Transcript: Kyle Olney: Open Source Is the Last Line of Defense

Marty Bent [0:01] Kyle Olney, I welcome you back to the show, but under under some pretty heady circumstances here, we've got we've got a battle for for freedom in the digital aid. It's it's raging on. Probably more more More pressing than it was when we spoke last November.

Kyle Olney [0:20] Yeah, absolutely. The the battle for the future of Freedom Tech is now.

Marty Bent [0:26] Yeah. And I think AI is really accelerating the battle. And that's I actually it's one thing I'd be interested to get your thoughts on 'cause I I think I've described AI as equally exhilarating and unnerving. It's typically in the context of my gosh, this is so powerful. It's so cool playing with these tools. I've been able to do more than I ever thought would be possible as a one man team playing with a clanker, not the number one man team. We have a six person team here at TFTC, but I think you catch my drift. And it's unnerving 'cause it's like, gosh, what's this going to mean for the state of the job market if if this is truly disruptive?

Marty Bent ⋮ I think on the job market side, I've become more convinced that I'm not sure it's going to be as disruptive as many people are fear mongering about. But the other side of that that coin is exil exhilarating because you can do all the things that I just described. And it's unnerving because we're sort of speed running. into it, making it an integral part of our workflows and it's almost like it's a a bit of a honey trap where we're getting addicted to it and the government, the governments of the world are obviously observing. And over the last week, I think we've seen the first big shot across the bow of how the governments think we should be able to utilize these tools, particularly with the export ban on Fable Five last week.

Kyle Olney [1:52] Yeah. I mean, I think you nailed it right on the head, like the whole world changed in the last two weeks, out here in Silicon Valley at least, right on the front lines of what's happening with AI, both you know, with the anthropic change on the pricing models and people kind of being forced to confront the real cost of tokens that they're using. and then, you know, in very quick succession, the US government, you know, coming in to you know pull back and implement export controls on Fable Five and you know kind of the newest class of models that Anthropic had released. It's heads are spinning, heads are spinning out here in Silicon Valley and people are still trying to figure out what this actually means and and kind of where things are going.

Kyle Olney ⋮ But those of us in the you know kind of Bitcoin community and the Freedom Tech community are are well aware where this is going. We've seen this before. we've been fighting this battle for years now. and I think, you know, I don't want to jump too far ahead with the AI stuff. I actually think it's great to to maybe take one step back or two steps back and and kind of start with you know, the BRCA and clarity and market structure and kind of like the debate around you know, our ability to access these freedom technol freedom technologies generally, that's going on in Congress. And then I'd be happy to connect that.

Kyle Olney ⋮ through line straight from what we see going on in in BRCA and Clarity to you know kind of AI and anthropic and you know the Department of War, the US government, all of that.

Marty Bent [3:31] Yeah, let's start with BRCA and Clarity, because I think that's taken a backseat to the AI stuff in the last month as as everybody sort of looks at the sable rattling between Anthropic and the US government and obviously last week's actions by the US government with those export controls. But I think the last I heard on BRCA and Clarity was that it's getting held up in an ethics committee because they want some language in the bill about insider trading or the the ability of the Trump family specifically to play with with any of these assets. And then the other one was the law enforcement blockchain association letter that went out a couple weeks ago where you had, I think, a couple hundred law enforcement officials sign a letter basically saying we want clarity because we've been promised that it's gonna expand the Patriot Act to make it much easier to track people using this.

Kyle Olney [4:31] yeah, it was it was quite a quite a turn of events to to see a bunch of law enforcement officials coming out in favor of clarity. but yeah, you you kinda hit it on the head. So there are a number of different counterbailing issues. I don't know how many of these that we discussed in in November, but as you just mentioned, there's kind of the overarching issue that it you know has been I I would say more navel gazing for the last, you know, nine months, which is, you know, Coinbase and you know, kind of the stable yields fight against Wall Street. you know, that's one dominant thread that is still unresolved.

Kyle Olney ⋮ it's worth mentioning. I mean, we've heard that there's a a deal that's been reached between you know, some different parties who are, you know, representatives of the banking industry and in the Senate. But you know, clearly we saw Jamie Diamond came out two weeks ago and, you know, kind of drop a gauntlet on Brian Anderson and and what was going on with Coinbase. So I would say we're definitely not out of the woods on on that front. you know, that Wall Street is not going to just roll over and and accept a completely, you know, crypto native reframing of the finance industry. right. And I think that that's That's one major problem or category problem that we have with the Clarity Act.

Kyle Olney ⋮ Then as you mentioned, you know, there's this other aspect of you know things that we care about as Bitcoiners deeply, which is the BRCA, you know, and developer protections and you know, the ability to know that if you're developing tools and open source software you know that utilize blockchains and you're not actually taking custody or or you know. Providing operating the service yourself, that you won't be prosecuted by the government. This is still an unresolved issue, and frankly, is I would say the most concerning issue, again, from a Bitcoin perspective, because the language that they inserted in the finance committee in order to get it voted out and brought to the floor added a clause or a you know what I would call a loophole that allows you know, prosecutors to continue charging.

Kyle Olney [6:52] you know, developers and basically you know, kind of in inviolates the safe harbor in circumstances where, you know, the government deems that you had knowledge or should have had knowledge of your ability to be helping nefarious actors you know, with the technology, which, you know, I I've said elsewhere, but you know, to me as a a builder, as a you know, entrepreneur or somebody who's, you know, been involved in the building of this technology, like that feels like a loophole big enough to drive a truck through, and should be very concerning to everybody. And then yes, the third issue, as you just mentioned, which n nobody really knows how it's gonna land because it's all kind of up to one man, is the ethics concerns.

Kyle Olney ⋮ r you know, and what we're hearing is the or actually what's been stated clearly, by you know, the senators, the dem two Democratic senators who voted it out of the Finance Committee to the floor of the Senate, they said very clearly that they would not vote for a bill that didn't contain strong ethics provisions, you know, against you know, kind of the Trump family crypto dealings. And clearly that would seem to be a deal breaker for if not the entire Republican Party, Donald Trump. So we've got three different layers of of problem that are still confronting you know the Clarity Act and its ability to get passed into law.

