Mr. Banzika will speak about the crashes and what led to the crashes of the most recent 737 model. He is a flight safety, he's an engineer and he also worked on flight safety and he analyzed plane crashes for a lot of time and a long time. And you have to keep in mind that this 737, although multiple models have been built, can be flown, all models can be flown with the same type rating since 1967. Which is one of the many root causes of the issues that led to the disaster that killed 346 people. Let's listen to Bernd and he'll enlighten us what else went wrong. Yes, thank you very much for the introduction. I see there are not quite as many people as with the Edward Snowden talk, but I'm not disappointed. Aviation safety has always been very important to me and I've done a lot of work on it and I'm happy to share my passion with so many of you. Thank you. So it's basically the outline of what I'm going to talk about. It's the Boeing 737 Max or 737 as some may say. I will briefly talk about the accidents, what we knew at the beginning, what went wrong and then what came to light later on. I will show our causal analysis method that we use very shortly, very briefly and the analysis, an overview of the analysis that I did of these accidents. Then talk about the infamous MCAS system, the maneuvering characteristics augmentation system, as it's called by its full name. Then I'll talk about certification, how aircraft certification works in the United States. It's very similar in Europe, although there are some differences, but I'm not going to talk about European details in this talk. So it's mostly about the FAA and aircraft certification across the pond. Some other things and an outlook how it is going to go on with the Boeing 737 Max. We currently don't know exactly what's going to happen, but we'll see. And if we have time, there are a few bonus slides later on. So the Boeing 737 Max, the star of the show as you may say, it's the fourth iteration, as the Herald already indicated, of the world's best-selling airliner. I looked it up just recently. I think there are almost 15,000 orders that have been for the 737 of all the series, the original, the classic, the NG, and now the Max. And the Max itself is the fastest-selling airliner of all time. So within months it had literally thousands of orders. It has now almost 5,000 orders, the 737 Max, and all the airlines in the world are waiting for the grounding to be lifted so they can receive and fly the aircraft. So the first accident was last year. It was a line air, Indonesian flag carrier. Actually, I think the second or third largest Boeing 737 Max customer in the world with a couple hundred, 250 or something aircraft, and it crashed relatively shortly after it entered service. And so we heard some strange things in the news and on the forums that deal with aviation safety. It seems that there had been uncommanded nose downtrim. So the tailplane is moved by an electric motor and it forces the nose of the aircraft down. The pilot can counter that movement with some switches on his control column. And apparently the stick shaker was active during the flight and there were difficulties in controlling the aircraft. We didn't know at the time exactly what it was. And then for the first time the abbreviation MCAS surfaced. And even 737 pilots, even 737 Max pilots, at least some of them said they'd never heard of it. It was a mystery. We later found that actually in some documentation it was very briefly mentioned that such a system existed, but not exactly why it was there. And I guess Boeing knew and the certification authorities, as it turned out, sort of knew a bit of the story, but not the whole story. But especially people in the West, in the US and in other countries said, oh, these are just poorly trained third world pilots and we expect that. And they weren't completely wrong. Lion air has a particularly bad safety record and it wasn't unknown to aviation safety investigators. There have been a number of crashes with lion air. So in the beginning we thought, okay, maybe it's a fluke, it's a one-off or maybe it's caused by poor maintenance or bad pilots or whatever. So several people on the other hand already began worrying because some flight data recorder traces became public and there were some very strange things which we will see shortly. And then only a few months later the second aircraft of exactly the same type and the same variant, Boeing 737 Max 8, also crashed. And you can see maybe on the picture on the left it left a rather big crater. It really dove into the earth quite fast. It turned out I think about between 700 and 800 kilometers per hour, so really fast. And not much was left. I think the biggest parts were about this size, I guess. So all small pieces of debris and the engine cores which are a bit bigger. And from that as well flight data recorder traces became public. The recorders had survived at least the memory in them and were readable. So we finally found out something and found some similarities, some rather disturbing similarities. We'll come to that in a moment, but I'll talk a little bit about the Boeing 737 family in general. So there were four, as I said, models. There was the original which had narrow engines under the wings. Not a lot of room between the ground and the engines. But it looked quite normal, you could say. It was one of the first short-haul airliners with underslung engines under the wings. Then new high bypass turbofront engines entered the market which were much more fuel efficient. We're talking about maybe some 15 to 20 percent lower fuel consumption, so it was a big deal. And the Boeing 737 was re-engined and became known as the classic. Big engines but still mostly analog mechanical instruments. And it was basically the same as the original instead that it had some bigger engines. They had to shape the cowling a little differently to accommodate the bigger engines, but more or less it worked for a while. And then as airlines demanded more modern avionics, so the cockpit electronics in aircraft, the next generation was conceived. It also got a new wing, new winglets, which again saved a lot of fuel. It had basically the same engines except that the engines now were also computer controlled by what we call FATIC, full authority digital engine control. And Boeing said, well, that's probably going to be the last one. And in the next few years we're going to develop an all new short and medium haul single aisle aircraft, which will be all new and super efficient and super cheap to operate all the promises that manufacturers always make. In the meantime, Airbus was becoming a major player with the A320. It was overall a much more modern aircraft. It had digital fly by wire. It always had digitally controlled engines. It had much higher ground clearance, so it was no problem to accommodate the larger engines in the A320. And Airbus then announced that it was going to re-engine the A320. And for the A320, that was the first time it got new engines. For a long time you had the choice of two types of engines for the A320. And then they said, we're going to install these new super efficient engines, which brought with it another optimization of fuel consumption. It was another 15% fuel saved per mile traveled, something on the order of that. So it was a huge improvement again. And many Airbus customers immediately ordered the so-called A320 Neo. And some Boeing customers also thought, well, this one is going to consume so much less fuel that we might consider switching to Airbus. Even though it's a major hassle, if you have a fleet entirely consisting of Boeing aircraft, if you then switch to Airbus, it's a huge hassle. And nobody really wants that, unless they're really forced to. But the promised fuel savings were so big that companies actually considered this and lots of them. And so Boeing said, we need something very quickly, preferably within two years, I think. So that's for airline development. That's very, very, very quickly. And they said, well, scrap all the plans about the new small airliner. We're going to change the 737 again. And now the new engines were going to be bigger again. And so actually there was no ground clearance to move them in the same way as on the NG. So they had to modify the landing gear to mount the engines even further forward and higher. And the engines were bigger. But the engines were on the hold. They were a very good new development. The same type of engines that you could get for the new Airbus by CFM International. And so, yeah, they decided to make the Boeing 737 fourth generation and called it the MAX. So when we analyzed accidents, we used a causal analysis method called YB-cause analysis. And we have some counterfactual test which determines if something is a cause or something else. We call it a necessary causal factor. And it's very simple. A is a causal factor of B. If you can say had A not happened, then B would not have happened either. So I mean, you need to show for everything that this, that there's a causal relationship and that all the factors that you have found are actually sufficient to cause the other event. So you can probably not read everything of it, but it's not really important. This is a simplified graph. And I will show the relevant details later. And this is the analysis that I made of these accidents. And you can see it's not a simple tree. As computer scientists, many of you are familiar with trees. And this is just a directed graph. And it can have branches and so on. And so some things are causal influence, causal factor of several different things. So some of the factors actually have an influence in multiple levels. For example, the airspeed influences the control forces. And it also influences the time the crew had to recover the aircraft before impact with the ground. So these are some of the things that I will look at in a bit more detail. So here's one of them. Uncommanded nose down trim. So what happened apparently on these accident flights was that you can see it in the flight data