's a little bit high and inside, you let it pass. Somebody throws you a pitch that's a little bit low, but it looks great, but you decide it's a little low let it pass. Nobody's calling strikes. But every once in a while, every couple few years someone's going to throw you a pitch that looks like the fattest pitch that you're ever going to see and when that happens come out of your shoes on it. You swing for the fences on it. That's probably where Buffett and I actually share a gene. That would be my advice. I'll actually close on some great advice my dad gave me. So I was hospitalized, I spent years in the hospital. I was an invalid all through my 20s. So that's why I ended up as a student all this time because I was in and out of the hospital and there was not much else to do. And Stanford was wonderful to me. They let me do much of the PhD from the hospital bed. Incidentally, when I started studied off there was mathematical logic which included computation theory which is the math that underlies cryptology which is why when bitcoin came along I said, "Oh, this is that stuff." I recognized right away what it was based on and why I got so into it. But my pop told me—my father got out of the Air Force, he played poker, he was a scratch handicap golfer, he was a golf hustler. He kind of was a typical Irish guy until he was about 30. And then he started getting serious about life. His father was a lifeguard until he was 36 and then end up being an insurance agent. But my pop when I asked him that, and my father died two years ago this week which is why he's on my mind I guess, he said, "You know, people worry too much about that. Float around, try different things. And when you find the right thing, you just start digging at it. It doesn't feel like work. And if you wake up some day and you're 35 and you haven't figured out what it is you want to be when you want to grow up, then you start having a problem. But Patrick, don't worry about it. Just keep floating around, try different things." You know, I took different jobs. I was in and out of academia. I would go and work this—and I got paid. I had a pretty modest existence, but it was enough to live on. I tried being a boxer. I was writing my dissertation. I was fighting with the Gracies. I got a scholarship here and there. And I was just recovering until I was about 30. And he was right. I came back to New Hampshire and went to work at a torch company in Lebanon, New Hampshire that made industrial plasma torches. I won't tell you how I got involved, but when I found that thing—gosh I was in at 7:00 in the morning and working to midnight. And I found the most intriguing thing in the world to me. It didn't even feel like a job. And it worked out. When you find that thing, just hammer it all the way to heaven. And it doesn't even feel like work. As Buffett says, "I tap dance to work." Buffett's 83 and he says, "I tap dance to work every day." Don't fret, young guy. How old are you?

[INAUDIBLE]

BYRNE: Don't fret too much. If you wake up and you're 35 and you're still wondering what to be someday, maybe you got to listen to somebody else. But just follow what your heart is behind—actually can I give one more piece of Buffett advice?

reason: I think you can.

BYRNE: This is a great piece of advice. I heard Buffett get asked—it was a private school teacher asked a question in an audience something like this. And the guy stood up and said, "You know, I'm a history teacher at a local high school. I make a nice middle class income and I'm comfortable. But all the folks I went to college with, they went on to law school and now they're out there and they're lawyers and making four times what I make. "And the guy said, "I'm thinking of leaving being a high school history teacher to go do this other stuff." And Buffett said, "Let me tell you about my life. I wake up in the morning. I have my Frosted Flakes"—he doesn't eat anything that healthy. It's like the craziest sugary stuff. And he says, "You have yours. They taste the same to each other. I read the paper. You read your paper. They read the same. You put on your clothes, I put on my clothes from JCPenney. Yours probably fit better than mine do. Most of our life—as long as you've made it into the middle class"—and of course it's easy for guys like me or Buffet to say—but if you make it into the middle class—and there's all this psychological evidence that shows really you're happiness increases with income up to about $50,000 a year in household income and at $70,000 it basically plateaus. There's a slight increase from $70,000 a year household income to $100,000 or something and then it just goes flat. He said, "So we do all these things and 85 percent of our lives we experience the same. Just one thing. I travel a lot better than you do. So why would you give up something you love doing, like being a high school history teacher, in order to do some crappy job being a corporate lawyer that you're going to smell like BO and eat stale ham sandwiches and you're going to hate your lawyer trying to improve that little 15 percent?" Scientifically, by the data, people don't get happier past a $70,000 household income. So you want to pursue what you dig rather than trying to run that number up.

reason: Well thank you so much, Patrick, for your time and your insights. This has been great. Really wonderful. And I love the batting thing, I mean that's like Zen and the art of the batting practice. It's really a wonderful way to think about things. On behalf of Liberty Forum, thank you so much. And thank you to all of you for listening. [APPLAUSE]

BYRNE: Thank you, Nick.