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"

Campus Crypto Fever

This past Friday I spoke at Penn’s inaugural Blockchain Conference. It was a special speaking engagement for me, as I am a Penn grad and my interest in economics and business started and flourished there.

Over the past five years speaking on college campuses, I have encouraged students to explore the blockchain sector. During the past year, I have received hundreds of emails from students in those audiences, some expressing regret for not paying attention sooner, and others thankful I helped them pay off their loans, or find a career path. Given this, I expected a lot of interest and engaged students at the Penn conference. My expectation was met and exceeded. From students studying cryptoeconomics to faculty guiding independent studies on the new asset class, it is clear that the oldest university in the United States is on board with the newest technology wave.

What were students most interested Continue reading "Campus Crypto Fever"

Bull$%^& Numbers

One of the economic numbers that always bugged me was the trade deficit number. In 1987, it was one of the numbers responsible for the momentum that caused the crash of the stock market. When we traded, merchandise trade was a huge number, until it wasn’t.

I am seeing it rise in importance again and it is frustrating.

Does it really matter if your (fill in the blank) object comes from (fill in the blank country) and not America?

Demand curves slope down.  When you go to the store to buy a pencil, do you care where it was made?  It’s really about the price.  The rest of the stuff surrounding the good informs why it’s being priced the way it is-or it’s slick marketing designed to differentiate the product and allow you to have some sort of justification to buy it at a different price than competing or Continue reading "Bull$%^& Numbers"

City Mouse, Country Mouse

Read William Galston’s column in the WSJ.  He was describing the growth of cities in America.  In his analysis, he compared the vote in the cities to the candidate running.  I don’t think this is a good correlation at all. For example, in Chicago which has been run by a strong handed Democratic Machine for 100 years, having the city vote overwhelmingly for a Democrat and trying to make a statistical inference from it is pretty useless.  Other cities in America are the same.

The broader point that he is making is 100% correct.

Berkeley economist Enrico Moretti’s “The New Geography of Jobs,” is a book you should read to get a sense of the difference between the city and the country.

He writes,

Mr. Moretti’s book offers a compelling and simple explanation of the most fundamental economic trend of our time—the widening split between dynamic urban areas on the Continue reading "City Mouse, Country Mouse"

Audio Of The Week: Skin In The Game

I have been listening to Nassim Nicholas Taleb‘s new book, Skin In The Game, in audiobook form while driving around LA this past week. I’ve always been a fan of having skin in the game and others having skin in the game and so it’s a topic that makes a lot of sense to me.

I happened upon this podcast between Russell Roberts and Nassim and it’s a pretty good summary of many of the important topics in the book. So if you don’t have time to read or listen to the entire book, this podcast is an excellent short cut to some important concepts.



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This Is Great

Russ Roberts just is plain spoken and makes sense. You might not like what you are hearing because it doesn’t conform to what you want him to say, but he has the data to back it up. He is doing a series on economic growth and who participated in it. My wife and I were lucky to be in Palo Alto and attend his first lecture on it and I blogged about that here.

Last night, former VP Joe Biden was at Northwestern talking about income inequality. Income inequality is an issue, but we need to be very careful how we remedy it and Roberts talks about it.