recorder traces. I don't know. Can you see the mouse pointer? Here there's the blue line. And that is labeled trim manual. And there's the orange line that is labeled trim automatic. And if they have a displacement to the bottom, that means that the aircraft is being trimmed nose down, which means in order to continue to fly level, you have to pull the control column with more force towards you. And what you can see is in the beginning, there are a few trim movements. And on this type, they are expected. It has an automatic trim system for some phases of flight which trims the aircraft to keep it flying stable. And then after a while it started doing many automatic nose down trim movements. Each of these lasts almost 10 seconds and there's a pause between them. And in every case, the pilots counter the nose down trim movement with the nose up trim movement. On the control yoke, there are switches that you operate with your thumb. And you can trim the aircraft that way and change the control forces and cause the aircraft nose to go up or down. So for a very long time this went on, the computer trimmed the aircraft nose down, the pilots trimmed the aircraft nose up and so on. Until at the very end, you can see that the trim, the nose up trim movements that the pilots made become shorter and shorter. And this line here, it says pritch trim position. That is the resulting position of the trim control surface which is the entire horizontal stabilizer on the aircraft. And it moves down and it doesn't really go up anymore because the pilot imports become very short. And that means the control forces to keep the aircraft flying level become extremely high and in the end it became uncontrollable and crashed, as you can see here. So the pilots for various reasons which I will highlight later, the pilots were unable to trim the aircraft manually and the nose down trim persisted and the aircraft crashed. And this is only the graph of one of the accidents but the other one is very similar. And so that's what we see. There is a known system which was already known before on the Boeing 737. I think it's available on all the old versions as well, which is called the speed trim system which in some circumstances trims the aircraft automatically. But the inputs that we see, the automatic trim inputs, don't really fit the so-called speed trim system. And so for the first time we hear the word AMCAS. And we'll talk a bit more about what made the Boeing 737 different from all the previous models and that is the bigger engines. As I said the engines were much bigger and to achieve the necessary ground clearance they had to had to be mounted further forward and they're also a lot bigger. Which means at higher angles of attack when the aircraft is flying against the stream of the oncoming air at a higher angle these engine cells produce additional lift in front of the center of gravity which creates a pitch up moment. And the certification criteria are quite strict in that and say exactly what the forces on the flight controls must be to be certified. And due to the bigger engines there were some phases or some angles of attack at which these certification criteria were no longer met. And so it was decided to introduce a small piece of software which would just introduce a small trim movement to bring it in line with certification criteria again. And one of the reasons this was done was probably so the aircraft could retain the same type certificate as was mentioned in the introduction. So pilots can change within one airline between the aircraft between the 737 NG and the 737 MAX they have the same type certificate. There's a very brief differences training but they can switch even in line operations between the aircraft from day to day. And another reason no other changes were made. Boeing could for example have made a longer main landing gear to create additional ground clearance to move the engines in a more traditional position that would have probably made it more aerodynamically in line with certification criteria. I hesitate to say the word to make it more stable because even as it is the Boeing 737 MAX is not inherently aerodynamically unstable. If all these electronic gimmicks fail it will just fly like an airplane and it is probably in the normal flight envelope easily controllable. But to make big mechanical changes would have delayed the project a lot and would have required recertification and what instead could be done with the airframe essentially the same. The certification could be what is known as grandfathered. So it doesn't need to fulfill all the current criteria of certification because the aircraft has been certified and has been proven in service and so only some of the modifications need to be recertified which is much easier and much cheaper and much quicker. So this is one of the certification criteria that must be fulfilled. It's even though I have removed some of the additional stuff that doesn't really add anything useful it's still rather complicated. It's a it's a procedure that you have to do where you slow down one knot per second and the stick forces need to increase with every knot of speed that you lose and things like that and it says it's stick force versus speed curve may not be less than one pound for each six knots and it's quite interesting if you look at the European certification criteria is that they took this exact paragraph and just translated the US units into metric units but really calculated the new values so the European certification have now very strange values like I don't know 11.79 kilometers per hour per second or something like that it's really strange so you can see where it comes from but they said we can't have knots even though the entire world except Russia and China basically flies in knots even Western Europe but the criteria in the certification specification need to be in kilometers per hour well I would have thought that you would even if you do the conversion you would use meters per second but it used kilometers per hour for whatever reason so due to the aerodynamic changes that were made the max did not quite fulfill the criteria to the letter so something had to be done and as I said mechanical redesign was out of the question because it would have taken too long would have been too expensive and maybe would have broken the type certificate commonality so they introduced just this little additional software in a computer that also existed already and so it measures angle of attack it measures airspeed and a few other parameters flap configuration for example and then it applies nose down pitch trim as it sees fit but it has a rather interesting design from a software engineering point of view can you read that is that there are flight control computers and one part of this flight control computer one additional piece of software is called the mcast the maneuvering characteristics augmentation system and the flight control computer actually gets input from both angle of attack sensors it has two one on each side for redundancy but the mcast algorithm only uses one of them at least in the old version in the new version it will probably use both if it ever gets recertificated and then if that angle of attack sensor senses a value that is too high then it introduces nose down trim and it may switch between flights between the left and the right sensor but at any given time for any given flight it only ever uses one so what could possibly go wrong and here we can see what went wrong it's the same graph as before and I may direct your attention to this red line that says angle of attack indicated left and the green line which says angle of attack indicated right so that is the data that the computer got from the angle of attack sensors both are recorded in the data recorder but only one is evaluated by the mcast and you can see here's the scale on the right you can see that one is indicating relatively normally around zero a bit above zero which is to be expected during takeoff and climb and the red value is about 20 degrees higher and of course that is above the threshold at which the mcast activates so it activates right and apparently in the old version of the software there were no sanity checks no cross checks with other air data values like airspeed and altitude or other things and it would be relatively easy to do not quite trivial you have to get it right in these kinds of things which influence influence flight controls but nothing too fancy but apparently that was also not done so the mcast became active so how could it happen and it's still to me a bit of a mystery how it could actually get so far that it could be certified with this kind of system and the severity of each failure the possible consequences have to be evaluated and the certification criteria specify five severities catastrophic hazardous major minor and no safety effect and that doesn't have to be analyzed any further but for catastrophic failures you have to do a very very complex risk assessment and see what you can do and what needs to be done to bring it in line to make it either mitigate the consequences or make it so extremely improbable that it is not to happen so here are the probabilities with which the certification criteria deal and it's different orders of magnitude there are usually two orders of magnitude between them it's from a probability of one times ten to the minus five per hour to one times ten to the minus nine per operating hour and this is the risk matrix many of you are probably familiar with those and it basically says if something is major then it may not happen with a probability of probable and if it's catastrophic the only probability that is allowed for that is extremely improbable which is less than once in a billion flight hours right and to put that into perspective the fleets with the most flight hours to date I think are in the low hundreds of millions of flight hours combined so we're still even for the 737 or the A320 we're still quite far away from a billion flight hours so you might have expected