ETH Inflation Rate: 5%

Source: TrustNodes, Jan 2020

an inflation rate of circa 5% a year which will increase a bit further potentially this summer once hybrid Proof of Stake (PoS) launches.

Then onwards it looks probable it will stay around these levels until around September 2021 when the difficulty bomb is to kick-in again.

Around that time full Proof of Stake might launch, at which point the Proof of Work (PoW) chain is set to be discarded.

This 5% inflation from the PoW chain will be discarded with it, leaving an inflation rate of only 0.22%.

These timings however are an estimate as are future inflation levels as packaging the PoW chain into a PoS first shard is very complex and something to be done with great care.

Yet the aim is to eventually get down to this 0.22% inflation level, but in the meantime ethereum’s inflation will stay at 5%.

Strategy Consulting (McKinsey & BCG) Billing Rates

Source: Matt Stoller blog, Dec 2019

McKinsey’s competitor, the Boston Consulting Group, charges the government $33,063.75/week for the time of a recent college grad to work as a contractor. Not to be outdone, McKinsey’s pricing is much much higher, with one McKinsey “business analyst” – someone with an undergraduate degree and no experience – lent to the government priced out at $56,707/week, or $2,948,764/year.

How does McKinsey do it? There are two answers. The first is simple. They cheat. McKinsey is far more expensive than its competition, and is able to get that pricing because of its unethical tactics. In fact, the situation is so dire that earlier this year the General Services Administration’s Inspector General recommended in a report that the GSA cancel McKinsey’s entire government-wide contractHere’s what the IG showed McKinsey was eventually awarded.

WeWork – Counterfeit Capitalism

Source: Matt Stoller blog, Sep 2019

WeWork, because it’s just such an obvious example of self-dealing couched in New Age management consulting speak. Its CEO, Adam Neumann, was just forced to step down.

The Stupidity of WeWork

WeWork describes itself as offering the ‘“space-as-a-service” membership model that offers the benefits of a collaborative culture, the flexibility to scale workspace up and down as needed and the power of a worldwide community, all for a lower cost.” In other words, the company sublets office space.

Generally speaking, Softbank’s model is to manipulate private capital markets as a way of drowning out competitors with cash.

For instance, there were several ‘rounds’ of WeWork investment where Softbank was buying more shares at higher valuations. WeWork ostensibly became more valuable because Son said it was more valuable, and bought shares for higher prices. And since there was no public market for these shares, the pricing of the shares was totally arbitrary.

WeWork then used this cash to underprice competitors in the co-working space market, hoping to be able to profit later once it had a strong market position in real estate subletting or ancillary businesses.

The goal of Son, and increasingly most large financiers in private equity and venture capital, is to find big markets and then dump capital into one player in such a market who can underprice until he becomes the dominant remaining actor. In this manner, financiers can help kill all competition, with the idea of profiting later on via the surviving monopoly.

Engaging in such a strategy used to be illegal, and was known as predatory pricing. There are laws, like Robinson-Patman and the Clayton Act, which, if read properly and enforced, prohibit such conduct. The reason is very basic to capitalism. Capitalism works because companies that thrive take a bunch of inputs and create a product that is more valuable than the sum of its parts. That creates additional value, and in such a model companies have to compete by making better goods and services.

What predatory pricing does is to enable competition purely based on access to capital.

Someone like Neumann, and Son’s entire model with his Vision Fund, is to take inputs, combine them into products worth less than their cost, and plug up the deficit through the capital markets in hopes of acquiring market power later or of just self-dealing so the losses are placed onto someone else. This model has spread. Bird, the scooter company, is not making money. Uber and Lyft are similarly and systemically unprofitable. This model is catastrophic not just for individual companies, but for their competitors who have to *make* money.

Endless money-losing is a variant of counterfeiting, and counterfeiting has dangerous economic consequences. The subprime fiasco was one example.

Another example was the Worldcom fraud in the late 1990s, which forced the rest of the U.S. telecom sector to over-invest into broadband. Competitors have to copy their fraudulent competitors. It’s a variant of Gresham’s Law, which says that “bad money drives out good.” If you can counterfeit something for cheap, the counterfeit will eventually take over the entire market and drive out the real commodity. That is what is happening in our economy writ large, a kind of counterfeit capitalism as ‘leaders’ like Neumann are celebrated and actual leaders who can make things and manage are treated like dogshit.

