Archives For Economics

Cryptocurrencies Are SO Money

September 18, 2017

The purpose of this post is to explain in simple terms why cryptocurrencies are not a currency, not an asset, not a store of value, and not an investment. With apologies to the guys from the film Swingers, cryptocurrencies are (so) money.

What is Money?

Money was invented to be a physical (and now digital) representation of productive energy. Whether it is the energy from sun, soil, water and toil used to grow an ear of corn, or the labor and resources expended in painting your house, the energy spent practicing and performing music, or getting your CPA so that you can attest to a client’s properly reported financial statements, it’s all derived from energy and it all has a dynamic value when measured in terms of money. Blockchain miners might agree with that run-on sentence. Is there a difference between currency and money? With regard to cryptocurrencies, that may be the crux of the problem.

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I feel that in 2016 we find ourselves on the precipice of so many major technology-driven transformations that it was impossible for someone like myself not to be overly self-indulgent in better understanding the many trends and their driving forces. If you appreciate the magnitude of what’s coming, you’ll understand I chose the term ‘precipice’ for good reason. Life in 10 to 20 years will be quite different than it is now. Though it may seem to some in 2025 0r 2035 that the evolution was gradual, the impact will probably be lumpy to many.

As has been the case with previous tech driven change, there will be positive and negative impacts, but I believe that the impacts will be felt more soundly by wide swaths of the population than in prior times. Imagine what life will be like the day after cancer is cured. Imagine how many drivers will lose their profession once self-driving vehicles become the norm. Imagine how good you will feel when a high performance pill is taken that has been personalized to your genetic makeup. Imagine the financial markets when the world turns to the bitcoin currency standard. Imagine the perfect prime rib steak being grown in a lab without the collateral damage of bovine methane that contributes to global warming. Imagine the townspeople arriving with their pitchforks as described by Nick Hanauer if economic disparity is left to grow unmanaged. Imagine being able to solve almost any problem perfectly by buying some cheap AI over the web. Then imagine the person who you used to pay to solve that problem wondering what they are going to do for income and how they will pay off the loans on their PHD.

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English: The monk Samten who came to Samye Lin... English: The Tibetan monk Samten who came to Samye Ling with Sherab Palden Beru around 1967. (Photo credit: Wikipedia)

This blog post is the third of a four-part series on the Hotel California Scenario for future social, local and mobile media, apps, platforms, and solutions (SOLOMO). In the first post, I likened lyrics from The Eagles Hotel California to a future SOLOMO scenario where the User is the Interface, The World is the Computer, and the Situation is the Network. The second post suggested that it will be increasingly possible to do an “end-around” your smartphone passcode lock to access the sophisticated, powerful and user-friendly data mining that play a central role in the highly personalized experience we are coming to expect. This third post explores legalities and practicalities of privacy rights, emerging use cases, and possible outcomes. I am not an attorney, nor consider myself an expert on digital privacy, but I can read the tea leaves on where we are headed.

Can Anyone Keep Up with Privacy TOS?

The companies creating what I am calling the Hotel California future want to provide you with offerings that you will pay for because they improve lives and business performance. There will be other less obvious costs as well, highlighted ahead.

New SOLOMO product introduction is rampant and adoption is rapid. Generally, this indicates that no one wants to be labeled a Luddite, and expectations are high that new technology delivers advantages. In this type of insatiable market setting, who has time to read every line of a Terms of Service (TOS) document, or to recheck boxes every time privacy rules change?

In the last post, I covered how data mining will be done regardless of passwords and passcodes. NetFlix just succeeded in changing a law to allow sharing of your viewing history on social media. This means, figuratively for now, that your television can watch and report on you, and most people do not even own connected TV’s yet.  There appears to be some sort of after the fact opt-in clause that is unclear to me, however, it must be renewed every 2 years.  Is the renewal of your privacy rights on everything from robocalls to social media platforms to television to perhaps offline shopping eavesdropping really going to be programmed into everyone’s to do lists?

Moreover, if you download an app that you only use once and then shelve with the other 100 apps, don’t be surprised if the TOS you agreed to when downloading the app allows continued data mining and/or rights to your data.  Repeatedly forgoing these rights, whether through the TOS or expiration of opt-ins, is a cost of your new free service or inexpensive app.