Kyle Olney ⋮ And it's very unclear at this point whether any or all of those are going to be able to be resolved and and certainly before we make it into the election later this year.

Marty Bent [8:35] Yeah, what what is it er is Congress in a recess right now? Are people on the hill or

Kyle Olney [8:39] I believe the Senate is actually in town this week, but Congress is off this week. Then Congress will come back for a couple weeks, and then we basically have the fourth of July holiday and and the summer recess. So there's less than thirty days left in the legislative calendar before we, you know, actually get to the election season. and you know, we've now I think blown past six self created deadlines for getting this bill done over the last nine months. And you know, the latest deadline that they were hoping for was to get it on President Trump's desk by July fourth. that clearly is not gonna happen.

Kyle Olney ⋮ It's literally a physical impossibility at this point to make that happen. So I think the game that they're playing is to try to cram something in before everybody goes home. for the summer recess and you know hope to have something that would be signable you know, maybe in September when everybody gets back from Labor Day. But that's getting really close to the election and it's hard to say why Democratic senators would vote in favor of a a bill that would broadly be perceived to be handing Donald Trump a a signature win going into the the next election. So yeah the politics And the policy are both very challenged at the moment.

Marty Bent [10:07] Yeah well i i it would look like a signature win for Trump, but as it stands today, I don't think it would be a sign signature win for Bitcoin or specifically.

Kyle Olney [10:16] No. I mean, yeah, if we I would say that we've marched right up to the line of what is tolerable or acceptable to Bitcoiners, with the latest carve outs in that BRCA provision, six four in the bill. Yep.

Marty Bent [10:33] Well, dive into that specifically. Like what what is the car about? And OU loosely characterized it, but what are the specific things they're leaning into?

Kyle Olney [10:43] Yeah, well s I don't have the language right in front of me. I'd have to pull it up. But basically the clause that was added to the to section six four of you know, which is the BRCA section of the Clarity Act, was basically this language that says that the safe har well, so actually maybe to take one step back. The original construction of the BRCA was that it created a safe harbor for developers of open source software so that they didn't have to fear prosecution. under any circumstance if they w never took custody of customer funds. Right? So that's a pretty clear, bright line that everybody would be able to understand.

Kyle Olney ⋮ If you're developing software, it would be clear and obvious to you whether you're taking custody of user funds, whether you have the control, the actual ability to move somebody's funds on their behalf. and that was one of the reasons that the BRCA has been very popular for multiple sessions in Congress now. It's been bipartisan. It was voted out almost you know, three to one out of the house with that language. you know, this is a a common sense you know, sort of application of the, you know, regulatory guidelines that we had already been given by FinCEN years ago. and it was just meant to anchor it into law so that it was clear.

Kyle Olney ⋮ To everyone that this wasn't a regulatory interpretation. It is literally actually the law. It should be the law. If you don't touch customer funds, you are not a money transmitter. The problem is that by adding this clause that they've added, where you now have to consider the intent of the builder in building or publishing the software as to whether they were aware or should have known that they're technology, their tool, was going to be used for nefarious purposes or, you know, was being helped to abet you know, the the funds that were gotten through illegal activities, this would violate the safe harbor and then you would now be able to be charged as a developer for intent, right?

Kyle Olney ⋮ To conspire or collaborate or whatever word you want to use with you know these people who are doing bad things with your technology.

Marty Bent [13:00] Well, I think it's important to bring up the precedent that's been set here already, which would completely I mean, if it gets passed with that language would render it completely ineffective 'cause Roman Storm, right, th in his case, they were using an email that he never responded to as evidence that he had knowledge that somebody nefarious may have been using Tornado Cache, correct?

Kyle Olney ⋮ yeah, go ahead. Yeah, correct. And and in the case of the samurai developers, you know, as well. like the the literally the reason that they created this subclause, which I think is D, subsection D in six four, it they created it so that they didn't quote lose the ability to charge samurai developers or the tornado cache developers. So the government Or the people who, you know, the senators who have added this language, the the presumptive reason for the compromise is to be able to continue to allow the ability for prosecutors to prosecute people like the samurai devs and the tornado cache devs. so that in itself should tell you everything about kind of how the BRCA has been modified already.

Kyle Olney ⋮ Now, you know, if you ask the lawyers in Washington, you know, people like Coin Center and you know, others who are kind of on the front lines litigating on these things, you know, BPI as well, you know, the lawyers are are less concerned by this language because they think that you know, the legal standard for proving intent is you know, pretty high. And, you know, you would have to have some meaningful paper trail. Like you can't just accidentally fall into you know, intending to help bad actors with your software. that would be the theory that the lawyers would like to, you know, feel good about.

Kyle Olney ⋮ But again, as a builder, as somebody who's you know, developed technology and, you know, is an open source proponent, I don't think you can ever know how somebody is going to use your tool and, you know, once it's been published to the outside world, and in doing so, you you know, nobody is going to run the risk that they might get ex post facto rounded up and thrown in jail for twenty, thirty, fifty years, right? So the kind of policy objective of you know making America the crypto capital of the world and trying to keep the industry in the United States and harvest the economic gains as a policy objective that come from, you know, the blockchain economy.

Kyle Olney [15:45] would seem to just be completely violated and kind of you know thrown in the bin by trying to take this approach that they're trying to to take by having their cake and eating it too. And so this is actually kind of the worst of all policy outcomes in my opinion. It's it's where we've come to the point where if anything were to happen with this bill or or rather if this bill were to be passed even with its current language, It's unclear that this would even stop or forestall the desire for blockchain developers to leave the United States, exit the US jurisdiction, and go elsewhere, and practice you know, or build their companies in places where you know, that threat of prosecution just doesn't exist.