perhaps one of these events because statistical distribution being what it is the one event might happen of course and but certainly not two in less than two years and quite obviously the severity of these failures was catastrophic I think there's no there's no discussion about that and here's here's the relevant part actually about flight controls in the certification criteria which was clearly violated it says the airplane must be shown to be capable of continued safe flight for any single failure without further qualification any single system that can break must not make the plane unflyable or any combination of failures not shown to be extremely improbable and extremely improbable is these 10 to the minus 9 per hour and this hazard assessment must be performed for all systems of course and severity must be assigned to all these and the unintended AMCAS activation was classified as major and let's briefly look at that what's major a reduction in capability maybe some injuries major damage so nothing you can just drug off but certainly not an accident with hundreds of dead so and therefore there are some regulations would say which kind of kinds of specific analysis you have to do for the various categories on for major no big failure modes and effects analysis FMA was required and these are all findings from the Indonesian investigation board and they're all in the report that is publicly downloadable in the final version of the slides I'll probably put some of the sources and links in there so you can read it for yourselves it's quite eye-opening so only a very small failure and failure analysis was made comparatively small it probably took a few man hours but not as extensive as it should have been for the event had it been correctly classified as catastrophic and some of these things that could happen were not at all considered such as large stabilizer deflection so continued trim movement in the same direction or a repeated activation of the AMCAS system because apparently the only design of the AMCAS system that the FAA saw saw was limited to a 0.6 degree deflection at high speeds and to one single activation only and that was changed and it is still unclear how that could happen it was changed to multiple activations even at high speed and each activation could move the stabilizer as much as almost 2.5 degrees and there was no limit to how often it could activate and what was also not considered was the effect of the flight characteristics caused by large movements of the stabilizer or movement of the stabilizer to the limit of the AMCAS authority the AMCAS doesn't have authority to move the stabilizer all the way to the mechanical stop but only a bit short of that much more than the manual electric trim is capable of trimming the airplane on the aircraft and you can always trim back with the manual electric trim switches on the yoke but you cannot trim it nose down as far as AMCAS can so that's quite interesting that wasn't that that was not considered what was also not considered at least it wasn't in the report apparently that that the Indonesian agency had seen was that flight crew workload increases dramatically if you have to pull on the yoke continuously with about let's say four equivalent to 40 kilograms or 50 kilograms continuously otherwise if you let go you're going to go into a very steep nose dive and at the short at the low altitude that they were they would not have been able to recover the aircraft and in fact they weren't what was also not considered was an AOA sensor failure in the way that we have seen it in these two accidents although apparently they those had different causes the effect for the AMCAS was the same that one of the sensors showed a value that was about 22 and a half degrees too high and that was not considered in the analysis of the AMCAS system so I hope that is readable that is a simplified state machine of the AMCAS system and what we can see is that it can indeed activate repeatedly but only if the pilot uses the manual electric trim in between it will go into a dormant state if the pilot trims manually with the hand wheel or if the pilot doesn't use the trim at all it will go dormant after a single activation and stay that way until electric trim is used so that's the basic upshot of this of this state machine so when the pilot thinks he's doing something to counter the AMCAS and he's actually making it worse but this isn't documented in any pilot documentation anywhere it will probably be in the next way if it's still working like that but so far it wasn't so Boeing was under a lot of pressure to try to sell a new more fuel efficient version of their 737 and so I can't say for sure how it was internally between the FAA and Boeing but it's not unreasonable to assume that they were under a lot of pressure from management to accelerate certification and possibly take shortcuts I can't make any accusations here but it looks that not all is well in the certification department between Boeing and the Federal Aviation Authority so originally the idea of course is the manufacturer builds the aircraft analyzes everything documents everything and the FAA checks all the documentation and maybe even looks at original data and maybe even looks at the physical pieces that are being made for the prototype and approves or rejects the documentation there is already a potential conflict that is not there in many in most other countries because they have separate agencies but the FAA has a dual mandate it is supposed to promote aviation to make it more efficient but also to ensure aviation safety and there may be conflicts of interests I think so here's what this certification has been up until not quite sure 10 15 years ago so the FAA the actual government agency the aviation authority appoints a designated engineering representative the DER is employed and paid by Boeing but is accountable only to the FAA and the DER checks and documents everything that is being done there's usually more than one but for simplicity's sake let's say and the DER then reports the findings and all the documentation all the low-level engineering and analysis documentation that has been done to the FAA and the FAA signs off on that or asks questions and visits the company and looks at things that makes audits and everything like that and so that usually has been working more or less and has certainly improved the overall safety of airliners that have been built in in the last decades and this is the new version and so he's the person is now not called DER but is called AR the authorized representative is still employed and paid by Boeing that hasn't changed but is appointed by Boeing management and reports to Boeing management and the Boeing management compiles a report and sends that to the FAA and the FAA then signs off on the report they hopefully at least read it but they don't have all the low-level engineering details readily available and only rarely speak to the actual engineers so anyone seeing a problem here well you have to say that most aircraft that are being built have been built in the last years aren't really terrible right the 787 is a new aircraft the 777 has been one of the safest aircraft around at least looking at the flight hours that it has accumulated so it's not all bad but there's potential for real really bad screw ups I guess there's another factor maybe that I've briefly mentioned is that the Boeing 737 even in its latest version is not computer controlled it's not fly by wire although it has some computers as we have seen that can move some control for surfaces but mostly it's really it really looks like that I think that's an actual photo from a 737 has some corrosion on it so it's probably not a max an older version but it's basically the same which is also why the grandfathering certification still works so it's all cables and pulleys and even if both hydraulic systems fail so yes it is hydraulically assisted the flight controls but if both hydraulic systems fail with the combined forces of both pilots you can you can still fly it and you can still land it that usually works except when it doesn't and the cases where it doesn't work are when the aircraft is going very fast and has a very high stabilizer deflection and this is from a video some of you may have seen that it's from mentor pilot and he has actually tested that in a full flight simulator which represents realistic forces on all flight controls including the trim wheel you can be in the center console under the thrust levers there are these two shiny black wheels and they are the trim wheels you can move them manually in all phases of flight to trim the aircraft if electric trim is not available within the normal trim system would not do this okay it would require manual trim to get it away from this that's fine all right trim it backward trim it backward as you can so now he's trying to trim it nose up again after he has manually trimmed it nose down because the normal electric trim system cannot trim it so far nose down they have to do it manually and now he's trying to trim it back nose up from a position which is known from the flight data recorder that it was in in the accident flights and is trying to trim it manually because some people said oh turn off the electric trim the electric trim system and trim it manually that'll always work and they're trying to do that and it has representative forces to the real aircraft oh my god okay uh you on pass the red and you can see that the pilot on the left the captain can't even help him in theory both could turn the crank at the same time they have a handle on both sides because he has to hold the control column with all his force so you can't let go he must hold it with both arms otherwise it would go into the nose dive immediately and this is the physical situation with which the pilots were confronted in the accident flights and he now says press the red button in the simulator so end the simulation because it's clear that they're going to crash so there's another thing that came that came up after the