Who’s The Biggest Anarchist of All-Time?

I was walking through town and had a University of Chicago pullover on. Someone asked me if I went there and I said I was with the capitalists in Chicago Booth. He said he studied math but was an anarchist. I mentioned that the biggest anarchists in human history were capitalists.

By the way, just because you went to Booth doesn’t mean you are a believer in free market capitalism. Plenty of socialists and crony capitalists went to Booth as well.

People don’t see capitalism that way but it is. Free market capitalism can be messy but it works better than any other human system to lift people’s standard of living and build wealth.

Adam Smith, John Locke, JS Mill, anarchists for their time. The signers of the Declaration, anarchists.

We tend to think of anarchists as some of the infamous people from our time. But, anarchists actually put in Continue reading "Who’s The Biggest Anarchist of All-Time?"

Goldman Pulls Out of Crypto

Goldman Sachs announced they weren’t going to put together a big crypto desk after all.  Predictably, the value of all crypto’s fell.  This is a tell in a lot of ways.

First, crypto markets have basically been tanking since CME/CBOT listed their respective futures contracts at the end of last year.  Futures allowed holders to manage risk and the risk premium that was in the cash contract is slowly finding its way into the futures contracts.  Futures have a way of letting air out of balloons.

Second, it shows that the institutions still aren’t there when it comes to buying, selling and transacting in crypto.   They certainly are interested but because the SEC/CFTC haven’t laid down any hard and fast regulation, they really can’t jump in.  No institutional flow limits Goldman.

Third, it also shows that Goldman couldn’t set up a network.  A lot of the flow for the Continue reading "Goldman Pulls Out of Crypto"

Drinking from a Firehose

The pace of news announcements over the last week shows the blockchain sector hasn’t received the August doldrums memo. Overall crypto markets improved, with Bitcoin hovering near $7000. Many other cryptocurrencies have seen more modest recoveries. NEO, often touted as China’s Ethereum, ends August with a 40% decline, the worst performing “large cap” currency of the month.

Behind the scenes, we’ve seen much development progress. Filecoin, which had one of the largest ICOs of 2017, published its quarterly update with its first demos. The World Bank exceeded its $73M target for its first blockchain settled bond, raising $81M from investors that included Northern Trust. Enigma, which spun out of MIT and raised a $45M ICO last year, announced 8 launch partners for its encrypted “secret contracts” platform. Privacy is one of the hot topics in the cryptocurrency world, with several different approaches including Monero, ZCash and Blockstream’s Confidential Transactions. I’m Continue reading "Drinking from a Firehose"

Crypto, Identity & the Need for Self-Sovereignty

Last week I wrote about how geopolitics can impact demand for public blockchain cryptocurrencies such as bitcoin. Cryptocurrency can serve as a (relatively) stable store of value when local currencies are devalued or taken out of circulation – most recently witnessed in Turkey.
In Venezuela, where citizens have flocked to bitcoin in light of hyperinflation, the government countered by announcing a state-controlled cryptocurrency called the petro. President Nicolas Maduro claimed to have raised over $700M for the oil-backed coin in February, although that account has not been verified. The petro also does not trade on any exchanges. Last Friday, he announced new economic measures as the IMF warned that Venezuela’s inflation could hit 1 million percent by the end of 2018:

Are Companies Responsible for Employees?

Senator Elizabeth Warren doesn’t think they are and she’s proposing a new bill to put in regulations that would make sure they are.  She wants to establish a new “federal corporate charter” for companies larger than $1B.

Clearly, she detests and abhors Milton Friedman.  I wish Friedman were alive to debate her. He would do so and relish the opportunity.  He would eviscerate her points one by one with logic, smiling all the way.

Here are her points:

In the four decades after World War II, shareholders on net contributed more than $250 billion to U.S. companies. But since 1985 they have extracted almost $7 trillion. That’s trillions of dollars in profits that might otherwise have been reinvested in the workers who helped produce them.

Before “shareholder value maximization” ideology took hold, wages and productivity grew at roughly the same rate. But since the early 1980s, real wages have Continue reading "Are Companies Responsible for Employees?"

Flights to Safety

Financial headlines over the past week focused on Turkey’s rapidly depreciating lira. Meanwhile many citizens there, ignoring President Erdogan’s calls to exchange gold and foreign currencies to local currency, tapped into the crypto market:
Bunyamin Yavuz, a cardiologist in Ankara, said he no longer trusts local banks and now buys XRP, monero, lumens, among other cryptocurrencies as part of his investment portfolio. Yavuz told CoinDesk his holdings now consist of 30 percent cryptocurrencies, 20 percent U.S. dollars, and just 10 percent lira.” – Coindesk (August 10, 2018)
Bloomberg News reported this morning that the Turkish lira showed more volatility over the past week than bitcoin had. This “flight to safety” to crypto markets has played out throughout the world over the past few years.
I was in India during demonetisation in November 2016. Overnight, Prime Minister Modi mandated that 500 and 1000 Rupee notes were to be taken Continue reading "Flights to Safety"

Here Is A Terrible But Irreconcilable Idea

Yesterday the news broke that Alderman Pawar wants basic income in the city of Chicago.  This is a horribly misplaced idea.  Interestingly, on the same day, former President Obama made a speech endorsing the idea of a basic income for everyone.

