Think of a kids playground.

Children running everywhere.

Mayhem.

The laughs.

The screams.

The squabbles.

A local favourite of ours at the moment, has a small sandpit area, that my girls enjoy digging around in.

I’ve never thought to bring their beach toys.

Annoyingly!

I mean, who doesn’t like to build a sandcastle with a proper bucket and spade…!?!

So I improvise, grab some paper takeaway coffee cups, and explain how they can use them to build with instead.

Off they go…

They love it.

For a while.

Before, oops, something else has caught their attention.

The slide, trampoline, or see-saw, is now the centre of their world.

Any parent out there will know this well.

What I want to highlight though is a process I witness each time.

Firstly, there is a feature in the centre of the sandpit, that all the kids gravitate towards.

They will dig trenches around it, put sand on top, and it becomes a castle, garden, or monument.

It is the critical piece of real estate in the sand pit.

Control this, and you’re on top.

Secondly, there was a time when a boy was with some well organised grandparents, who had thought to bring all his beach toys.

Trucks, diggers, spades, buckets, and a heap of shells etc.

Kids flocked to them.

For the boy, this was a disaster, as sharing all his goodies was not part of his plan.

As you can imagine, there are fights over the centre feature, and there was a fracas for the toys.

Which brings me to the point of today’s story.

What is this, if it’s not a rehearsal for the age old human instinct, to control land and technology?

A petri-dish for future discussions over who owns what.

“That’s mine!”

Can just as easily be the true owner of a toy or a child simply wanting to play with it.

Instinctively we want things.

So how do we control this urge as adults?

Often we don’t.

We fight.

But as I’ve been reading lately in Hernando De Soto’s excellent book “The Mystery Of Capital”, one excellent solution to this has been the development of property rights, which enable the growth of capital.

I highly recommend having a read.

One story resonated strongly, in relation to how settlers in the USA organised themselves, as they spread west through the continent.

Men would settle on land as squatters.

They would build, farm, and develop it.

Luckily for them the English property law prominent at the time didn’t follow across the Atlantic, which diss-allowed squatting, but rather they innovated, and it became common practice that squatters could legalise their ownership over time.

Precedent was set.

The incentive structure was clear.

Add value, care for the land, and the law will catch up to reflect your capital creation eventually.

Interestingly, settlers would identify the boarders of their newfound territory with signals as simple as axe cuts in tree’s.

Imagine that!

Primitive.

But effective.

De Soto also highlights brilliantly how a countries inability to build an effective property rights system hamstrings its growth.

For some citizens of the word today, it’s either too expensive, or takes literally years, to try and legitimise their property rights.

This forces them into what he describes as the ‘extralegal’ economy.

A place where people go to do business, in order to best go about their hustle, but without the ability to generate capital long-term.

It’s not that they’re criminals.

Quite the contrary in many cases

The issue is simple, the systems they operate in just don’t provide what they need, so they come up with innovate solutions of their own.

But these agreements are hyper-local in most cases.

Each neighbourhood knows how it works.

But, unlike the USA, these places never had an effective centralised institution willing and able to document, manage, and maintain property rights.

This is the missing piece to true capital development.

As a Brit living in Australia, I am very accustomed to utilising a house as collateral for a loan for example.

In many places that is simply not possible.

What really got me thinking though, was his detailed plans on how to help developing and ex-communnist countries put in place effective property rights.

They’re long.

Really long.

And with each step one can’t help but feel his ideas become less and less viable.

“I wonder if he has ever studied Bitcoin?” I thought to myself.

My bet: he hasn’t.

Indeed, it’s my belief that Bitcoin represents the highest form of property rights mankind has ever had access to.

If you have the key, you own the wealth.

If you don’t have the key, you don’t own the wealth.

Super simple.

Chuck into the mix Bitcoin is easily divisible, can be taken anywhere, cannot be debased, and is easy to exchange, you start to see its extremely attractive characteristics as a store-of-value with capital growth potential.

Consider all those extralegal economic actors globally.

Millions and millions of them.

All in need of a way to generate capital long-term.

Well instead of requiring a centralised government, which has clearly failed them to date, to dramatically figure out a way to evolve into the USA, now they can utilise an open network, digitally native, open 24/7, 365…

Quite a moment in history in my view.

Everyone, anywhere in the world, how have access to equal property rights.

With De Soto’s lens, now they can truly nurture capital.

Said another way, squabbles in the sand pit, no longer carry the same weight as they once did…

Best, Jake

Ps - even as someone that was highly trained in how to “make money”, it’s only recently that I asked the question “what is money?” This seemingly innocuous ask, has helped me to see the difference between an investment, and simply saving, which is a definition the average person has been de-sensitised from. Part of this exploration means one really starts to dig into the word “capital”. What I have found is quite the opposite to the champagne socialist wisdom of today that “capitalism is the cause of all our problems”. True capital management is the key to our future, based in property rights fit for the digital renaissance, with the potential to help more people live a happy life than any social phenomenon before it.