Marty Bent [16:34] Well, I mean I've seen the lawyers, I saw Peter Volkenberg and Zack Shapiro making the intent case. And it's like, well, you can say that it's really hard to prove intent, but like again, samurai devs are in jail, Roman Storms on trial. Like they they without the language even existing there, they they sort inferred intent. And again, that I think the Roman Storm case of he had an email in his inbox that he never responded to and saying if you check the emb email like you knew it was happening, therefore you're guilty. And so it's it's complete bullshit in my mind. I think it's a non starter in terms of actually protecting devs.

Marty Bent ⋮ And that gets to the question, like what is what is the state? Even I mean, it seems like despite the language in the BRC section, in section six four, it seems like i i it even without that having being a point of contention, it seems very unlikely that this gets passed anytime soon due to the procedural process that you you referred to earlier with the the lack of timing between now and midterms and then who knows what happens after midterms.

Kyle Olney [17:54] Yeah, exactly. I th I think at this point, you know, the odds of this bill getting passed even in its current language is pretty low. and we know for a fact that it can't pass in its current language. Right? Like we know for a fact that the Democrats in the Senate are going to try to weaken the BRCA even further, because to them, even the current carve out that allows prosecutors, you know, kind of this loophole to continue charging people for violating, you know, kind of you know, whatever theory, legal theory they can come up with around, you know, facilitating bad intents or bad actions in the real world.

Kyle Olney ⋮ it's just not tenable, right? Like it's not tenable for for anyone really, at this point. And so it's it seems like you know, we're we're heading toward a bad conclusion. if if you know, from a political perspective at least, right? It's not going to be the win that everybody was hoping it to be, when we started out on this process. And again, from the perspective of Bitcoiners, this may actually be a good thing. You know, we back to our earliest conversations about clarity, you know, we were saying that no bill was better than a bad bill. and, you know, we've seen all of the trade groups in the industry line up and say that a bill without strong BRCA protections is a non-starter for them.

Kyle Olney ⋮ Think most people on that front have been just kind of I don't want to say it was naive hope, but they they've been kind of, you know, hoping that we were gonna get something better than it seems we're gonna be able to get. And so, you know, kind of now I I would say that you know, our backs are kind of against the wall as a you know freedom tech and liberty-oriented community. Like, you know, at this point, if we can't get strong BRCA protections. then I think we would prefer not to have any bill because the alternative is that it radically expands BSA surveillance requirements for every licensed or you know you know kind of above board operating company in in America, right, that has that touches a blockchain.

Kyle Olney ⋮ Like if you touch a blockchain, you basically have to surveil all of your customers and report all of that information to the government, which

Kyle Olney [20:16] you know, again, I think as Bitcoiners we we kind of find onerous and yeah, abhorrent. So yeah, it's it's challenging times for freedom lovers in the blockchain community.

Marty Bent [20:20] Yeah. Yeah, well we were talking about the BSA on the first episode and how that should really be the the focus is is repealing the Bank Secrecy Act. And since then we've met in person and had had a dinner in Austin and I think there was an update on your end from the the language of the Bank Secrecy Act and particularly the appeal Was there appeal the Supreme Court in the seventies or eighties? And what what's this story? Because there is it seems like there's a chink in the armor of the BSA that we didn't talk about the first time you were on that lead wanted to lean into and has to do with I think reasonable like reasonable amounts of of lower thresholds of triggers that would trigger a s suspicious activity report.

Kyle Olney [21:01] Yeah. Yeah, so you know, I guess I'll caveat by saying I am not a lawyer, and this does not constitute legal advice. But I am a legal nerd, I suppose. almost went to law school, so I'm very interested in such things. And yeah, I mean I think without turning this entire episode into a BSA episode, I guess what I would say is that the Both the legislative and the judicial history of the Bank Secrecy Act raise a lot of questions about how it has been applied and extended in the modern era. And there are a number of concerns that people who like I and you and others who have looked at this, and I should say a a lot of the other policy organizations, again like Peter von Wolkenberg Coin Center has been quite vocal about this over the years.

Kyle Olney ⋮ you know, that The BSA has been wrongly applied and it has i is basically unconstitutional, and it only survived its very earliest sort of challenges for this you know, I don't want to call it a loophole, but this like kind of factual oddity, which was the when the BSA was passed in the seventies, the threshold for reporting was you know, the inflation adjusted equivalent of about a hundred and thirty thousand dollars. So, you know, the bank would not have to produce a suspicious activity report you know, unless it was ten thousand dollars in, you know, again, the nineteen seventies, right? But in the statutory, you know, construction of the bill, there was no in inflation indexing that was ever done.

Kyle Olney ⋮ And so you know, obviously everybody listening to the show will be familiar with how much inflation we've had in the last 50 years in the United States. But you know, $10,000. now, today, I mean, just to give you an example of how commonplace and everyday a $10,000 transaction is, I mean, it's like I moved out of an apartment in San Francisco and the landlord wrote me a check for my security deposit in my first month back, and I couldn't even deposit the check at the bank because it was over their limits and they needed to like do a physical ID check and you know, wait a bunch of time for it to clear.

Kyle Olney ⋮ And they gave me this whole

Kyle Olney [23:48] song and dance about it, right? I mean, it's and it was all because of, you know, the the SAR reporting and BSA flags and all of these sorts of things that have to happen in the background, which are just massive compliance overhead headaches for the banks. I mean, again, as a kind of former bank regulator in in a prior life, like, you know, my per personal opinion is that you don't even need these kind of surveillance tools that the BSA provides you know at in order to do proper regulation, it's really just an excuse to dragnet surveil everybody in broader society. And I back to the the kind of jurisprudence of of the BSA, you know, there were two challenges that happened in the seventies after it was first passed.