Let’s disregard the fact this is a socialist policy reminiscent of failed nations across the world.  Let’s also ignore that the US has many large government transfer payment programs that assist the less fortunate.  The cost is 65% of the federal budget, and growing.

Instead, let’s think about the core of the issue.  What’s the problem that is being solved?

Fear, for sure.  We are heading into a lot of unknown territory when it comes to innovation and jobs.  How are people going to earn a living in the future if our future is full of robots?  The answer is hard to digest.  We don’t exactly know.  However, Continue reading "Here Is A Terrible But Irreconcilable Idea"

Tariffs Are Dumb

I am not going to go into a super long explanation of tariffs.  The TL:DR is my headline. If you take a basic economics course from a professor that believes in free markets, they will illustrate the point graphically and theoretically.

I don’t know when a country has caved to tariffs.  No one has that sort of market power these days.  What happens is countries on both sides of the tariffs find some alternative or substitute.  There is some short term pain, but the market works itself out.

Saying “it’s not fair” is subjective.  A lot of things are subjective.  Harry Reid used to cry, “It’s not fair” all the time on the Senate floor.  Certainly, a lot of the trade practices that other countries inflict on the US don’t seem “fair”.  Canada’s use of tariffs and duties on the American lumber industry or American dairy industry seem excessive Continue reading "Tariffs Are Dumb"

Dog Days of Summer

As the United States celebrated its Independence Day on July 4th, several jurisdictions around the world, including South Korea, Bermuda and Malta, passed legislation to support crypto assets and virtual currencies. Of these, South Korea’s appears the most detailed by providing a classification scheme as a framework for regulation. This is the most sophisticated understanding of the blockchain sector I have seen to date from a government:

“The government has subdivided its industry classification scheme into three sectors, with ten further subdivisions under the guidance of the Korean Standard Industrial Classification ( KSIC ). The subdivisions include detailed considerations of blockchain-powered infrastructure for DApps such as EOS , Ethereum and NEO , blockchain-based cloud computing services, and cryptocurrency mining.The survey is also covering blockchain systems integration into existing industries, including the financial sector, security, insurance, copyright management, supply chain management, medical services, and software development.” — Cointelegraph, Continue reading "Dog Days of Summer"

What’s the Value of a Startup That Has Completed an ICO?

In the past year, $3B-$6B has been raised by startups using initial cryptocurrency offerings (ICO).  That’s a big number.  I don’t think that traditional venture capital statistics are capturing that number.

The hard thing is valuing a company in startup land.  It’s always been hard, and it always will be hard.  An ICO makes it harder.  Here is an example.

There are two kinds of valuations that I want to highlight: accounting valuation and economic valuation.  They are not the same and using accounting valuation will screw you up.  Governments and the media screw this up constantly.

Suppose you are a typical startup.  You pitch some VC funds that invest at seed and you are pre-product.  What valuation are you going to get?  In Silicon Valley, you will get a higher valuation than you will anywhere else.  For our example, let’s say it’s $5MM pre-money and you are raising Continue reading "What’s the Value of a Startup That Has Completed an ICO?"

What’s Real?

In all the excitement about fake news these days I see that most people are in two different tribes.  They see the same information and process it differently.  Sometimes it’s because of their own confirmation bias and sometimes it’s because of the way it is served up.  I am going to give you an example of that as it relates to my own city and state.

I am concerned because we cannot have a brain drain out of Chicago if we want to have an entrepreneurial community.  We need to be attracting people like a magnet.

Chicago has always had a natural draw for Midwesterners.  I think it can be a draw for people from all across the globe.  I am typing this outside on a beautiful summer day.  I am on a balcony looking at a fantastic skyline with a city abuzz.  I am blocks from a lake.

It Continue reading "What’s Real?"

Crypto and Free Markets

Yesterday the government released the unemployment numbers.  Unemployment is going down.  Our economy is on an upswing.  I think a lot of the things Trump is doing is moving the economy forward in the short term.  I think there are some things he is doing that could hurt us in the long term.

I am a very strong believer in free markets.  I bathed in them daily for 25 years on a trading floor.  I have witnessed, and felt to my core how they work.  I don’t think the rest of America is with me on their faith or their knowledge of free markets.  The reaction to the financial crisis and the way we think and talk about them now tells me there is a lot of catching up that has to be done.

I came across this letter from Brian Wesbury to Arthur Brooks.  Brian Wesbury is an economist Continue reading "Crypto and Free Markets"

A Bit Of Reprieve

Congress started to roll back some of the Dodd-Frank law last week.  This is good news.  The reason I started blogging way back when was because of the debate over Dodd-Frank.  You could see the freight train coming.