accidents and 737 pilot said oh it's just a runaway trim runaway stabilizer trim there's a procedure for that and just do the procedure and and you'll be fine well runaway stabilizer trim is one of the emergency procedures that is trained at infinitum right that's something that every 737 pilot is aware of because there are some conditions under which the trim motor always gets electric current and doesn't stop running that just happens occasionally not very often but occasionally and every pilot is primed to recognize the symptoms saying oh this is runaway runaway stabilizer and you turn off the electric motors for the stabilizer trim and trim manually and that'll work but if you look at what are the actual symptoms of runaway stabilizer it says uncommanded stabilizer trim movement occurs continuously and MCAS movement isn't continuously MCAS trim movement is more like the speed trim system which occurs intermittently and then stops and then trims again for a bit and then stops again so most pilots wouldn't recognize this as a runaway trim because the symptoms are very different the circumstances are different so i guess some pilots might have recognized that there's something going on with the trim that is not right and will have turned it off but some didn't even though they know they all know about runaway stabilizer and yeah that's the second file that i have so that's the sound the stick shaker makes on a Boeing 737 and now imagine flying with that sound all the while shaking the control column violently violently flying with that going on for an hour and that's what the crew on the previous flight did they flew the entire flight of about an hour with the stick shaker going i mean that's quite that's quite interesting because the stick shaker says your wing is about to stall right but on the other hand they knew they were flying level they were flying fast enough everything was fine their craft wasn't about to stall because it was going fast and right so from an aerodynamics perspective of course they could fly the airplane because they knew it was nowhere near a stall but still i think in most countries and most airlines they would have just turned around and landed again and saying the aircraft is broken please fix it something is wrong but yeah so the stick shakers are activated by the angle of attack vane on each side and but the sticks are mechanically coupled so both of them will shake with activation from either side so is it going to fly again it's still somewhat of an open question but i suspect that it will because it's it's hard to imagine that letting these 460 airplanes or some something like that that have been built sometimes sitting around on on employee parking lots like here just letting them be scrapped or whatever i don't know almost 5000 have been ordered as i said neither airlines nor Boeing will be happy but it's not quite clear it's not yet being certified again so it's still un-airworthy so there's another little thing certification issues with new Boeing aircraft reminded me of this have you ever seen that so battery exhaust which aircraft has a battery exhaust i mean what do you do with that does anybody know yeah of course some know yeah Boeing 787 Dreamliner less than two years after introduction or after entering to service actually had two major battery fires they have two big lithium ion batteries uh lithium lithium cobalt i think i'm not sure the one that burns the brightest really because they wanted the the energy density really and that wasn't available in other packages if they had used nickel cadmium batteries instead they would have been like 40 kilograms heavier for two batteries that's almost a passenger so yeah they were on board fires and if you ask pilots what's your worst fear of something happening in flight they'll say flight control failure and fire so you don't want to have a fire in the air absolutely not and one of the fires was actually in flight with passengers on board one was on the ground shortly after disembarking and the lithium ion batteries because they are unusual and novel features as it's called have special certification conditions because they are not covered by the original certification criteria and it says here safe cell temperatures and pressures must be maintained during any foreseeable condition and during any failure of the charging system not shown to be extremely improved extremely remote sorry and extremely remote is actually two orders of magnitude more frequent than extremely improbable extremely remote is only less than once every 10 million flight hours but I think the combined flight hours for the 787 at that time were I'm not quite sure maybe a few hundred thousand at most so and also happened two times that was not really not really fun and then it says no explosive for Texas toxic gases emitted as the result of any failure may accumulate in hazardous quantities within the airplane I think they've neatly solved the third point by putting the battery in a stainless steel box really thick walls maybe I don't know eight millimeters or something like that and piping them to this hole in the bottom of the aircraft so the gases cannot accumulate in the aircraft obviously so yes and with that I'm at the end of my talk and there's no I think quite some time for questions thank you extremely punctual I have to say thank you for this interesting talk we do have the opportunity for quite some questions and healthy discussion please come to the microphones that we have distributed through the hall and while you queue up behind them do we have a question from the internet already do you signal angel is your microphone working no yes do you think extensive software tests could have solved the situation software tests in this case perhaps yes although software tests are really a problematic thing because to test software to these extreme reliability is required you really have to test them for a very very very very long time indeed so to achieve some confidence say of 99% that a failure will not occur in say 10 million hours you'll have to test it for 45 million hours really and you have to test it with the exact conditions that will occur in flight and apparently nobody thought of an angle of attack failure angle of attack sensor failure so maybe testing wouldn't have done a lot in this case thank you microphone number four yes thank you for the talk i have a question concerning grounding so what is your view that the fa waited so long until they finally ground the aircraft week after i think the chinese started with grounding yes that's a good point and i think it's an absolute disgrace that they waited so long even after the first crash they made an internal study and it was reported in the news some some weeks ago and estimated that during the lifetime of the 737 max probably around 15 aircraft would crash so say every two to three years one of them would crash and they still didn't ground it and waited until four days after the second accident yes it's a shame really thank you microphone number seven please thank you for your talk i have a question regarding the design decision to only use one a away sensor so i've read that bowing used the mk system before on a military aircraft and that used both sensors so why was the decision made to downgrade yeah that's a good question i'm not aware of that military system if that was really exactly the same but if that's the case yes that makes it even stranger that they chose to use only one in this case yes thank you okay uh microphone number two please um yeah thank you for your talk um so how do you actually test these requirements in practice so how you determine in practice if something is likely to fail every 10 to the minus nine as opposed to every 10 to the minus eight no that's that's obviously practically completely impossible why you can't as i said if you want to have a reasonable confidence that it's really the error rate is really so low you'd have to test it for four and a half billion hours in operation which is just impossible um what instead is done there are some um industry standards for aviation that is do 178 currently in revision c and that says if you have software that if it fails may have consequences of this severity then you have to use these very strict very formal methods for developing the software like doing very strict and formal requirements analysis specification uh in a formal language preferably and um if possible and some some companies actually do that formally prove your source code correct and in some languages that can be done but it's it's very it's it's a lot of effort and um that's how this should be done and this software obviously should have been developed to the highest level according to do 178 which is level a and quite obviously it wasn't thank you signal angel please the next question from the internet um your talk focused mostly on encas but someone noted that the plane was actually designed for engines below the wings and already and the ng model so the one before already had problems with the wing mounts and engine mounts do you think there will be mechanical problems with the max two i'm not sure there were really mechanical problems there were aerodynamic problems and apparently well i'm sure they have tested the ng um to the same standards to the same certification standards because obviously there were aerodynamic changes even with the ng and the ng apparently still fulfilled the formal criteria of the certification there are some acceptable means of compliance and quite specific descriptions how you test these stick forces versus airspeed and as far as i know the ng just fulfilled them and the max just didn't so for the max something was was required although even the classic which basically had the same engines as the ng even the classic had uh some problems there and that's where the speed trim system was introduced and uh yeah so it has a similar system and actually the m-class is just another little algorithm in the computer that also does the speed trim system please stay