Monday, August 21, 2017

Climateer Line of the Day: Are Initial Coin Offerings Securities or Not Edition

From Preston Byrne's Back of the Envelope blog: 
...The question the paper does not directly answer, and the question everyone would like to see answered, is whether the method for conducting a token sale as they are actually done on a daily basis – the “Bro Down Model™” – is legally compliant..
Given what we are dealing with (selling unregistered investments to unsophisticated investors over the Internet) it is pretty easy for the answer to that question to be “no.” And to reach that conclusion, it doesn’t really matter whether we’re dealing with a security or not....
That is from his post "Against Tokens: Part II":
This is adapted from a Reddit thread (shout out to my homeboys in /r/ethereum). It is a follow-on from an earlier piece, Against Tokens.
Warning: this blog post is long.

Today brings us a paper, written by Coin Center and Debevoise & Plimpton, and sponsored by Coinbase, USV, Coin Center and ConsenSys, which explores the question of whether tokens sold on a blockchain are or are not securities under the test of Howey v SEC.   

Given what we know of the paper’s sponsors, the paper’s unsurprising conclusion is:
An appropriately designed Blockchain Token that consists of rights and does not include any investment interests should not be deemed to be a security, subject to the specific facts, circumstances and characteristics of the Blockchain Token itself…. given our analysis in the above, it should be characterized as a simple contract, akin to a franchise or license agreement.
Oh! So tokens are acceptable now, all is forgiven and this is now a valid business model?


So I’m going to spend the next 3,000 words taking Coin Center’s proposition apart. The paper arrives at this conclusion because it asks the wrong question. Of course it’s possible to do virtually anything on a blockchain in a legally compliant way, including representing an interest of some kind as a security or not, as any type of data entry you want, whether that be a “token” or otherwise. As one comment on Reddit put it, aptly,
you can make a tree branch into a security if you wrap it in the utterances and ceremonies which make it a tally stick.

Mr. Byrne was discovered by yours truly via a commenter at FT Alphaville's post "Goldman’s foray into cryptocurrency" which I'd intended to use as a jumping off point to look back at the long-only commodity index funds that the friendly Goldman swaps salesmen were peddling to the credulous yet complicit CalPERS buyers who used the swaps to evade commodity exchange position limits

Good times. 
Ms. Kaminska's triggering example in that post on what's up w/crypto begins:
...This, of course, follows exactly the pattern of events which led to the great commodities bubble. This too saw Goldman declare commodities an asset class suitable for passive investors and fund managers....MORE

Lines On Charts: Tesla Breaks Decisively Below 50-Day Moving Average As Uber Investor Proposes A Merger (TSLA; FAIL)

First up the chart via FinViz, the 50-day is the orange line:

TSLA Tesla, Inc. daily Stock Chart

And from CNBC:

Early Uber investor says the troubled company should merge with Tesla
Angel investor Jason Calacanis, one of Uber's first investors, has a top pick to be the company's next CEO: Elon Musk.

Calacanis said Friday on his web show "This Week in Startups," that a tie-up between Tesla and Uber would give Uber the autonomous driving technology it so badly needs and expand Tesla's reach into many more markets. 

"If those two companies were together, they would beat everybody at transportation," said Calacanis, who backed Uber in 2009. "They're on a collision course for sure."

The only reason Calacanis is entertaining such a wild idea is that Uber is in utter chaos. It lost its co-founder and CEO Travis Kalanick to a forced resignation in June and venture firm Benchmark, one of the company's biggest investors, is now suing Kalanick alleging fraud and breach of fiduciary duty. In court documents filed last week, Kalanick called the suit a "public and personal attack" without merit.

Uber, which was valued at about $70 billion in its last private financing, is operating without a C-suite and with nobody clearly in charge. Meanwhile, the company is locked in a court fight with Alphabet's Waymo unit that could thwart Uber's effort's to keep developing self-driving cars....MORE 
Every couple years Calacanis would spread the rumor that Apple was about to buy Tesla or should buy Tesla or was thinking about Tesla and he'd get a 5% pop out of the stock. We were not impressed:

February 2015
Apple Is Not Going To Buy Tesla (AAPL; TSLA)
At a minimum the instigator of the latest AAPL/TSLA rumor, Mr. Calacanis, should have lead his blog post with something like: "I was dreamin' when I wrote this, forgive me if it goes astray..."