Sarbanes-Oxley was another act that was done in haste to combat one or two companies wrongdoing.  Again, the end result was that companies were staying private longer. A lot of that has been fixed but why did we do it in the first place?  Spite.  Populism.

Government regulation is keeping the middle class and poor from growing their wealth.  They are locked out of many types of investments because of the overlords fear.  It’s wrong.  One of my hopes with cryptocurrency is that this can be remedied.

Dodd-Frank was and is a terrible law.

The legislation gave the government the power to intrude deep into our lives.  The headline stuff on Continue reading "A Bit Of Reprieve"

How AI Is Making Prediction Cheaper

Avi Goldfarb, a professor at the University of Toronto’s Rotman School of Management, explains the economics of machine learning, a branch of artificial intelligence that makes predictions. He says as prediction gets cheaper and better, machines are going to be doing more of it. That means businesses — and individual workers — need to figure out how to take advantage of the technology to stay competitive. Goldfarb is the coauthor of the book Prediction Machines: The Simple Economics of Artificial Intelligence.

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Step Into The VC Time Machine

One of the things humans are bad at is remembering the past and incorporating the lessons they learned from difficult experiences. I’m sure there’s a philosophical word for this, but I’ve now heard the phrase “this time it is different” so many times that it doesn’t register with me as a valid input.

I woke up this morning to Howard Lindzon’s post R.I.P Good Times (Said Sequoia in October, 2008) and Nobody Knows Anything pointing to David Frankel’s tweet:

All of this ultimately led to me reviewing Sequoia’s classic slide deck from 2008.

I remember reading it in 2008. We were about a year into our first Foundry Group fund, which

Continue reading "Step Into The VC Time Machine"

Capitalism Rules, Socialism Drools

Today is Cinquo de Mayo or Mexican Independence Day.  It’s also Derby Day so have a mint julep after your margarita.  It also happens to be the birthday of Karl Marx, one of the worst philosophers the world has ever known.  Over at the Library of Economics and Liberty, they have an essay on Marx.   No need to celebrate Marx.

Communism and socialism have killed more people than any other form of government.  I saw today that Argentina raised their interest rates to 40%.  Venezuela is in tatters.  You can thank socialism.

Since Adam Smith outlined capitalism in his seminal book, Wealth of Nations, we have seen worldwide poverty decrease.  The US is a prime example.  Our standard of living is the best in the world, due to capitalism.

You might not like certain things that are going on in the US, but when you centralize power and eliminate Continue reading "Capitalism Rules, Socialism Drools"

These 3 Personality Traits Affect What You Earn — but Only After Age 40

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Donna Grethen/Getty Images

We often hear about the power of personality, and how some traits are beneficial for our careers while others are more harmful. For example, we know that being more conscientious (hard-working, driven, reliable, and organized) is associated with better job performance, and that being nice (more agreeable) does not pay off in wages. But it is less clear when these personality traits matter most for our careers — are they more important earlier on, or in the middle? — and who benefits most from them.

In a recent paper, I investigate these questions by looking at the connection between personality traits and lifetime earnings among men at different ages. I find that men’s earnings are not affected by personality at all in the beginning of their careers, but that men who are more conscientious and extroverted, as well as less agreeable, reap large benefits between their

Continue reading "These 3 Personality Traits Affect What You Earn — but Only After Age 40"

Blockchain Will Not Change Economics

A lot of people are touting some new economic system because cryptocurrencies exist.  I don’t think that is true.  I just think that the way we interact is the change.

Economics has some iron laws that are immutable.  Technology doesn’t change them, it merely changes the marginal costs and benefits.  It’s like changing the variables on a calculus equation.  The iron laws of math still apply even though you are using different numbers to solve the same equation.

Prior to fiat currency backed by governments, we bartered.  Humans intuitively understand there are gains from trade.  There are gains from specialization.  Post fiat currency we had a medium of exchange.  But, we still “barter”.  Instead of trading rice for a cow, we simply use fiat to model the same transaction.  Of course, it’s much more efficient and that is reflected in the price and speed of transaction along with the possibilities Continue reading "Blockchain Will Not Change Economics"

Blockchain Will Not Change Economics

A lot of people are touting some new economic system because cryptocurrencies exist.  I don’t think that is true.  I just think that the way we interact is the change.

Economics has some iron laws that are immutable.  Technology doesn’t change them, it merely changes the marginal costs and benefits.  It’s like changing the variables on a calculus equation.  The iron laws of math still apply even though you are using different numbers to solve the same equation.

Prior to fiat currency backed by governments, we bartered.  Humans intuitively understand there are gains from trade.  There are gains from specialization.  Post fiat currency we had a medium of exchange.  But, we still “barter”.  Instead of trading rice for a cow, we simply use fiat to model the same transaction.  Of course, it’s much more efficient and that is reflected in the price and speed of transaction along with the possibilities Continue reading "Blockchain Will Not Change Economics"