seated and buckled up until we have reached our parking position uh no um we are still in the q and a phase please stay seated and please be quiet so we can enjoy all of this talk and uh if you have to have to leave then be super quiet right now it's way too loud in here uh please the next question from microphone number one so considering lessons learned from this accident has the f a a already changed the certification process or are they about to change it or what about other agencies worldwide the f a is probably going to move very slow and i'm not aware of any specific changes yet but i haven't looked into into too much detail in that other certification agencies works works somewhat different and at least the a asa in europe and the chinese authorities have already indicated that in this case they are not going to follow the f a a certification but going to do their own and until now it was usually the case that if the f a a certified the airplane everybody else in the world just took that certification and said what the f a it is probably fine and vice versa when the a asa certified a Boeing airplane then the f a a would also certified and that is probably changing now thank you microphone number three so uh hi uh thank you for this talk two questions please were you part of the official of the investigation or this your own analysis of the uh facts and the other one i heard something about the software being outsourced to india can you comment on that please the first one no this is my own private analysis i have been doing um accident analysis for a living for a while but not for any official agency but always for for private customers um and uh about outsourcing to india i'm not quite sure about that i've read something like that um what i've read is that it was um produced by honeywell i think maybe wrong about that but i think it was honeywell and um who the actual programmers were sitting if it's done properly according to the methodologies um prescribed by d o 178 and fulfilling all those requirements then where the programmers sit is actually not that important and um i don't want to write indian programmers and i think um if it's done according to specification and analyzed with static code analyzes and everything else um vis-a-vis the specification then that would also be fine i guess but the problem is not so much really in the implementation but in the design of the system in the architecture thank you microphone number five please um hello uh um i may got your presentation wrong but for me the real root cause of the problem is the competition and uh hide that line from the management uh so the question for you is is there any um suggestions from you that process could be i don't know maybe changed in order to um in order to um avoid the uh the box in the um in the software and have the mission political systems saved yeah so we don't normally just talk about the cause of the root cause but there are always several causes basically you can say depending on where you stop with the graph where is it uh where you stop with the graph all the leaves all the leaves in the graph are root causes and but i've stopped relatively early and not not done not gone into any more detail on that but yeah the the competition between albus and bowing obviously was a big factor in this and um i don't suppose you you suggest that we abolish competition in the market but what needs to be changed i think is the way certification is done and that requires the fAA reasserting its authority much more and that will probably require a lot more personnel but with the good engineering background and um maybe that would require the fAA paying better wages so i don't know because currently probably all the good engineers will go to bowing instead of the fAA but the fAA ideally needs engineering expertise and lots of it thank you the next question we hear from microphone number four hi thank you for the talk um i've heard that there is or i've heard i've read that there's a version of the 737 max 8 that did allow for a third a oa sensor to be present that served as a backup for either sensors but that this was a paid option and i have not found confirmation of this do you know anything about this no i'm not aware of that as a as a as a paid option um there was something about an optional feature that was called a safety feature but i can't exactly remember what that was maybe it was an angle of attack indicator in the cockpit that is available as an option i think for the 737 for for most models because the sensor is there anyway um as for a third a oa sensor i'd be surprised if that was an option because that is a major change and requires a major change to all the system layout then you'd need an additional a data inertial reference unit which is a big computer box in the aircraft of which there are only two and that would have taken a long long time in addition to develop so i'm skeptical about that third angle of attack sensor at least i've not heard of it thank you signal and do we have more from the internet please one quick one um if we need a quick one would you ever fly with a 737 max again if it was ever cleared again i was expecting that question and actually i don't have an answer yet for that and that maybe would depend on on how i see the f a and the asa doing the certification um i've seen some people saying that the 737 max should never be re-certified i think that it will be and um i look at it in some detail seeing how the f a develops and how the asa is handling it and then maybe yes great okay in that case we would take one more very short question from microphone number five do you know why the important a oa sensor failed to give the correct values there are some theories about that but i but i haven't investigated that in any more detail now there were some stories that in the case of the indonesian the line air that it was actually mounted or reassembled incorrectly um that would explain why there was a constant offset it may also have been somebody calculated that it was actually exactly if you look at the raw data that is being delivered on the bus there was exactly one flipped bit which is also a possibility but i i don't really know but there were some implications in the report maybe have to read that section again from the indonesian authorities about um substandard maintenance as it's euphemistically called okay we have two more minutes so i will take another question from microphone number one hey i would have expected that modern aircraft would have some plug physical plug hermetic one that would disconnect any automated system isn't something that exists in our plans today now and especially modern aircraft can't just disconnect the automatics because if you look at modern fly by wire aircraft there is no connection between the flight controls and the control surfaces there's only a computer and the flight controls that the pilots handle are only inputs to the computer and there's no direct connection that is true for every airbus since the a320 for every Boeing since the triple seven so the triple seven and the seven eight seven are totally 100 fly by wire well i think 95 percent because there's one control service that is directly connected one spoiler on each side but basically there's there's no way and so you have to make sure that the flight control software is developed to the highest possible standards because you can't turn it off because that's everything that's well let me put it this way on the fly by wire aircraft only the computer can control the flight so the flight control surfaces yeah so yeah just hope that it's good think about that when you next enter a plane and also please give a big round of applause for our speaker band Zika thank you


Oh my god, 2 rules. 1. No cheating, hacking or mods. They give an unfair advantage while we have mods. 2. No extremely offensive language.  I just broke the YouTube rules. 3. No grieving. Don't touch what is not yours. Oh, Ethan. I broke the rule again. I'm sorry. 4. No spam.


Well, ladies and gentlemen, we'll get started. It's almost six o'clock. Now, I've heard some of the rumors today about who the mystery guest might be. And I have to disabuse you of the idea that it was either Ron Paul or Tom Woods. I know we both heard both of those gentlemen speak many, many times. And this gentleman is, in many ways, more interesting, although perhaps not as well known to all of you. And he was originally going to be here in person, unfortunately, being a business person and a very busy entrepreneur. Things changed. And he will instead join us on a miracle known as Skype. Ladies and gentlemen, Patrick Byrne, CEO and founder of Overstock.com. Now, Patrick, we're not going to embarrass you, but we are going to read a little bit of a biographical sketch for some of the young people in our audience who might not be as familiar with you as we are. As I mentioned, he's both the chairman and founder of a wildly successful tech company known as Overstock.com. But he is in no way, shape, or form your average tech entrepreneur. He doesn't come from a Silicon Valley background or a Wharton Harvard MBA-type background, although he does have whole degrees from Dartmouth, from Cambridge, and just this little PhD thing from Stanford. But instead of studying Econ or obtaining an MBA, he studied philosophy and mathematics. He has a varied interest. He's very much a Renaissance man. He is involved in martial arts and is at one time, I don't know if still, involved with boxing, very interested in Eastern philosophy. And in his business life, he has really applied Austrian economics across the board, and in particular, some of Hayek's thoughts on the use of knowledge. And he gave a terrific talk at our research conference earlier this year in March on how he applied Hayek's understanding of what we don't understand in his own life and work. One of the most interesting things about Patrick is somehow, in a fair time, he runs a website called Deep Capture. And on this website, he effectively operates as an investigative