This is at least the fourth fifth time this oddity has made the rounds and if it weren't for the fact the linked piece does such a nice overview of Tesla we'd ignore it as we did the previous iterations.

And seriously, is it too much to ask for trigger warnings? Please, please Mr. C., include trigger warnings if you are writing something moronic.

TSLA up 30 cents at $204.07....
The link goes to FT Alphaville's Dan McCrum who laid out a straightforward "No one needs to buy Tesla" and got 61 comments to boot.  
Our wrap-up:
...We've been posting on Tesla since before the 2010 IPO and as far as I can remember there were rumors that Apple would buy Tesla in Feb and Nov. 2014 and May and Nov. 2013.
I may have missed some if they were going around earlier.  
$336.74 last, down $10.72.

Tesla’s Priced-for-Perfection Bonds Fall Within Week of Sale

From Bloomberg, Friday Aug. 18:
  • Company’s new debt issue traded below par almost immediately
  • Notes due in 2025 had sold at record low yield last Friday
Tesla Inc. bonds slid a week after they were sold, as excitement over Elon Musk’s ambitious rollout of the Model 3 was tempered amid geopolitical tensions and second thoughts among investors about how little they’re getting paid.

The company’s $1.8 billion of 5.3 percent notes due 2025 slipped below par almost immediately, trading as low as 97.4 cents on the dollar on Friday, according to data compiled by Bloomberg. The eight-year securities had priced a week ago at a record-low yield for a bond of its rating and maturity -- a touch higher than initial talk of 5.25 percent -- and Tesla had added $300 million to the offering to meet demand.

Musk had personally pitched investors for Tesla’s debut offering in the junk-bond market, ultimately drawing orders for about double the initial offering. The demand allowed the company to boost the size of the sale even as investors and analysts highlighted Tesla’s lack of profit and record cash burn.

“The way that it’s traded is showing that portions of the market just weren’t long-term holders at that price,” Gershon Distenfeld, director of credit at AllianceBernstein LP, said in an interview. “I own a Tesla, I love the product. But I think investors recognize that 5.3 percent was probably not the right price.”...MORE

"How the Internet Cartel Won the Internet and The Internet Competition Myth"

From the Precursor Blog, August 9:
Summary: The substantial evidence catalogued here provides proof of the Internet’s cartelization, extreme concentration, winner-take-all tendencies, and mythical competition. The public data shows that the tacit Internet cartel of Google, Amazon and Facebook is 7-8 times more concentrated than the top three offline companies and that the top ten Internet economy companies are >10 times more concentrated than the top ten offline economy companies.

Public data that Google, Amazon, and Facebook have acquired ~350 potential competitors and the Internet Association overall has acquired ~900 potential competitors, indicates that the apparent cartelization of Internet companies’ investment, acquisition, and innovation processes ensure no innovative “garage startup” has a plausible competitive opportunity to seriously threaten the Internet cartel’s dominance.

Public data also ironically shows that almost all the Internet Association’s members are anti-competitively threatened by one of more of the Google, Amazon, or Facebook, winner-take-all online onslaughts.

U.S. antitrust authorities have enabled a cartelized and extremely concentrated Internet by taking their eye off the purpose of antitrust law -- protecting the process of competition, by first protecting the process of innovation by dominant online platforms.
The notion that the business of the Internet trends competitive is a myth. After twenty years, the evidence below proves that the business of the Internet powerfully trends toward cartelization, extreme market concentration, and winner-take-all outcomes.

The Internet reality is that multiple unaccountable, winner-take-all online platforms – primarily Google, Facebook and Amazon -- are the core of a tacit Internet cartel. Together they are a de facto governing gatekeepers of aggregated consumer Internet demand for different core, end-to-end, business purposes -- Google for information, Facebook for social sharing, and Amazon for retail ecommerce.