Kyle Olney ⋮ And in both of those, some of the most famous justices on the Supreme Court in, you know, the twenty First century, you know, were strongly opposed to the BSA and thought that the arguments in favor of it were you know, kind of ridiculous and and kind of you know undermined, you know, core constitutional guarantees that we have in the Bill of Rights. But but they felt that the the threshold for application was so high that it was something that you know, was tolerable. in in that moment. And so yeah, again, like the chink in the armor here, I would say, is that as we see even more onerous overreach on the behalf of government to surveil, you know, kind of the everyday transactions and data stream that surrounds all of us living in a you know society where you know digital payments are ubiquitous, you know, it's becoming obvious now that you basically don't have an expectation of privacy in the United States anymore, if the BSA continues to be rolled out to the level of, you know, every four dollar microtransaction that you might you know, engage in in in the economy on either a stable coin rail or you know, a layer two of a a native blockchain you know, is going to be surveilled.

Kyle Olney ⋮ Right? Like that's not

Kyle Olney [26:11] Again, I d I just think that like if you were to look at kind of the original construction intent of the bill, we've drifted so far away from it. And if you were to show, you know, the justices in the seventies who, you know, f barely found the BSA passable in the contemporary moment, what has happened today, and how it's being applied, I think they they would flip the table, frankly. And so I think, you know, broadly, broadly speaking, I think that we should feel the same way as Bitcoiners and we should push back and do everything that we can to to fight against this, you know, you know, what I would call an unconstitutional invasion of our privacy rights.

Marty Bent [26:48] Not even just as Bitcoiners, just as Americans. You should flip the table. We should take it back to the Supreme Court. the reasonable threshold of ten thousand dollars that existed back in the seventies and was a point of contention for for justices who thought at the time, like, the amount of people that are making a ten thousand dollar transaction so low, it doesn't really bother anybody. But today that would be interesting data to get. I'm sure somebody's run the numbers, but the frequency of ten thousand dollar payments on a daily basis today versus nineteen seventy and adjust that for population and I'm sure it's still orders of magnitude higher.

Kyle Olney [27:26] Yeah, well, and I think again, kind of more importantly to the point, like it's really theater, right? It's kabuki theater, even in its current incarnation, because we see people like Jeffrey Epstein getting a thousand suspicious activity reports from bank compliance officers moving a billion plus dollars through the pipes over a 10 year span, and literally nothing was done about it. So if you needed more proof that you know they're not really using these suspicious activity reports, at least not proactively, for, you know, kind of their stated purpose. I don't know what better example you could find than that one.

Marty Bent [28:07] Yeah. And bridging this back to section six four of the BRCA and maybe a segue bridge to the AI conversation too. It's like I'm sure you've been paying attention to it, but like what Calais has been doing with Cashew, particularly with the ability to run a mint in a trusted execution environment, which would completely separate the mint operator from anybody using it. Like they would have no visibility into this. And I think we discussed this in November when you were first on, but we have the ability to re architect the banking infrastructure on top of Bitcoin natively in a new way, more efficiently, more privately, with better payments rails.

Marty Bent ⋮ And you could see something like the BRCA passing in its current form with that loophole language and just completely curbing this. But if you look at what that that single example of running a cachew mint in a trusted execution environment in a secure enclave, it's almost impossible. I think it is impossible for a mint operator to know anything that's going on with the mint. unless somebody explicitly tells them. But this is like technology I want to see. And it makes you worry for developers like Cali and others working on the protocol. Like are they going to get in trouble for really pushing the limits of what's possible with this new tech?

Kyle Olney [29:24] Yeah. Yeah, well I mean there's a reason that Cali isn't an Anon. right. I mean I he's probably wise to remain in Anon and continue doing what he's doing without attaching his, you know, r real world or government identity to you know what he's doing for those of us who are fans of the technology and and think that it, you know, ought to be something that we're able to engage with freely, you know, in normal society. But yeah, I I think the through line here is so this is this is kind of like, you know, we were talking just before the call and I I was trying to like kind of s sketch this picture and and I want to like, you know, kind of connect the constellation for everybody here, right?

Kyle Olney ⋮ Like the fight that we're having right now over the BRCA and the Clarity Act and the right to utilize open source software that doesn't harm other people is I think becoming the primary through line that we're going to experience in all of the technology battles that we're encountering, probably for the next at least five years, if not the next decade. because the action that the US government took by you know implementing export controls on the model and the weights that are coming from anthropic and I'm you know, again, trying to make it in the export control so that it was targeted at individuals of foreign national origin.

Kyle Olney ⋮ That is a very scary escalation of the precedent that we were already dealing with in the BRCA. And it's now taking it and extending it to the level of basically digital ID, right? Like how You know, part of the reason that it sounds like Anthropic was forced in and we don't really know what happened here. We've seen lots of different characterizations from everybody, and so you know, it's kind of there's kind of a fog of war. But nonetheless, what we've been told is that Anthropic couldn't comply with the US government's edict to restrict access to foreign nationals because they can't even do that equal.

Kyle Olney [31:57] easy easily inside their own company, right? Like they have foreign nationals who work at Anthropic, who have access to the source code. They have, you know, they use it every day. They probably have to use it in order to do their job. And so the ability for them to comply with that order just broke right on its face, even internally inside the company, right? On day one, to say nothing of the millions of people around the world who are using the the commercial version of the model. And again, that is something that you know we've now gone from the level of you know kind of export controls on physical hardware, chips, you know, things of this nature to software and ideas, right?

Kyle Olney ⋮ and that it I think should really scare every American all around the country because if you know your ability to access a core tool. That most people will need in order to engage in daily civil society moving forward is being controlled by a a bureaucrat somewhere who has very limited understanding of the actual technology underneath it, and you're in incapable of challenging, you know, their their restriction, and you can't even be told exactly why or how it's being applied. I don't think that that means that we're sovereign anymore as citizens inside this country, right? Like that that would seem to to argue that, you know, your access to a common tool or commodity that you need in order to live your life exists at the end of the discretion of a state agent and how they feel about your ability to access that technology or that tool today versus tomorrow.