The free and freemium service platforms and apps that are so helpful to us can also require approving lengthy CYA terms of service so protective that you’d need a team of lawyers to distinguish the egregious from the simply liberal. Of course, a quick policy change can turn what is the simply liberal today into the egregious tomorrow.  At some point, regressive analytics turned into predictive analytics and that will soon give way to persuasive analytics – how do we get you to buy a product you would not ordinarily try, or go somewhere you would not ordinarily go?  This has been a core goal of any marketing for decades, but the manners in which it will be done are changing rapidly. For example, which friends can we enlist, knowingly or otherwise, to persuade you using new forms of digital multi-level marketing? Does anyone really think that last month’s Instagram policy over-reach on their rights to market using your photos will never be repeated by another friendly startup with an innocuous cartoon logo? Changing policies that affect how others view you are another cost of using free platforms.

Today’s Evolving Models of SOLOMO Data Capture

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Piers Morgan at CES 2011. Piers Morgan at CES 2011. (Photo credit: Wikipedia)[/caption]

Due to their importance, I’m dedicating this second blog post to Sandy Hook related issues, with the hopes that readers act locally. After this, I’ll re-focus on technology.

Most nights this week I’ve been glued to my TV watching Piers Morgan on CNN. Tonight he said he was surprised people don’t publicly debate gun issues. He has expressed some passionate views on the gun control issue, and has gotten some passionate replies from the gun rights side of the issue. I believe that both sides are well-intentioned. In my opinion, this has been a classic example of two parties with conflicting views talking past each other, intensified by emotions that are understandable given recent events.  The key to understanding both sides comes from analyzing their arguments. This blog post is meant to help readers consider the differences between Means and Motivation, and how the focus on Prevention is crowding out a seriously needed discussion of Protection. Essentially, I think both sides are right about what they disagree on, and both sides are wrong about what they agree on.

If an argument goes on for weeks, months and years, like the gun control argument, it is probably an unwinnable argument. In my opinion, both sides have been talking past each other on CNN’s Piers Morgan show exactly because they are engaging in an unwinnable argument.  Let me explain what I mean when I say both sides are right about what they disagree upon, and both sides are wrong about what they appear to agree on.

Piers Morgan argues about Means. His argument is that having 300 Million firearms in circulation in the US has led to all of these killings.  Piers argues that without all of these guns and rifles, we would have far fewer killings because madmen would not have the means. He is right.

The pro-gun side argues about Motivation. Their argument is that an individual who commits such heinous acts is one of countless mentally unstable people watching violent movies, playing violent video games, and if the maniacs who are capable of these atrocities were identified, treated, and/or nullified ahead of time, we would eliminate the motivation and have far fewer killings.  So, the last thing they want is to not be able to protect them selves when faced with such a madman.  They are also right.

So, night after night, I watch both sides continue to argue past each other that two different things are the most important, Means vs. Motivation. And, they are both right about what they disagree on. The marriage of both Means and Motivation is what results in these tragedies; both elements are involved. However, I fear they are probably wrong about the underlying premise that they agree on, and that is that following either of their recommended courses of action will ‘PREVENT’ another tragedy.

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Classroom layout Classroom layout (Photo credit: Penny Coutas)[/caption]
This has been the season of Sandy sadness.  First a hurricane levels the Jersey Shore and devastates surrounding areas, and now the tragedy that occurred in Sandy Hook, CT devastates us all.

This is a sensitive time that brings up a number of sensitive issues including mental illness, the desensitization of youth through ever more realistic violent films and digital games that reward the player for more violence, our mainstream news practices, the propensity for copycat criminals, the right to free expression and of course the right to bear arms and how the arming of America has led to so many more gun injuries and killings in the US versus other advanced nations. If I stated a position and an opinion on any of the above, they would be largely uninformed.  However, I’ll weigh in with a possible solution.