Consider the harsh anti-competitive reality of the U.S. Internet marketplace today.
Now most every offline business and competitor seeking to reach mass market consumer demand online, increasingly must go through the Internet’s governing gatekeeper’s gates, and abide by the tacit Internet cartel members’ strategically-similar discriminatory-terms, if they want to effectively market, reach, and sell broadly to their offline customers -- online.

And if those businesses and competitors won’t submit to the Internet cartel’s demands to be their primary online distributor for their core business purpose, the Internet cartel’s anti-competitive and discriminatory gatekeeping practices, increasingly pressure them into submission on the gatekeeper’s terms.

This is the increasing harsh reality for online branding, marketing, and advertising of offline companies via the Google-Facebook duopoly/ad-cartel, just like it is for the physical distribution of offline companies’ goods and services via Amazon Prime/Marketplace’s de facto dominance.

The Evidence the Internet Cartel Has Won the Internet and Internet Competition Is the Loser
The evidence below will first prove how extremely concentrated most of the U.S. Internet economy has become. The evidence will also show how the Internet cartel coopts, copies, buys, stockpiles, or tames potential competitors of disruptive innovations way before they ever get a chance to become a credible direct competitor to the Internet cartel members.

Consider what the Internet Association (IA) tells us about the Internet economy.
The Internet Association’s tagline is “We are the unified voice of the Internet economy” and “the voice of the world’s largest Internet companies.”

The association’s 41 members comprise the largest U.S. public and private Internet companies save for Priceline. It is a surprisingly small number of companies.

When one compiles the latest public financial information from the Internet Association members that comprise the largest and the unified components of the Internet economy by annual revenues, revenue growth, employees and market capitalization, the extreme concentration of this sector becomes evident.

Comparing Google/Amazon/Facebook concentration to top 3 offline companies: 
The online winner-take-all platforms -- Google, Amazon, and Facebook -- comprise 61% of the Internet companies’ annual revenues, (73% of revenue growth), 62% of employees, and 60% of market value....


Boston Consulting Group: "Global Asset Management 2017: The Innovator’s Advantage"

From BCG, July 11:
The growing challenges confronting asset management were confirmed by the industry’s global performance in 2016. For the first time since the 2008 financial crisis, the revenue pool of traditional managers fell worldwide, along with their profits. Margins contracted as fee pressures continued to increase.

Assets under management (AuM) returned to growth, largely thanks to rising asset values on financial markets. Net new flows, the industry’s wellspring of growth, remains tepid and little changed from recent years.

In 2017, the environment remains challenging, with the specter of continued outflows from active products and even esoteric long-only asset classes. Meanwhile, the acceleration of new, disruptive technologies will create opportunities for some asset managers while posing threats to others.
With that in mind, we argue in this report that tomorrow’s industry leaders will appear quite different from today’s. To be among them, asset managers will need to seize opportunities to act boldly and transform the very way they work, through innovation that fully embraces advanced technologies such as artificial intelligence, machine learning, big data, and analytics. This will be especially true in investment management and distribution.

Understanding and pursuing opportunities embedded in big market moves will also define success—whether through M&A, partnerships, or gaining entry to promising new markets, such as China. Finally, acting to address costs structurally will differentiate winning managers, whether they take advantage of automation technology or leverage third-party resources.

Those that succeed in making these changes will consolidate their position. Others will increasingly struggle with disruption and turbulence.

These conclusions are among the central themes of this report, The Boston Consulting Group’s 15th annual study of the global asset management industry. They are the result of market-sizing research, an extensive worldwide benchmarking survey, and insights from our client work and other industry activities.

Like its predecessors, this report opens with a detailed and data-based profile of the industry’s overall state of health. It reviews asset management performance, globally and by region, as well as emerging product and competitive trends. The opening chapter concludes with a discussion of the five sources of the most significant gain for players in the years to come: growth in China, product portfolio management and innovation, business models and mergers and acquisitions (M&A), technology, and cost management.