Kyle Olney ⋮ Or next week. and so yeah, I think that this is a very scary precedent. that hopefully is waking up a lot of freedom tech advocates around the world. I know for a fact the last two weeks here in Silicon Valley, a lot of people suddenly woke up and realized the importance of open source software and open source weights and models and open source intelligence, in a way that they really hadn't for the prior two and a half or three years of the AI d you know debate that's been going on here in the Valley.

Marty Bent [34:24] Well expand on that a bit. What what are people recognizing? What are they saying? what are they saying as it pertains to Anthropic's battle with the US government? And I'll I'll add that it was a bit disconcerting last week to see the reaction of people laughing at Anthropic, which I think to a degree rightfully so, of Dario being very public about his desire to have this technology licensed and tightly controlled by people on the frontier in collaboration with the governments and it's a almost like a ha ha look, you got what you wish for. but you you're not gonna be the one. It seems like the US government doesn't wanna ordain you as the the frontier model that's gonna write the licensing regime and really, really push this forward.

Marty Bent ⋮ But a lot of people were throwing shade at Anthropic and David Sachs, a lot of respect for him and obviously he was the crypto and AR ISR for Trump. for a bit there, is no longer there and but he was giving the government's he had that tweet, I think he sent it out Friday or Saturday, basically saying the govern giving the government's perspective is we asked Anthropic to do this, they pushed back. We said you can't do that, you gotta shut it down, blah blah blah. But everybody was Positioning it as the US government had the right to do this because Anthropic wasn't playing ball.

Marty Bent ⋮ But to your point, it's like, how do we know what the intent of the US govern like if we it's a slippery slope, like if if we do it now for this, like what kind of precedent does that set? And I think that's one thing that many people are trying to grapple with is this again, this idea that on one side you have this incredibly powerful technology, it's nation, Anthropic specifically has fearmongered about the particular model, Mythos, Fable Five, which got export controlled. is a guardrailed version of Mythos, but Dario basically said this is the strongest model ever, it's gonna destroy all these critical systems.

Marty Bent ⋮ And they had the Operation Glass Wing where they gave access in the model to all large software companies to make sure they could harden their systems and operating systems and

Marty Bent [36:42] it seemed like just observing the amount of software updates that have been pushed out in the last few months that they were able to unearth some. And so you this this push pull where it's like they are powerful. And just to play devil's advocate, does the government have a good argument to be made to to to throw export controls on this because it is that powerful? And if so, how do you move forward and ensure that individuals have access to to the software without digital ID or anything like that.

Kyle Olney [37:18] Yeah, I mean there's there's so much to unpack in this, based on everything you just said. I guess the first thing I want to touch on and and not let just kind of like go by is that clearly the US government and you know kind of authorities around the world have an interest in making sure that truly sensitive, existentially dangerous capabilities do not leak through something like a frontier model. right. I mean, there are real use cases like bioweapons, you know, chemical weapons, things of this nature that like, you know, you just you don't want any random person with access to a, you know, an anthropic account to be able to spin up a bioweapons lab that can cause a mass pandemic.

Kyle Olney ⋮ Right. Like that's very obvious. I don't think any of us would disagree with that. I think like all rational observers would say, Yes, that that is a valid and legitimate goal. Of you know, the US government and and authorities to prevent, you know, broad impact to their citizens in this regard. However, I think what we have to do is we have to take a step back and really ask whether the approach that they've taken serves their overall policy objectives, right? And I think this is the place where they've probably missed the mark the hardest. And you know, this is where I would argue that we suffer greatly in Washington DC and kind of like legislative policymaking in the United States for there being very few software people on the East Coast and in Washington, DC.

Kyle Olney ⋮ Like they don't really understand the physics of the internet. They don't understand information theory. it's clear that they don't understand how this is actually going to work once they they took the actions that they took because I mean, there's a much larger conversation that I I'd like to have around the various other pieces of what happened and kind of the impact in Silicon Valley, but like specifically as it relates to the US government's objectives, right? What are the two things that that they would want? They would want the US sort of regime or like model of the world, the US champions to be the the the winners, right?

Kyle Olney ⋮ you know, the people who are setting the standard around the world. We don't wanna, you know, live in a world where, you know, Chinese models

Kyle Olney [39:44] air quotes, are you know the things that are determining you know everyday access to intelligence for the average person. And then the second thing is like, you know, is it actually effective for preventing the thing that we're discussing, right? Which is the catastrophic tail risk outcomes. So on the first measure, you know, I would say that cutting the world's access to the model and restricting anybody's ability to utilize that model in both inside the country and outside the country, clearly is not extending the lead of the American model companies, right? Like you're literally shutting them down, preventing them from doing business. This prevents more people from adopting that particular technology.

Kyle Olney ⋮ It pushes people into competing platforms, which are likely to be non-American, right, and outside of the reach of US jurisdiction. So, you know, I would say just on, you know, the face of the first, you know, objective, clearly it's a failure. right. You can't really argue that you're advancing the US, you know, sort of strategic dominance you know, equation on you know model adoption or you know kind of Americanization as you know, the standard when you're restricting everybody from accessing the American, the leading American offering. more importantly, what I would say is that that policy error could make sense in a universe where you actually had secure ability to prevent that information or those capabilities from leaking out elsewhere, right?

Kyle Olney ⋮ Like if you did legitimately have a monopoly on, you know, the supply chain or the physical material or, you know, any of the kind of skeworphic comparisons that we would make to like nuclear enrichment, for instance, right? Like there are specific pieces of technology, specific you know, production methods, specific you know, raw materials that need to go into non-proliferation. Like those are places where you can execute a a just a full blanket blackout and probably still maintain control. But again, this is the whole

Kyle Olney [42:05] Thrust around open source software and information theory and kind of the physics of the internet, right? Like you can't dictate, you can't stop knowledge from spreading around the world, right? Like that is not something that is really a a capability of any state authority, right? Like we and we know this as Americans. Like we, you know, the whole idea to win against the Soviet Union was to, you know, drown them in Levi's and rock and roll, right? I mean, and Despite the fact that, you know, the Russians and you know the the Soviets didn't want those things coming in and kind of disrupting their social, you know, system, they did, right?