journalist looking into some of the less salutary practices of Wall Street. And one of the most interesting things about Patrick Burns, from my perspective, is his audacious plan and idea behind using blockchain technology to completely revolutionize capital markets and the way you and I invest in stock or bonds and the way companies raise money by using blockchain technology to eliminate the middleman and allow peer-to-peer lending, in effect, which would be an upending of the capital markets to put it mildly. So with that, Patrick agreed to talk to us very briefly. And then I hope that we all have some great questions for him. So again, Patrick, thanks so much for joining us. What an honor. What an overage generous introduction. I hope you can forgive me for not being with you in person. I'm up my 83-year-old mother and lives in New Hampshire. And I wanted to come see her. She was widowed two years ago. So I had to be here with her today. It's truly a great honor to speak to you. I cannot, and I really do want to leave almost this whole 45 minutes for questions. I can give you a lecture on philosophy, but you're at the Mises Institute. You're getting the lectures already, and you're getting the truth already. Licent, it's not about giving her orders. It's also about information costs. The costs of centralizing information are higher than people understand until they have worked in actual organizations that have missions like fighting a war or making a profit. And what you find is that the Dilbert cartoons are quite correct. And if there's one book I can recommend beyond all the books you're being exposed to there, it is a book by Thomas Sowell. Actually, two books, A Conflict of Visions, and another book called The Knowledge and Decisions. Thomas Sowell was himself extremely influenced by a 1943 article by Friedrich Hayek called The Use of Knowledge in Society, which also influenced me. And when you understand the thoughts in there, you realize that the costs of centralizing information are much higher than people understand.  And that pretty much describes the way collectivists want to organize the world. They don't want there to be peer-to-peer consent. They think they can save a bunch of time and costs if everything can be centralized. And you can get your mind over that hurdle. And really, the people who got it all were Hayek, and especially this 1943 article by Hayek, The Use of Knowledge in Society. And that and Sowell have driven the world view, whether we're talking about business or social matter. Life is all about avoiding the costs of centralizing information to some higher power who then spits orders out. So in a nutshell, that's my philosophy. And I'd love to talk about anything from business to politics to the crypto revolution is basically the whole card for we liberals. We've been fighting these guys for 500 years. We finally got the bomb. And the bomb is the blockchain, the crypto technology that underlies Bitcoin and other things that are going to be that are being built. And I'm building some of them. You're going to see in, I'll put it this way, unlike Al Gore, I was not around quite for the beginning of the internet. But I was around close to the beginning. And we knew that the internet was going to be like the Gutenberg Bible. But those of us who are involved in Bitcoin already and this crypto revolution see this as bigger than the internet. And it's going to be more disruptive internet itself ones. I'll stop there and take questions. I think I see a new rock. Is that you, Mr. Ryup? Hello, nice to see you again, sir. Thank you for inviting me. And I'd love to take questions on any subject. Well, Patrick, since we've had a lot of academic talk this week, why don't we start with a talk with a question from me that's a little less academic and a little more real world for our students here. Can understanding Austrian economics make one rich? Well, you know, but it has sure been a big help. This has certainly been a big help. Because it will keep you from making bad decisions. Austrian economics can help you because it will keep you from making big mistakes. It is what it will do. And those are mistakes dealing with how you organize companies, how you organize work in a company. OK, with that, Thao has a microphone so he can go around. It's very important that we use the mic so that Mr. Byrne can hear us. So do we have an opening question for him? We've got some hands in the air. This gentleman in the red tie. Good evening, sir. What are some of your concerns regarding Wall Street then? Well, my biggest concern for 10 years has been something called regulatory capture, which is based on an article from 1971 by George Stigler. And the truth is you can tell history of this country as a history of competition between two power centers, Wall Street and Washington. And what has happened is Wall Street has gotten Washington under its thumb. Milton Friedman said, if socialism comes to this country, it's not going to come in from the left.  Well, that's happened. That's what's happened. And these guys are practicing something called a control fraud. And every seven or eight years, they have to be bailed out. Happened in 1981, happened in 1987, 88. Happened in 1997 with Russia. Happened in 2001. Happened in 2008. And one way or another, they're getting bailed out on your credit card. And that a control fraud, when you hire me to run something and you hire me to run your sandwich shop and I loot the sandwich shop, and then it bankrupt, and I just turn it back over to you. Well, Wall Street historically had a put where basically about half the money that half the profits that get generated on Wall Street get drained out through bonuses.  And if you lose, I'll pick up the cost. And if you win, I'll split the profits with you. Are you going to go and play the dollar slot machines or are you going to play $30,000 a hand backer app?  Well, the same principle applies on Wall Street. Given that society has given them this right to take risks and when they win, they keep half. And when they lose, you pick up on your credit card, they're just doing what's rational. And the way to take risk out of the system is to take away that social backstop that Wall Street enjoys. And everything that happened in 2008 was the order of course. It was just the order of course. Something bigger and uglier is coming. And all they're doing is reflating a bubble to delay it. There's been nothing fixed. Hi, my name is David. You have a bachelor's in Asian studies. What do you feel the East is doing better than the West? And what are we getting wrong that they are getting right? Great question. That's maybe one of the best questions I think I've ever gotten in a talk. No, I think that life, the two propellers on the ship of civilization are how we form human capital and how we marry human capital and financial capital. How you form human capital is education. The two civilizations that have that the best are Judaism and Confucianism. And the reason that those civilizations have been so successful and are so successful when they come here is because of their commitment to formation of human capital. And in the case of Judaism, there is one very good explanation. Well, there's a lot to explain why. But especially if you're being run around Europe for centuries, you don't want to invest in anything that the Cossacks can take away from you. You want to, well, if you become a landowner, if you become a factory owner or something, they can take it away from you.  So there's been this wonderful tradition. The Judaic tradition is education is such a part of it. The same is true of Confucianism. And they are so serious about education that I think that is their great advantage. It's not their social organization. It's not the Communist Party of China. It's none of that. It's that they are very good at formation of human capital. And what finally happened in the last two decades is the government got out of the way. And so they're having this great boom. By the way, just as a business student, we are used to hear a lot of theory and how to run a business. But I believe I learned more, listened to you for 20 minutes when you had your first talk at Mises and how you do with your employees and how they have a voice in your business. I wonder if you could explain a little bit, like again, how you make your decisions and how you listen, because most of the time, most of the business is more like a dictatorship or more of 51% want this. This is what we're going to do. And I think you have pretty much the perfect model. Thank you. I know the last thing I want to be is the Dilbert manager who sits in the corner and thinks he has all the answers.  