This kind of counterfeit capitalism is terrible for society as a whole. At first, with companies like Walmart and Amazon, predatory pricing can seem smart. The entire retail sector might be decimated and communities across America might be harmed, but two day shipping is convenient and Walmart and Amazon do have positive cash flow. But increasingly with cheap capital and a narrow slice of financiers who want to copy the winners, there is a second or third generation of companies asking Wall Street to just ‘trust me.’

As euphoria in capital markets takes hold, predatory pricing scheme come to entirely wastes capital on money losing enterprises, and eventually these companies become Soviet-style generators of white elephants and self-dealing.

The men and women who run them have to be charlatans, because they are storytellers justifying losses. Powerful men like Dimon are sucked in, consultants start explaining to old-line economy companies how they too can become like WeWork, and eventually more and more of the economy just adopts counterfeit capitalism.

Across the West, the basic problem of a corrupted productive process is becoming a quiet crisis. The reason is simple. The people that do the work in organizations are increasingly excluded from the decision-making about the work.

That is why Boeing is losing its ability to build planes, why we can’t build infrastructure, and why New York City is on the verge of disaster. And the cherry on top is investors pouring money into enterprises that aren’t even speculative, but are purely loss-making, because they find a destructive personality like Adam Neumann compelling.

If we restore laws against predatory pricing and centralized financial control, the entire counterfeit capitalism model will go away. We can then get back to the business of making and selling things to each other without engaging in celebrated cases of fraud and abuse under the guise of ‘quirkiness.’

Charming Helps!

Source: Medium, Jan 2020

Bring The Positive Energy

Here’s the first key to being charming: you have to make other people want to talk to you… and that means that you want to be open and welcoming.

People who are charming are people who make us feel good. They make us feel like they understand us, value us and think we’re awesome. They’re nonjudgmental, empathetic and caring. They’re the sort of people you feel like you could rely on when the chips are down because they’re just that kind of person.

So how does one convey warmth to others?

To start with, you want to smile. A broad, genuine smile that reaches the eyes — the famous Duchene smile — is a way of making yourself instantly seem friendlier and more approachable. It also forces you to feel happier and friendlier in a nice bit of biofeedback; by making yourself feel more friendly, you will come across as friendlier and more likable.

You want to make sure to be as positive as possible. You don’t have to be a wide-eyed optimist, but we are instinctively drawn to people who are happier. Happy people give energy to the room and make others feel good.

Build The Emotional Connections

The next key to being charming is to build the emotional chemistry by finding commonalities with the person you’re talking to. Charming people have the ability to make us feel as though we’ve known them forever — even if we’ve only just met them thirty minutes ago. They bring an easy sense of familiarity and intimacy that we don’t often feel with other people, especially with people we’ve only just met… but it feels so natural that we never think about it.

In fact, one researcher found that it was possible to build an incredibly intense emotional connection — one stronger than even some long-term friendships — in the span of an hour.

The key to building this emotional intensity comes from sharing personal emotional information with one another.

You want to share emotional truths that illustrate some of what makes you who you are. One of the easiest ways to do this is through the Question Game– taking turns asking meaningful questions of one another. Those questions like “what would a perfect day look like to you”? They may sound cheesy… but they’re the ones that elicit the emotional truths and help forge those surprisingly deep and intimate connections that make us feel so close to someone we’ve just met.

So you may want to ask something like “What would you do if you could do anything with no chance of failure?” or even just sharing an embarrassing — but amusing — incident in your life. The key is that you want to allow yourself to be vulnerable; being charming means letting others feel as though they’re getting insight into you that few other people may get.

Just be sure to leaven it with humor. After all…

Funny is Sexy

As I’ve said many times before, there’s a reason why women rank a sense of humor so highly when they’re listing what they find attractive in men. In fact, some researchers believe that there’s a direct correlation between being able to make a woman laugh and her level of sexual or romantic interest.

The most charming people out there have excellent senses of humor. Some are droll and witty, others are self-deprecating, while yet others are brash, even borderline offensive… and we love them for it.

So why is humor so important to charm? It’s the way that it makes people feel.

Charm is all about making the other person feel good in your presence. Laughter releases muscle tension in the body, leaving you feeling relaxed calm while also releasing endorphins in the brain. If you’re able to make a woman laugh, you’re able to make her feel good… and she’s going to associate that feeling with being in your presence.