Kyle Olney ⋮ Because you can't stop these things from that are decentralized with decentralized production and decentralized distribution from making their way to the average person in any economy, let you know, or around the world. And so, you know, I think the challenge here is that the at least from the outside, the charitable read would be that the US government understands that they can't prevent this knowledge, this intelligence, this capability from you know leaking out around the world. And they're kind of just relying on the idea that we're that far ahead of our competitors, that this is maybe buying us, you know, around or two around the board before you know the next guys catch up.

Kyle Olney ⋮ But again, if you're paying close attention, you know that, you know, the the models, the Chinese models are only 30 to 90 days behind the US frontier labs. And they've taken an open source approach to the distribution and production of their AI technology. And so, you know, they are becoming the global standard, right? If you are somebody in Africa or let's just say the global south, right? Like South America, Africa, any non G10, G20 country. You can't afford a frontier model subscription, right? Like the only thing that you're gonna be able to afford is an open source model. And so there we've already got the playing field tilted in the direction of, you know, what at the moment are primarily Chinese open source models because the US market is not investing at the moment in producing open source intelligence.

Kyle Olney ⋮ at least at this moment, you know, a couple years ago, Mark

Kyle Olney [44:27] Zuckerberg and kind of Obama and you know the various things that were happening there, and there was a thrust, but they've since kind of faded in their position. And because of this reason, not only would it seem that the Chinese models are going to have wider distribution than the American models from like a cost perspective, but now just pure accessibility perspective. the other reality is that we can't stop any of those non American models from eventually converging to the same level of intelligence and capability that the Frontier models have. you know, because at the end of the day, this technology is just kind of a probabilistic engine, right?

Kyle Olney ⋮ Running over text, right? And you can't classify probability. You can't classify text, plain text, right? Like there's no way to do that without implementing full blown censorship on speech. So, you know, it's kind of an inevitability that capabilities are going to rise in the non-American intelligence market. And again, all of this is like a very long way of saying, I don't think that either of the US government's policy objectives were well served by the decision that they made to implement these export controls in the last week. It would seem that they, you know, again, it's kind of a desperate plea to bide time. and hope that maybe we can get smarter on the policy internally in the United States in the brief respite that, you know, this you know, restriction provides.

Kyle Olney ⋮ So that's kind of the the challenge as I see it, at least from the, you know, geopolitical and kind of like government perspective.

Marty Bent [46:14] What are the people in the valley saying? How scared? How how how big of a shot across the bow was this?

Kyle Olney [46:20] I mean it was massive, right? I mean, it was almost a an eight point earthquake, I would say, right? I mean, the the rest of the economy is not fully adopting AI just yet, but you know, everyone here in Silicon Valley is trying to integrate it. Everyone's been token maxing for months now, right? And and actually this is what the lesson you know that taught everybody why token maxing on proprietary closed source models was not a good idea. So two weeks ago, when Anthropic changed their pricing scheme and basically, you know, kind of dropped the veil on what it actually costs to provide inference to the end users. I'm sure you actually I think I heard you talking about it on one of your prior podcasts. You had even had the moment of hey, this is getting really expensive. Like maybe I need to figure out how to lower these costs and and make this more more tolerable for our business, right? Like you had that experience, didn't you?

Marty Bent [47:20] Yes, yes.

Kyle Olney [47:22] Yeah, so you know this quite well. Like, and it affected, you know, you know, an outfit even of your size, right? Let alone the Ubers and the Facebooks of the world where they, you know, blew through a probably a multi-hundred million dollar budget for the year, you know, in one quarter. Right. The challenge is that these proprietary models are insanely expensive. and they're insanely expensive both in on an absolute basis of like what it requires to pay for the actual cost of the delivered tokens right now. But also they're incredibly expensive compared to the open sour source alternatives that you could pull off of the shelf.

Kyle Olney ⋮ I think the last number I saw is that they're 10 to 20 times the price per token of what you get from open source intelligence and so or open weights and bottles. And so, you know, if you are a, you know, the I I used to work at Uber, so I'll I'll just use Uber as an example here. I don't wanna like put words in anybody else's mouth and to be clear, this is a contrived example. He didn't actually say this. I just happened to work at the company previously and I understand how it works and what was going on. So none of these numbers are real and you know none of this should be taken as as you know a statement from Uber.

Kyle Olney ⋮ But you know, if you're the CTO at Uber, right, and you've got a multi billion dollar budget on a yearly basis that has to support tens of thousands of engineers who are operating at breakneck pace in 180 countries around the world. And your primary barrier to servicing greater customer customer demand that you can't even keep up with is how quickly you can ship software and iterate and get it to market and you know build this deep backlog of features and capabilities that you know are going to keep your team busy for the next 10 years. Of course, you're gonna lean into something like agentic engineering, where you can spin up a hundred or a thousand agents that can work 247, 365 and do all the things that you need to be done while you're sleeping.

Kyle Olney ⋮ Like that's an obvious conclusion, right? The problem is twofold. One, when the real cost of those tokens comes home to roost, as we just saw, all of a sudden the real dollar cost of, this is what it's gonna cost me to.

Kyle Olney [49:42] Be a fully agentic engineering organization at enterprise scale, like that's 10 or 20 or 50 times what we had budgeted in our CapEx for engineering spend this year. Like that's a huge problem. And structurally, you need to refactor that machine in order to make it work just from a budget PL perspective. But then the US government comes along the next week. while Silicon Valley was already digesting, like, okay, like what are we gonna do? Maybe this is the equivalent of buying a super expensive machine, but like I don't ever need a human to operate the machine again. And so, like, maybe the payoff period is like, you know, five to eight years, but like we get enough, you know, on the backside that it like the you know, upfront costs make sense.