We all know it will take months and years to take a step back to analyze root causes and recommend productive action and pass new legislation.  In the meantime, with so many millions of firearms in circulation, the notion that your children are safe in schools is a fallacy. All of this adds up to an impossible situation, where we can sadly expect to see more incidents while the powers that be work through all of these and more issues.  One thing that should be extremely clear to a lot of us is that we cannot wait to better protect kids in school and provide them with new ways to evacuate what can unexpectedly turn a great learning environment into a war zone nightmare.  Recall what happened when IED’s were rampantly wounding our soldiers.  Soldiers took it upon themselves to begin welding donated armor to the bottom of vehicles deployed in the Middle East. They did not wait for congressional approvals and new budgets to catch up because lives were at risk. In my opinion, the entrepreneurial ecosystem can do this as well and help define and solve the school safety problem.

The U.S. is a country of entrepreneurs. Entrepreneurs are uniquely qualified to solve problems quickly. They turn negatives into positives and see opportunity where others see problems. Entrepreneurs are action-oriented doers. While all of these issues are being discussed in Washington, I’d like to call on any entrepreneurs that read this to tweet or re-post an entrepreneur challenge to protect kids in our schools. We have the power of crowdsourcing, the power of networks and fully vested interests in coming up with ideas to protect kids in schools.  We have experience creating business models, getting them funded and implemented. There’s nothing wrong if someone makes a business out of this, as profit-generating efforts are self-sustaining.  The startup ecosystem can drive change, and here are some ideas to get started.

  • Crowdsource solutions
    • It would be great to have a web developer create a “Grand Central Station” for ideas from diverse experts, for donor commitments, state by state feedback, and progress updates to channel the solutions.
  • Commit capital
    • It would be great to see the capital folks, angels, venture capital and private equity, offer no strings grants to start companies throughout the states that focus on this problem.
  • Involve industry
    • It would be great for some security manufacturers and consultants to donate time and materials to solving the problem.
  • Think locally
    •  It would be great if local tradespeople who donated their weekend work installing systems could later write off the donated time on their taxes.
  • Consult Security Experts
    • There must be thousands of veterans throughout the US who can add value to the security problem after creating green zones and operating in dangerous environments
  • Consult Psychiatric Experts
    • There must be hundreds of psychologists that can add value as to how solutions can be implemented in a way that is interpreted as a positive by schoolchildren and teachers
  • Involve Teachers
    • Self-explanatory

In the end, all that matters is that the problem of kids’ safety in schools is solved rapidly, and without having to wait for all sides to debate and negotiate the issues.  The goal might be to arrive at a handful of standard solutions that can be authorized and implemented locally.

Let’s get the brainstorm going.

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English: Jack Dorsey and Barack Obama at Twitt... English: Jack Dorsey and Barack Obama at Twitter Town Hall in July 2011 (Photo credit: Wikipedia)[/caption]

This is the second part of a 2 part blog on evolving government power.  The first was entitled “Why Tax Rates Must Rise On The Top 2%”

What has already changed regarding the essence of power vis a vis changing media? The ability to consolidate popular power via ownership of major media and traditional forms of power is continuously waning, especially within key growing segments of the electorate like busy Moms, Hispanics, African-Americans, and of course, youth. Anyone with a blog, a Twitter and Facebook account or similar social media, can broadcast and promote ideas one to everyone, globally, instantaneously at almost no cost. Moreover, adoption past the chasm is bringing us to a “tipping point” of personalized anytime anywhere any form media as the preferred means of receiving mass communication. Witness, that the current administration has recently asked us to tweet to hashtag #my2k in order to force the opposition’s hand in lowering tax rates for 98% of Americans. They’ve begun to take the power of social media past the election, and into the governing. It is clear that news and opinion is being digested differently, and given the relative costs of the web versus cable TV we can expect to see more media channel substitution in coming years.  Once Apple shows us how it has “cracked the code” on TV, we may well see a spike in substitution that shifts our attention for a decade or more.

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Members of Congress raise their hands Members of Congress raise their hands (Photo credit: @mjb)[/caption]

I spent this morning watching the Sunday morning network TV pundits discuss tax pledges and the fiscal cliff that promises to plunge the US in another recession.  This would have been a colossal waste of time if that cliff did not have such serious consequences. This is the first part of a 2 part blog post. The second will deal with how New Media’s popularity in emerging demographic voting blocks is changing the balance of political power. Without taking a position on who is right in the US tax policy battle (it would not matter if I did) the tax rate on the top 2% must increase. Here is why.