The second and third chapters of this report assess two topics critical to every asset manager’s future growth. The second chapter explores the benefits of optimizing investment management for the digital age. Investment management stands at the crossroads of success and failure as firms race to enhance investment performance while achieving customer-driven innovation, technological prowess, and heightened operational efficiencies.

The third chapter explores the strategic value—and dangers—of M&A for asset managers. As the industry’s economics become more difficult, M&A activity will likely accelerate. Deals will become bigger and more international, raising the stakes and the challenge of postmerger integration....MUCH MORE, including the report download page (40 page PDF)

China’s Bitmain dominates bitcoin mining. Now it wants to cash in on artificial intelligence

China is making an all-out effort to 'own' AI. We'll have more on that later in the week but for now a major piece from Quartz:

Bitmain's mine in Ordos, Inner Mongolia, China
Two years ago, a Chinese chip-design expert named Micree Zhan was reading China’s seminal science-fiction novel, The Three-Body Problem, by Liu Cixin, while wrestling with how to create a new processor. He had already designed custom chips for the company he co-founded, Bitmain, that had made it into the world’s leading bitcoin miner, allowing it to dominate the new, hyper-competitive industry of unearthing bitcoins. Now he needed a chip that could launch Bitmain onto a new trajectory, one that would help it master a world-altering technology called deep learning, a branch of artificial intelligence.

While performing his nightly meditation, a practice he has kept up for nearly a decade, it suddenly came to Zhan. “It was late at night, and something inspired me—Sophon!” he recalls. A sophon is a fictional proton-sized supercomputer from The Three-Body Problem that is sent by an alien civilization to halt scientific progress on Earth. It’s capable of causing strange phenomena—such as inscribing flashing words on the retinas of elite scientists. The aliens use it to take over Earth when their own planet is destroyed by the chaotic gravitational forces of its three suns.

Bitmain’s newest product, the Sophon, may or may not take over deep learning. But by giving it such a name Zhan and his Bitmain co-founder, Jihan Wu, have signaled to the world their intentions. The Sophon unit will include Bitmain’s first piece of bespoke silicon for a revolutionary AI technology. If things go to plan, thousands of Bitmain Sophon units soon could be training neural networks in vast data centers around the world.

Bitmain could pull it off, says Michael Bedford Taylor, a professor at the University of Washington who has studied the bitcoin mining industry and its specialized chips. Taylor says these types of chips, called application-specific integrated circuits, or ASICs, that are designed to perform a single function extremely efficiently could create the next wave of distributed computing (pdf). “This will invigorate the hardware field,” he says. “We are about to see the emergence of all kinds of ASICs clouds, and the bitcoin hardware community has demonstrated that under the right conditions this can happen rapidly as a grassroots effort.”

China’s shadowy colossus
To grasp how a Beijing startup is poised to challenge the likes of Google, Nvidia, and AMD in the deep learning arms race, it’s essential to understand Bitmain’s pivotal role in the $70 billion bitcoin economy. Incorporated in Hong Kong as Bitmain Technologies Ltd, Bitmain’s controlling shareholder is a trust registered in the Cayman islands.
Micree Zhan explaining the significance of the word "Sophon."
Bitmain co-founder Micree Zhan explaining the significance of the word “Sophon.”
The company is a marvel of vertical integration. Bitmain designs the silicon that goes into its bitcoin mining rigs, assembles the machines, then sells them to customers around the world. It also operates the machines for its own account, runs vast bitcoin mines that it rents out on contract to others, and, finally, manages several of the world’s largest mining “pools”—agglomerations of processing power so huge that they greatly improve the odds of successfully mining a bitcoin block.

Bitmain may now be the most influential company in the bitcoin economy by virtue of the sheer amount of processing power, or hash rate, that it controls. Its mining pools, Antpool and, account for 28.9% of all the processing power on the global bitcoin network.

Hash rate is critical because bitcoin is in the midst of a messy “civil war.” Controlling chunks of hash rate provides miners with a public vote on the bewildering array of technical proposals dictating bitcoin’s future. At the crux of the technical debate: How to increase the number of transactions the bitcoin network can handle at any given time. The recent split of bitcoin into bitcoin and bitcoin-cash illustrated one way to do this.