Kyle Olney ⋮ Like people were already furiously working through the economic model of like, how do we rationalize this after you know, six months of token maxing? then you know, the government comes along and says, yeah, you can't serve that model to anybody in the outside world. you know, shut that thing down immediately. Well, if you're the risk officer, or you know, the CTO or the CFO inside, you know, Uber and all of a sudden, you know, you can't build and ship your product now on a daily basis, or your velocity drops by 10X compared to what it was last week, and you got no warning. That was going to happen and you have no idea how long that freeze is going to be implemented.

Kyle Olney ⋮ How do you operate a business? Right. This is the very reason that publicly traded companies have a risk management team on the board. And the risk management team often will not let you single source core technology from a provider. You need to have backup providers because what happens if this one guy that you use for this thing goes out of business? Right? Are you gonna have continuity? Are you gonna be able to stay in the game? Are you gonna be able to continue generating revenue? Like when Uber, when a you know again, like a back-end service at Uber, right? Like when you're serving at the scale of billions of users, like if you have something that goes down for an hour, you're talking about potentially tens of millions of dollars in lost revenue.

Kyle Olney ⋮ I mean, how much impact to velocity to dollars served to everything?

Kyle Olney [52:03] you know that the businesses we're operating on under the new kind of token maxing model has been lost just since Friday last week. Right. I mean, I would argue that the economic impact across the broad economy is probably totaled in at least the hundreds of millions of dollars at this point. Probably billions. Right? so I'd say like those are the first two layers of you know the layer cake that everybody in Silicon Valley is kind of working their way through and trying to understand. and again, I think like I've seen more people who did who never understood the the purpose or the value of open source software just wake up suddenly once their access to this intelligence model was taken away from them. Suddenly, with no warning and no clarity around when it's going to return.

Marty Bent [52:56] Yeah. Well th that last point is like when is it gonna return? Are they gonna allow it to return? Like what does that mean for anthropic training new models? Like do they have any clarity on what they're allowed to train and release and

Kyle Olney [53:08] Yeah, I mean I don't I we don't know what the backroom negotiations are like, I guess, between the administration and Anthropic. But but yeah, I mean you can imagine that this is this has gotta be damaging for Anthropic's business too. Right. I mean, again, if you were interested in an American champion being the primary leader of this paradigm, which I would say inarguably anthropic would seem to be at the moment, kneecapping them and putting an indefinite suspension on their ability to compete with whatever their best product is in the market certainly would not seem to be helping them you know, be more efficient or more productive or more cash flow generating.

Kyle Olney ⋮ right. Like th this can't be good for Anthropic's business. It's definitely not good for any of the people who are using or relying on Anthropic. So again, I think that the this level of chaos, you know We've kind of become accustomed to it a little bit in the Trump administration with all the tariff madness and kind of like the general reordering of the chessboard. but these are really consequential, really meaningful twists and turns on, you know, the roller coaster that are I'd say shaking everybody up, you know, across Silicon Valley, because we're everybody, I think, is being forced to ask the question for the first time.

Kyle Olney ⋮ Like, okay, well. If I don't actually have access to the underlying model or the weights myself, can I put this in any kind of a, you know, critical path workflow in my business when the US government can just come in and shut it down any day of the week with no warning? And or anthropic shutting it down any day of the week for no warning, with no warning, right? It's it's kind of the same problem on you know, just a different impetus or a different person instigating the challenge. So I think all of this is to say that like, you know, open source is is poised to really have a moment right now.

Kyle Olney ⋮ And and I think we should really lean in and support that, you know, as Bitcoiners and Americans, because it is really the the path to greater liberty and prosperity for everybody in the economy.

Marty Bent [55:24] Well I do too, but you have to ask the question, if they're doing it to anthropic, what's to stop them from doing it to any of these open source labs?

Kyle Olney [55:33] Well, I mean, i in America, I suppose the argument would be that once you've published the software, it's out there, right? so I guess they could come preemptively stop you from trying to publish the software or you know, again you could end up in the scenario that we are talking about with you know with the samurai devs where they went and talked to a regulator and asked for guidance. They were given guidance, they followed the guidance and then the government still charged them anyway. you know, we could see that kind of behavior. I mean, I think one of the fears that I certainly have looking at what's going on now is, you know, we've been lucky f so far to have avoided kind of draconian or onerous you know, state licensing or you know, national security restrictions on this technology until Fable.

Kyle Olney ⋮ and this would signal to me that there's been a change of feeling in DC about the fact that they are going to move in the direction of doing licensing and regulation over intelligence and AI. And I think that that i is gonna be incredibly dangerous, because we know that the government, I mean, here we are fifteen years later in Bitcoin and we still don't even have sensible market regulations that we're talking about, having been turned into law. Can you imagine, you know, if if you know we have to go, you know, I I basically the sk the fear that I have is that the government may have learned the lesson in the wrong direction.

Kyle Olney ⋮ They think that they waited too long on the Bitcoin thing and like now they're gonna try to do it way early on the AI side. and that's just gonna lead to to disaster because I think even this some of the smartest people in the world on AI don't really know how to land this plane and get it to where we're going, right? Because the reality is that w I don't think we really know it's like kind of like 3D printed guns or something like that, right? Like i if it's just information, you know, how do you prevent that information from moving around the world at the speed of light, right?

Kyle Olney ⋮ You kinda have it's not really something that we understand how to do in the in the physics of the modern internet.

Marty Bent [57:51] No, I mean my hope for this export control move by the government on Anthropic is that it was just a p pedantic move, stemming from Anthropic's sort of confrontational relationship with the Department of War specifically. And hopefully it was them. I mean not even hopefully, I mean I guess best case scenario, it's the government just saying we're gonna shove you in a quarter anthropic because you wanna give a skill decision leveraging your technology. which is a fucked up thing to say. But again, I think that's best case scenario. Worst case scenario it's like, shot across the bowel, full licensing regime coming, we're gonna completely cuck the models, gonna limit the access to these models to certain individuals with certain that meet certain ID credentials. and we're gonna very aggressively try to stamp out any development on the open source side because it's systemically dangerous to to the safety of our country and the children and national health and security.