So my job is building institutions that lets that distributed intelligence express itself. So I have built various mechanisms that let innovation come from the front line, from customer agents, from people in marketing and so forth. The early days of the company, frankly, I did have to have the good ideas. I had to do the business plan. I had to do a lot of work. Now I'm like a constitutionalist. I just design the institutions that let the distributed knowledge that's latent throughout the 2000 colleagues get expressed so they can have the good ideas. They can comment and vote on each other's ideas. The better ideas bubble up through these systems. That's what sets the direction of the company. By and large, I don't have to even work anymore. I'm like a constitutional monarch. I get to watch, I just came back weeks surfing in Malibu. I mean, I get to, for the first time I'm actually enjoying my life in about 15 years because these terrific mechanisms are now in place for people to innovate without me. It's not me telling them what to do. It's them bubbling up these ideas and those very formal systems within the company now that let them do that and promote ideas. We're basically crowdsourcing the innovation. We built a system to crowdsource innovation. And believe me, they are much collectively, the wisdom of crowds is far smarter, certainly than I'm ever going to be and more consistently intelligent than anybody I know. It still needs, at this point, a monarch to sit in the back and once in a while say, you know, I think you got that wrong. I'm going to veto you. And I know something you don't. And it's just the nature of various things that I sometimes do know things that the mass don't. Because for legal reasons or whatever, they can't be told. So once in a while, I have to nudge my society of 2000 colleagues. But for the most part, I can now just let it run. And I just have to give them what they need and they get smarter and smarter and do more and more. Hi there, could you give a little more detail as to one of those mechanisms inside your company and how it works and how that differs from mechanisms in a more orthodox company and how they use information internally? Yes, well, there's a field that evolved in the last seven years called Enterprise 2.0. I highly suggest you study it. And there's a book called Enterprise 2.0. It's also just called E2.0. And the idea is online technology that lets people keep an organization flat without hierarchy. Because when you get hierarchy, you get Dilbert managers. Flat and people collaborate through technology. Very simple example is Wikipedia. But there are other, if you wanna get sort of on the leading edge of something that has not taken over America, corporate America yet, but will, I really suggest you write this down. Look into a field called idea management, idea management. And it is online systems that let people propose, it's, think of it as a super sophisticated suggestion box. But it goes beyond suggestions. People, a suggestion box, people write their suggestions and it goes into a box and the pointy hair Dilbert manager reads them and decides what to do. That's not idea management. Idea management is people are making suggestions but they're seeing each other's suggestions. And they're working to develop each other's suggestions like you would work together on a wiki and people vote each other's suggestions up and down. And then you can even, so suppose 200 ideas get proposed over a six month period through this system, I let the crowd figure out, let's say the best 10. And then I take those 10 and I say, okay, now you the crowd, you rank these, you tell me which are best and which we should do first and which I should put capital in. And they do that. Well, I'll give you another example. So can you hear me okay? Oh, by the way, it seems to be a better connection. Yes, we can hear you great. For some reason, when I move my mouse, there's probably some propeller head in the crowd who can explain why, but when I move my mouse constantly it keeps you folks from freezing. Here's another example. At the end of last year, I knew I wanted to give my colleagues a $4 million raise. The base pay was $80 million. I say, okay, here's a $4 million raise, how do you want it? People proposed about 20 years, improve our 401k from 50% matching to 100% matching. Oh, we want bigger bonuses or oh, we want just raises in the pay or oh, we want daycare, et cetera, et cetera. So they proposed 20 ideas. I gave them to the accounting department to price out what each one would cost. Then we came okay to improve the 401k matching cost $830,000. And this is that we put a price tag on each one. Then I gave them back to the 2,000 employee colleagues and I said, you vote on what you want, you rank them. So then they ranked them and we ended up with a social rank based on all the individual ranks and their voting. We ended up with a collective rank and then we just went down from the top. Okay, this one costs $300,000, this is $800,000. Until we got to $4 million, then I cut it off. I said, okay, that's what we're gonna do this year. Now, what do I care? It's the same $4 million to me, but they got to choose and I count on them to know how do you spend that $4 million to make them in aggregate best off, to most improve their wellbeing. So there's more and more decisions like that that are being made in our company, not by me, but by the people in general. And so again, what is the philosophy underlying this all? All comes from Hayek, all comes from Mises. The idea that the knowledge, the true knowledge is out there, is out there among my colleagues. It's not with me. Innovation, again, these examples of innovation. There's only so many different projects we can do in a year. Let them tell me, let them propose projects I've got the staff who can figure out what each one will cost and so on and so forth, but truth is, I don't know which is gonna work. I don't know what projects are gonna work and what are not. And so, I mean, I have my own guesses, and like, but I have found when I turn that over to the group, the result is more intelligent than the executive team can do. It's more intelligent that I can do by myself. And like I say, I keep the constitutional right to Trump when I need to Trump, but I would say that 95% of that decision-making is now being pushed out to the crowd. And while that may sound collectivist to you, it's not collective. It's not collectivist in any sense. It's very much, in my view, a proof of this concept of Hayek and Mises and Thomas Sowell, that the real information doesn't sit in my corner. It doesn't sit with one small group of elites. It is scattered, it's latent knowledge that is scattered throughout the system. And you have to have mechanisms. You have to think of mechanisms that can liberate that rather than think you're gonna be the smartest guy in the corner who knows more than everybody. Hello. My question is, what if you were in the opposite shoes of what you're in now? Say you were a middle manager or not an executive and you want to drive some of these change ideas that you have had success implementing. How would you do so? I would understand really that the people, if I'm a middle manager, I've got some set of people who report to me. And I would think very much in terms of not being authoritarian with them, but how to have the relationships and to lead them in a way that their good ideas can be useful, can be useful to the comfort, can be, how do I liberate the good ideas of the people who report to me? And I can tell you, this is a really key point. In the new world, everything is organized in terms of teams. It's all about teams. Google, Apple, Amazon, everybody works now. The old image of a corporation, of a bunch of chimneys with bosses at the top is not how leading edge corporations are organized anymore, because we suffer this problem of central planning. What these companies do is they organize their work as much as possible into teams. And the teams, they call them at Google, I think they call them pizza teams, because you don't want a team that's bigger, a large pizza can serve. The reason is that once you get, and that's about six people, once you get more than six people on a team, you get both free writing behavior, and you get these problems of the costs of centralizing information. So if you wanna be prepared to work in entrepreneurial leading edge companies, you gotta understand that your work is going to be organized in this way. And you wanna get on those teams. And the truth is these companies, yes, they always have the part of the company that's the old fashioned, normal way of organization, but the leading edge, the innovation is always done within these teams, always. Everybody has gone to this model in Silicon Valley, because it's so much better. What that means is the skill set that is in shortest demand that people like me are always looking for are people who can lead a small team.  The first step in leading, being able to be a good team leader is being able to be a good team member. You're not able to be a good team member, you won't be a good team leader. And so there's a set of things that make you a good team member.  They're things like showing up on time and doing what you say you're going to do and always doing your share of the work and a little bit more and things like that. And believe me, that is what, hey, that's in quite short supply.  Part of his character, it's in short supply. Secondly, it's what will make you stand out. It's what will make you stand out is having that set of characteristics. Is what makes you stand out, lets you be a good team member and lets you get selected to be a good team leader. And once you're a good team leader, you never forget the people who got you there and you understand that it's the people under you. It's the people who report to you that you're supposed to be leading actually are the ones with the knowledge and it's looking to them. If you're trying to figure it all out by yourself and believe me, there are times in my career where I've had to figure it all out by myself. Life's tough. You want, so it's about being a good team leader and that comes with being a good team member and being able to listen and look for ideas among the people you work with. I was really hoping you could briefly elaborate for us some of the technical details of how the blockchain can replace Wall Street and the nature of the obstacles that are in the way of this 21st century revolution in capital markets. That's a great question. The way I think of it, and this is why the blockchain is, I'm not even sure in our movement and our pro-freedom movement, people are really understanding at the significance of the blockchain. There was, if you Google my name and Wired magazine, you'll see a number of articles where I explain this, but the real article you should look at just came out a few weeks ago and it's in Politico. So if you Google my name and Politico, you will see this article. I'm just about three or four weeks old. I'm told it was being read and talked about all over Capitol Hill that there were senators walking around quoting this article to each other for a couple of days. Here's the key and this journalist, first journalist outside of Wired who got the philosophical significance. So here's the point. For 6,000 years, we've always faced this choice. If we wanna have consensual exchange, there's always a question of trust. Trust. If I want to sell you my camel and you're gonna give me a gold coin, I have to know, can I trust that you did not debase this coin? So they're a business model. A business model of whoever has the monopoly on violence in some area can monetize that by saying I will print gold, I will mint gold coins and put my face on them. And if anybody tries to debase that coin, I kill them. That's just a business model. It's a way to monopoly, it's a way to monetize my monopoly on violence. Now we happen to call that business model a government. Now it's just a business model. There's other, so the point is, do we have consensual exchange, or do we pick some central institution that you and I don't need to trust each other? We all just need to trust it. And if we each just trust it, it facilitates our exchange.  