Bitcoin mining is the process of checking and adding new transactions to bitcoin’s immutable ledger—its blockchain. Miners must compete with one another to be the first to find a new block. In return for performing this work, which requires massive processing power and incurs hefty electricity costs, miners are rewarded with a certain number of bitcoins for each block they add to the blockchain. Currently, that’s 12.5 bitcoins per block, and a new block is found roughly every 10 minutes. At the current bitcoin price of about $4,000, that’s $50,000 up for grabs every 10 minutes, or $7.2 million a day.

Controversy and criticism over blockchain
Wu, the business brains behind Bitmain, is a polarizing figure in the bitcoin world. He has been a vocal and vociferous proponent of one particular technical approach to increase bitcoin’s transaction capacity, one that would increase the size of bitcoin’s blocks by eliminating the 1 megabyte limit imposed by the bitcoin’s pseudonymous creator, Satoshi Nakamoto. Bitmain is among the signatories of the so-called “New York Agreement,” which calls for doubling the block size under the Segwit2x proposal. Some see this as technically risky, and philosophically fraught because it concentrates power in the hands of miners—like Bitmain. “In France, nobody likes him at all. He is despised,” said Sosthène, the pseudonym of a Parisian bitcoiner I met in Beijing.
Critics of Bitmain suspect that Wu was behind the recent, somewhat related split of bitcoin called the bitcoin-cash hard fork. That split was supported by a miner in Shenzhen named ViaBTC—which happened to be a company that Bitmain has invested in. Wu denies he was behind the split and Bitmain has publicly said it’s neutral on the matter. “If we had such an influence,” he laughs, an earlier scaling proposal called Bitcoin Unlimited, which he and other prominent figures had backed, “would have already been activated.”

Jack Liao, a Shenzhen-based bitcoin miner who has clashed with Bitmain, says Wu is trying to dominate the bitcoin economy and shape it for his own ends. “He wants to control the code, he wants to control the environment,” Liao says. “Then he can design the entire bitcoin ecosystem.” Liao has clashed with Wu on social media in China, claiming that he’s prepared to take legal action against Wu for bad-mouthing his company, Lightning Asic.

Wu, 31 years old, spars with his critics on Twitter, where he says he is inundated by professional trolls. He famously published an expletive-laden tweet in 2016 in response to users who he believed were trolling him during one debate about bitcoin’s future. It was promptly turned into memes and held up as evidence that Wu was unqualified to lead the conversation about influencing the future of a protocol worth $70 billion.
Wu says he regrets that particular Twitter outburst. “If I had a time machine I would not have posted that,” he says. Fixing his image problem is partly why we’ve been invited to Beijing to meet him—he rarely grants interviews—and why we were invited to visit his firm’s bitcoin mine in Inner Mongolia the day following our meeting.

Another split for bitcoin is looming in November, when the community must again decide if it will raise the block size limit. Wu, who favors the new split, says such schisms shouldn’t be avoided. “The core developers don’t own bitcoin as a whole,” he says. “Maybe they own the bitcoin-core software project, but bitcoin is not software, it is a kind of social agreement that is implemented by software. And if people do not agree with each other, a fork will be inevitable. It is only a matter of time.”

A chance encounter with a chip designer
Bitmain and Wu’s power would never have come about had it not been for a chance encounter on a Beijing street. Zhan, the Sophon chip designer and the technical brains behind Bitmain, was running a startup called DivaIP in 2010 that made a set-top box that allowed a user to stream a television show to a computer screen. One of Zhan’s staff was canvassing for customers when Wu walked by....MUCH MORE

The Bank of England's Bond Crisis Scenario

From Institutional Investor, July 12:

Bank of England Report Outlines Bond Crisis Scenario
Central bank warns that heavy withdrawals from bonds could lead to cash hoarding, illiquidity, and a market breakdown.
A Bank of England report says the European investment-grade corporate bond market could reach the “breaking point” if investors collectively withdrew 1.3 percent of total assets.