Kyle Olney [59:08] Yes. Well it's it somehow is always for the children. you know, if you but you know it

Marty Bent [59:13] That's the other thing. Like the UK age verification laws just went in.

Kyle Olney [59:19] Yeah, I know. This is and I think this is kind of what I mean about the policy policy regime feels like it's shifted now in a kind of scary way, right? Like the stuff that we're seeing out of the UK with chat control and digital ID and you know kind of banning the use of social media under the age of sixteen, regardless of, you know, kind of your feelings on that last point, right, like just the fact that they like the how they implement it. Right. The only way to implement it is to create a national ID and to have you sign into every device that you touch with a KYCAML identity.

Kyle Olney ⋮ Right. that is incredibly terrifying. It should be incredibly terrifying to everybody because that means that every web search, every inference request, every everything, anytime that you're touching anything with a screen, you're being surveilled, monitored. And a hundred percent of your activities are being associated to your, you know, real world identity, right? real world government identity. And again, this is something that, you know, as freedom-loving Americans who believe in, you know, the right to free speech, you know, and free commerce and free, you know, transactions between two willing parties, like, I just don't know that we can consent to a a regime that looks like that.

Kyle Olney ⋮ right. I mean, again, we've kind of been moving in this you know, kind of surveillance, total surveillance direction for twenty five years now, since September eleventh. But we really have to draw a line in the ground somewhere, and say enough is enough and and start pushing back. And and that would be my contention. I mean, I think that the the importance and and the momentous moment that we need to have with Freedom Tech right now, it's never been more important than it has. you know, and then it's become, I I should say, this month. right. And the only other time I can think of that is even equivalent is, you know, the original encryption wars.

Kyle Olney ⋮ right.

Marty Bent [1:01:22] Completely. Completely agreed. And it's really I'm sure just a coincidence that the UK age verification laws were sort of rushed to market two days before the the UK rape gang inquiry report was released by by the the restore Britain party. all right, with all this in mind, what's the call to action for the audience out there? I I I'm very happy that you were able to do this on quick notice because I I know that you're on top of this. And I I I I think I agree with you that most people don't understand, outside the valley at least, don't understand the gravity of the precedents that are being made right now.

Marty Bent ⋮ I And like I said earlier, it was disconcerting last week to see everybody cheering on the government's move because they viewed it as like a ha ha look, you got what you wish for anthropic. But I think if you go a layer deeper, it's it's much more it's much graver than than the US government versus anthropic specifically. Like this is a fight for freedom in the information age and he who controls the information is gonna have the most power as we continue to transition into this age. And so having the ability to leverage these intelligence tools and give them context that is specific to the information and the data sets that you care about is going to be important to give the individual leverage against stronger forces than himself.

Marty Bent ⋮ And if these licenses, regimes and digital ID get thrust through, the ability to do that is severely hindered and therefore, you're not really free at the end of the day. And the government has all the power and all the leverage.

Kyle Olney [1:03:06] Yeah, I mean I think you said it right, right? Like if your access to intelligence, if your access to, you know, free, you know, kind of unsurveilled money exchange in the broad economy can be revoked by a bureaucrat you've never met for a reason that they don't have to disclose at the drop of a hat. I think that we have to ask, like, whether you you actually have rights. or whether you, you know, are kind of just a permissioned node in the network. Right. So you know as far as call to action for everybody who would be listening to this, I mean, I think starting at the top, like, first of all, the game's not over with the Clarity Act and the BRCA.

Kyle Olney ⋮ I mean, we can still have an impact here. I think it's incumbent upon everybody listening to this. If you haven't already, pick up the phone, call your Congress People and your senators in particular right now, make sure that they know that this is super important to you, that, you know, developer protections and open source software are your most important issue that you care about and that you're going to vote with. and that you will not support any candidate who doesn't you know, share your views in that way. I think like that's not a fruitless endeavor, although it is an uphill battle at this point. and I I think it again, it's like super urgent that people do that as much today as it has been for the last you know, twelve months or so.

Kyle Olney ⋮ And then you know, I would say that understanding the connection here to what is now going on in AI and the fact that this is really the same fight and that it's going to continue and extend into, you know, AI and your ability to access intelligence freely. in the future and utilize it for you know your own reasons, you know, that is another existential risk that we're staring at right now. And so, you know, it's important to make sure that your representatives understand your feelings on this issue, on both of them, or how it applies to both of them, I should say. and then I would say like getting organized and in the fight and for open source

Kyle Olney [1:05:27] i is the next most important thing for everybody to do here. right. Like being you know unapologetic about the fact that, you know, as Americans, we deserve access to open source freedom technologies. that is, you know, literally should be our right, you know, as as citizens of this country based on, you know, the social contract that we all sign up for. and It's incredibly important that everybody begin to orient themselves and understand you know both the value of open source software and freedom technologies in this area that we're moving into, because if you don't have the ability to run your own model and control your own weights, then you are subject to the whims and fancies of whoever else that's not you controls that model.

Kyle Olney ⋮ Whether it's anthropic saying, well, we've developed mythos, but you know, only a small chosen priesthood of people will get access to it in order to protect themselves from the worst of the effects that we expect to come back from this technology. Or whether it's the US government saying, well, we just don't think anybody should have access to this. and so we're just gonna unilaterally shut it down in a way that nobody can appeal and that there is no due process around. that is just again, I I think a a bridge too far. and it's something that we as Americans, as Bitcoiners, as freedom loving, you know, sovereigns in in a country that is supposed to be, you know, by of and for the people should not tolerate.

Marty Bent [1:07:18] Couldn't have said it better myself, Kyle. thank you for continuing the fight, the good fight. As you made pretty clear the fight is not over. It may be just be beginning, so I'm sure we'll have many more checkups in the future as both these stories progress in parallel.

Kyle Olney [1:07:36] Awesome. Well, great to be with you, Marty. And yeah, look forward to catching up and and continuing the the talk about Freedom Tech and the need for open source software.

Marty Bent [1:07:46] yeah. Peace and love freaks. Take a