A good sense of humor is also a reliable indicator of intelligence; after all, most humor — even puns — is intellectual in nature. Even pratfalls and low-brow humor require a strong sense of comedic timing and being able to gauge the social appropriateness of the situation. Plus: being able to understand the proper time and place for different forms of humor is a sign of finely tuned social calibration.

Develop Your Presence

The final part of charm is to utilize your presence. We often talk about people who feel larger than life, or who have us riveted. These people have presence.

We like people who like us… and the ability to make you feel liked is one of the keys of being charming. Charming people have a way of making you feel like the most important person in the world. They give you their full attention and give you the impression that not only are they hanging on your every word, they’re finding absolutely everything you have to say fascinating.

The first and most important way of using presence is simply to give someone your full attention.

The next way that you develop presence is to indicate that you’re actually paying attention. There are many ways of doing this — countless non-verbal signs like nodding your head and “go on, I’m listening” sounds, for example — but the most powerful is to be an active listener.

Making a point to ask questions about the things that she’s telling you, especially if you use her choice of words or phrasing, makes it abundantly clear that not only are you paying attention but that you’re making a point to engage with her, not just passively absorbing her words like a sponge. Even just repeating the last couple of words back in an intrigued, questioning tone can build and signal your interest in what she has to say.

On China: Technology, Innovation and Growth

Source: Dan Wang, Jan 2020

The main ideas can be summed up in two broad strokes.

  1. First, China’s technology foundations are fragile, which the trade war has made evident.
  2. Second, over the longer term, I expect that China will stiffen those foundations and develop firms capable of pushing forward the technological frontier.

It’s not obvious to me that apps like WeChat, Facebook, or Snap are doing the most important work pushing forward our technologically-accelerating civilization. To me, it’s entirely plausible that Facebook and Tencent might be net-negative for technological developments. The apps they develop offer fun, productivity-dragging distractions; and the companies pull smart kids from R&D-intensive fields like materials science or semiconductor manufacturing, into ad optimization and game development.

The internet companies in San Francisco and Beijing are highly skilled at business model innovation and leveraging network effects, not necessarily R&D and the creation of new IP. (That’s why, I think, that the companies in Beijing work so hard. Since no one has any real, defensible IP, the only path to success is to brutally outwork the competition.)

I wish we would drop the notion that China is leading in technology because it has a vibrant consumer internet. A large population of people who play games, buy household goods online, and order food delivery does not make a country a technological or scientific leader.

How about emerging technologies like AI, quantum computing, biotechnology, and hypersonics, and other buzzing areas? I think there’s no scientific consensus on China’s position on any of these technologies, but let’s consider it at least a plausible claim that Chinese firms might lead in them.

So far however these fields are closer to being speculative science projects than real, commercial industries. AI is mostly a vague product or an add-on service whose total industry revenue is difficult to determine, and that goes for many of the other items.

In my view, focusing the discussion on the Chinese position in emerging technologies distracts from its weaknesses in established technologies. Take semiconductors, machine tools, and commercial aviation, which are measured by clearer technical and commercial benchmarks. They are considerably more difficult than making steel and solar panels, and Chinese firms have a poor track record of breaking into these industries.

The focus on speculative science projects brings to light another issue around discussions of China and technology: an emphasis on quantifying inputs. So much of the commentary focuses on its growth in patent registrations, R&D spending, journal publications, and other types of inputs.

One can find data on these metrics, which is why measures of “innovation” are often constructed around them. But these inputs are irrelevant if they don’t deliver output, and it’s not clear that they often do, neither in China nor anywhere else. Wonderfully asymptoting charts on Chinese patent registrations and R&D spending suggest that Chinese firms might overrun the rest of the world any day now. So far however the commercial outputs are not so impressive.

Learning by doing

I think however that long-term prospects are bright. In my view, Chinese firms face favorable odds first in reaching the technological frontier and next in pushing it forward. I consider two advantages to be important. First, Chinese workers produce most of the world’s goods, which means that they’re capturing most of the knowledge that comes from the production process. Second, China is a large and dynamic market. On top of these structural factors, Chinese firms have stiffened their resolve to master important technologies after repeated US sanctions.

My essay How Technology Grows argues that technological capabilities ought to be represented in the form of an experienced workforce. We should distinguish technology in three forms: tools, direct instructions (like blueprints and IP), and process knowledge.