I Pledge Allegiance, To A Policy

Schoolchildren and government officials routinely pledge allegiance to the flag of the USA, and to the Republic… When a congressman takes office, he/she also takes a pledge to fulfill the duties of the office. These pledges are traditional methods to publicly proclaim and personally acknowledge intentions.  Until this past election, Congressmen always pledged on a Bible to ensure God was also aware of their pledge. The problem with pledging allegiance to the flag or to the duties of an office arises when these are thought by the pledger to conflict with a previous pledge.

We elect people to represent us.  We don’t elect policies.  The advantage to electing people is that we are placing confidence in more than a set of policy beliefs. We are placing our confidence in the character and intellectual capabilities of an individual who while professing some biased point of view on policy that agrees with our own, can negotiate with other elected viewpoints, adapt his/her positions to unforeseen events, and craft policy to meet changing circumstances. Otherwise, why would we need Congressmen?  The populace could just vote en masse on legislation.  No need for analysis or nuance, no grey areas, just black and white policy commandments.

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The answer to all world problems that will manifest themselves in grave ways in coming generations can be summed up in one word: Innovation. – Ed Rodriguez

Innovation

“Prudence is an attitude that keeps life safe, but does not often make it happy.” - Samuel Johnson

In my never-ending need to explain myself, I want to justify the use of space in what is a SOLOMO* / New Media tech opinion and personal interest blog for my Points Of View on Government (filed under Economics).  They say to never discuss religion and politics. Why get on this soapbox?  Here is the quick rundown top 8 of my reasons in no particular order:

  1. This blog is being launched just after 2 years of brutal non-stop national office campaigning.  Needless to say, Government power, policy and its real effects on life and business are still on a lot of people’s minds, including mine.
  2. I’m from Boston, home of the Kennedy’s.  I’ve drunk the Koolaid. The guiding quotation for this blog is RFK’s “There are those that look at things the way they are, and ask why? I dream of things that never were, and ask why not?.”  Without minimizing the enormity of RFK’s point, and the brilliance of his insight, this quote applies to the way I see the world, but also technology-enabled opportunities to fulfill unmet market needs. (We can get into social bottom lines later.) A blog on new business opportunities would be incomplete if it were to ignore government choices that foster the economic environments in which they bloom or wilt.
  3. Patents, copyrights, trademarks and financing rules are playing such an increasingly decisive role in web and mobile marketplaces and startups that overlooking them completely would defeat the purpose of the blog.  I’m not an attorney, but as I learn more, I’ll try to pass along my perspectives.
  4. One of my greatest pet peeves for the country, and more so in the Boston region, is that despite the opportunities available relative to other nations, the top of the funnel of new venture early stage financing in the US is so subjectively constrained as to be inherently ineffective.  I’m referring to the system, not the participants.  I am hopeful that new crowd funding rules being decided now as part of the Jobs Act will bring more opportunity and competition to counter an antiquated, broken system.  Moreover, tax reform may influence some on where they invest, and whether to invest in early stage businesses.
  5. I have an economics degree.  While I am far from an economist, I’d like to believe this gives me a perspective on how macro / micro business problems, solutions and relationships can be influenced by legislation, or lack thereof.
  6. I’ve spent a not insignificant number of years working in companies that serve federal, state and local government agencies. I hope that helps me to offer some context to readers.
  7. I have run a business in another country, and travelled enough that I have a high appreciation for American capitalism. I also know better than to use the term “American” to describe the United States since it is inclusive of all the Americas.  However, I think most of this blog’s audience will get that using that term conveys a mindset or zeitgeist that is uniquely “American” regardless of being geographically inaccurate.
  8. Like a lot of people, I have a diverse set of interests and opinions.  You don’t have to agree with any of them. Initiating a pros and cons discussion chews the fat off the issues and gets down to the bones.  Politics is a touchy subject. I’d appreciate it if readers didn’t bury my bones in the process.

*SOLOMO refers to social networks, localized content and commerce, and mobility.