You don't know whether to trust me or not.  There's one office that keeps all these pieces of paper and that's how we control things like the transfer of land. Again, the central institution has created to solve this problem of trust. On Wall Street, when you see a movie, you know that behind the scenes, there were grips and gaffers and lighters, little people who do the lighting. You're not aware of them. You're just watching a movie.  You know that there's something going on behind the scenes and you almost certainly don't know what, but you assume there's some plumbing that is making all that work. That plumbing works a lot differently than you think it does. It turns out there are central insta, there's a central institutions that got created in the 1970s, all with allegedly the purpose of of accomplishing that that's called settlement and accomplishing settlement. What happened is, even when I was a child, if you went to Wall Street, there were people called stock joggers who were running around Wall Street with sacks of stock, so as sacks of certificates, so as people traded, as the brokers traded, there were these guys on bicycles who ran up and down Wall Street with sacks of stock certificates. In the 1960s, those, the guys on, the volume quadrupled in the 1960s and the guys on bicycles couldn't keep up anymore. So they created a system that you can't believe. It's called, and I won't go into the details. If you want the details, look it up on Decapture or some of my other talks. They created some centralized counterparty clearing and what it means is throughout the stock settlement system, throughout the capital markets, there is fractional reserve banking going on without a reserve requirement. That's what happened and it gets very, very technical to explain over a Skype connection. But what it means is as of the, as of 2008, it was quite possible that Merrill Lynch was sending you a certain, a statement at the end of the month saying you own 100 shares of IBM and they were sending someone else a statement saying you own 100 shares of someone else's statement but back at Merrill Lynch, they only had 100 shares. They were telling five different people they owned it. On most days, that won't make a difference but deep down, that's a big game of fractional reserve banking. And what it really, what was really happening was there are ways that the system was getting looted, just absolutely looted. And everything was being made fungible and so forth and the system was being looted. And just like if somebody practiced fractional reserve banking without telling anyone and you're depositing your goal, someone could loop that vault for a long time before the vault, before people start realizing it. That happens whenever you have central institutions, I think you get ways that things that can be looted but with the blockchain, this is why the blockchain is sort of maybe the most revolutionary thing in 5,000 years because for the first time in our history we can have consensual peer-to-peer exchange where trust is not an issue. So think about that, for 5,000 or 6,000 years we've always had to have central institutions to facilitate our exchange because we can't trust each other. I mean, we can trust each other, but we don't need those central institutions anymore.  There's a bunch of offices of government that are really deep down just filling that business model and suddenly we can disrupt it. And what's amazing is we don't need anyone's permission. We really don't need anyone's permission, it's so crazy. And I swear the first mainstream journalist who finally got this was just a few weeks ago in Politico.com and he wrote, forget Bitcoin, this is going to disrupt history and he wasn't exaggerating. This thing is gonna disrupt history and how I see it is like we've been in a fight, the people who are about consent, which are liberals, us, we've been in a fight with authoritarianism, one flavor or another for 500 years, whether the authoritarianism be socialism or fascism or social, social, social justiceism or what I call social fascism or so on and so forth. We've been in this fight and in this fight, our side just got the bomb. We have the bomb, we now have a technology that lets us have consensual exchange, not needing central institutions to keep everything honest. And since I understand why central institutions have been created for centuries because you actually do need in many kinds of exchange, you do need some central institution to make sure people when they transfer a piece to land, they really do own the piece of land and such, all that can be reduced now to the blockchain. I've been out in a company in Silicon Valley on and off for six months that have 160 projects on a big board about what they're going to disrupt. And so Bitcoin is just the beginning. Bitcoin disrupts fraction reserve banking and central banking. How about land and tidal land? We can replace all the land titling systems in the world with an open free blockchain based public ledger, a public ledger of land that control, that governs land transfer. Just that function alone, you know how much government is actually involved around the world in that function? There's a wonderful book by Hernando De Soto called The Mystery of Capital, which is about, he believes capital really forms once you have good land titling. And he documents in places like Peru and Haiti for people to get title. They may have been living generations on one piece of land. And yet if they try to get a title to it, it takes them 20 years and 200 stamps from 200 petty bureaucrats along the way.  So it takes in Haiti, it takes like 35 years to get title to a piece of land that your great grandfather may have lived on and your grandfather and your father and you, still takes 35 years and 200 little payoffs. Well, you can do all that now in the blockchain. You can do all kinds of things on Wall Street now that are done by great big corporations that are all extracting a little rent that's along the way can be done now for free within the blockchain. And that's what I'm focusing on. And there's 160 of these functions that have been thought of that can be disrupted. And like I say, some of those functions are being done now by people in three piece suits in Wall Street. Some of those functions are being done by guys in two piece suits in Washington. Some of those functions are being done by guys in black robes behind benches. Some of those functions are being done by guys with badges and guns. Suddenly all these, all these, the work of these central institutions that are ultimately about enforcing the rules of our consensual exchange can be turned into buggy with manufacturers. We don't need them. And as I said in this political.com article, we've got to remember that these central institutions didn't come out of a burning bush. They're not things, I mean, we tend to reify. They need to think, well, it's gotta be or not we, but people often think that it has to be that way. Doesn't have to be that. They're just things we created. We don't work for them. They want us to think we work for them. We created them in order for us to be able to do this, this exchange we want to do. Suddenly we don't need them anymore. And you know what? In the last month or two, they got the joke. They have gotten the joke. The CEO of J.P. Morgan, a real schmuck named Jamie Dimon. He wrote a letter to shareholders in April that basically freaked out.  Since he did that, everybody on Wall Street in the last three months, every day it seems there's another announcement of another corporation of UBS, of NASDAQ, of New York Stock Exchange, of Credit Suisse, of J.P. Morgan, of Morgan Stanley, et cetera, et cetera, et cetera. Everybody's saying, oh my gosh, we're forming our own group to study this and get involved in this and stuff. Well, a year and a half ago, we started on it. We've been very aggressive about protecting our intellectual property, about developing and patenting. And what people are learning really in the last few weeks is how far ahead we are. But anyway, the point is I'm not doing this because I want to create a new monopoly. I want to create a bomb that through which we can use to blow up. These central institutions, you know, Wall Street collects 40% of the profits made in corporate America. It's made on Wall Street. We used to laugh at the Soviet Union because the Soviet Union had 20% of their people involved in planning. 20% of the workforce was involved in planning what the other 80% did. Well, we're now paying 40% of all the profits of corporate America are going to the guys who move the capital around. And believe me, they don't deserve anything like that. They don't know what they're doing. And we're able to liberate all that, the significance of this invention. Like I said, I was around almost for the beginning of the internet. We knew the internet was going to be like the Gutenberg Bible. It was going to be so profound. But I can tell you the people who are involved in this crypto revolution all get, this is going to be more politically significant than the internet itself. Well, we are out of time. How to big round of applause and thank you for Patrick Berg. Thank you.