The third is most important: “Process knowledge is hard to write down as an instruction: you can give someone a well-equipped kitchen and an extraordinarily detailed recipe, but absent cooking experience, it’s hard to make a great dish.”

We should think of technology as a living product, which has to be practiced for knowledge even to be maintained at its current level. I offered the example of the Ise Grand Shrine, which Japanese caretakers tear down and rebuild anew every generation so that they don’t lose its production knowledge.

Here’s an example I came across more recently: Mother Jones reported in 2009 that the US government forgot how to produce “Fogbank,” a classified material essential to the production of the nuclear bomb, because relevant experts had retired. The government then had to spend millions of dollars to recover that production knowledge.

I believe that the hard-to-measure process knowledge is more important more easily observable tools and IP. We would be capable of making few meaningful advancements if a civilization from 2,000 years in the future were able to dump blueprints on us, just as the Pharaohs and Caesars from 2,000 years in the past would have been able to do nothing with the blueprints of today.

Today, Chinese workers produce most of the world’s goods, which means that they engage more than anyone else in the technological learning process. Few Chinese firms are world-leading brands. But workers in China are using the latest tools to manufacture many of the most sophisticated products in the world.

They’re capturing the marginal process knowledge, and my hypothesis is that puts them in a better place than anyone else to develop the next technological advancements. To be more concrete, Chinese workers will be able to replicate the mostly-foreign capital equipment they currently use, make more of their own IP, and build globally-competitive final products.

90% of All ETH Wallets Now ‘Out-of-the-Money’

Source: CoinDesk, Jan 2020

The second-largest cryptocurrency, which powers ethereum’s blockchain, is currently trading at $131, representing a 90 percent drop from the all-time high of $1,431 reached in early January 2018, according to CoinDesk’s ether price index.

The relentless price slide has pushed 90 percent or 31.31 million ether addresses “out-of-the-money,” according to blockchain intelligence firm IntoTheBlock.

An address is said to be out-of-the-money if the current price of ether is lower than the average price at which the coins were acquired or sent to an address.

So, the 31.31 million ether addresses have acquired coins at an average price higher than the ether’s current value of $131.

A major chunk of out-of-the-money addresses purchased coins in the range of $211 to $530. Notably, the biggest cluster, some 4.77 million addresses, is in an average cost range of $262 to $352.

Meanwhile, a mere 8 percent or 2.79 million addresses are “in-the-money” – the cost of acquisition is lower than the current price of ether – and 1.78 percent addresses are “at-the-money,” with an average purchase purchase price almost equal to the current spot price.

The majority of the in-the-money addresses have acquired coins in the range of $0 to $130, while 4,120 addresses have an average cost of $0. These could be early buyers who bought ether in the period between August  2015 and December 2015, when the cryptocurrency was trading in cents.

While the number of addresses in-the-money is small, the volume of ether these addresses are holding is quite significant.

Only 8 percent of addresses are in-the-money, but hold 31.24 percent of the total ether held in all addresses. That amounts to 34.05 million ethers ($4.5 billion).

These investors have already seen their massive profits evaporate in the last 23 months and may offload their holdings if prices find acceptance under $100, adding to bearish pressures around ether.

Out-of-the-money addresses are holding 73.13 million ethers. Clusters of addresses with an average price in the range of $144-$170, $212-$262, or $262-$352 are holding a total of 36.24 million ethers.

A few observers believe ethereum’s persistent scalability issues likely dented investor confidence, leading to a price drop.

Ethereum has consistently missed deadlines for protocol upgrades,” said Connor Abendschein, research analyst at Digital Assets Data, to CoinDesk. “Ethereum 2.0 was supposed to have already gone into effect earlier this year, and it still hasn’t gone through.”

Ethereum 2.0 is a major network upgrade that will shift the blockchain’s current proof-of-work consensus algorithm to proof-of-stake and transfer validation function from miners to special network validators.

Under proof-of-work, miners compete with each other to solve a difficult puzzle (algorithm) to add each block to the chain. Under proof-of-stake, there is no competition as the block creator is selected based on the user’s stake in the project – in other words, ether holdings.

The market is expecting the first upgrade to be rolled out in January 2020. Ryan Selkis, CEO of Messari, however, thinks the transition won’t happen until 2022.

Feynman: “we represent the physics department” for Free Food (bottom box)

Source: “Feynman’s Rainbow: A Search for Beauty in Physics and in Life“, 2003