In its highly anticipated report, “Simulated Stress Across the Financial System: The Resilience of Corporate Bond Markets,” the British central bank outlines a pattern of behavior that would lead to the breakdown in the European bond ecosystem.

Analysts for the bank suggest that when withdrawals exceed 1.3 percent, fund managers would begin hoarding cash to meet redemptions and hedge funds would likely fail to supply liquidity for bond buying and selling.

The report also finds that in times of high market stress, bond market intermediaries, such as investment banks, would be less willing or able to intermediate markets when redemptions exceeded 0.9% of total assets. However, bank analysts acknowledge that this threshold could be as high as 2.4% of assets in periods of low market stress.

“The level of redemptions at which corporate bond market dislocation occurs is determined by the ability and willingness of dealers to intermediate markets, which is assumed to vary with market stress,” the report notes. “If the dealer is exposed to significant market volatility when redemptions occur and expects to incur losses, the dealer is more likely to reduce its risk appetite and its provision of market intermediation services to the extent that even moderate levels of redemptions and asset sales could overwhelm the market capacity to absorb them.”

The Bank of England report made reference to a run on United Kingdom real-estate funds in July 2016, after fund management groups put a temporary ban on withdrawals from institutions overwhelmed with redemption requests in the wake of the Brexit vote....MORE

FX: "Transitioning to a New Phase"

From Marc to Market, Aug. 20:
The US dollar sold off for the first seven months of 2017 and then spent most of the past month consolidating those losses. The Federal Reserve's Jackson Hole Symposium likely marks the end of the market's summer, and the consolidation phase. The next several weeks may prove to be more challenging for investors than the past several weeks.

It is the confluence of events more than economic data that will shape the investment climate. The Jackson Hole confab takes place at the end of the week. At the end of the following week is the EMU's flash August CPI and the US jobs report, then Norway's national election, followed by the ECB meeting. The Fed and BOJ hold policy-making meetings two weeks later, which is days before the German election. When the US Congress comes back from its summer holiday, it will have a short window to lift the debt ceiling and approve new spending or risk missing debt servicing payments and government shutdown.

Except for Japan's CPI and the flash eurozone PMI, the economic data in the week ahead are unlikely to attract more than passing attention. Headline CPI in Japan has firmed in recent months, but even if it ticks up to 0.5%, matching a two-year high, it is nothing about which to get excited. The GDP deflator, despite the strong growth (1.0% in Q2 quarter-over-quarter, to lead the G7) remains negative and the targeted core CPI measure (~0.4-0.5%) is well below not only well below the BOJ's target, but lags behind targeted measures in the US (core PCE deflator 1.4% and the ECB's headline rate of 1.3%). In the mishmash of policies, the central banks have more or less the same quantitative target for inflation, but the quantities they measure are quite different (dare one say incomparable?).

The eurozone economy continues to expand at a sufficient rate to absorb some of the spare capacity, and the output gap is closing. While the regional economy appears to be continuing to operate at strong levels, the momentum has waned. A small gain or a small rise in the composite PMI will be consistent with this assessment and may not be much of a market factor. If it were just the real economy, one wag, noted, the ECB would be ending its extraordinary policies. And if it were just the acting, Mrs. Lincoln would have enjoyed the theater.

The vast majority of the ECB still appears to believe that the economy still needs extensive monetary support. Draghi has a fine line to walk, which is even more of a reason why the Jackson Hole forum is a proper venue to talk about the need for structural reform, an important hobby horse of his, but not the nuances of ECB monetary policy. In September, the ECB is likely to announce an extension of its asset purchases into next year at a slower pace (we suspect 30 bln euros a month down from 60 bln presently and 80 bln initially). However, as the record of the July meeting showed, officials are sensitive to the market prematurely tightening financial conditions.

The Fed's challenge lies in the other direction. Financial conditions have eased despite its efforts to systematically, but gradually, remove accommodation by lifting the Fed funds target, now four times during this cycle that began in December 2015. The market is pricing in a little more than a one-in-three chance of another hike this year.

The market may be under-appreciating the Fed's resolve, and the weaker dollar and easier financial condition add to the pressure for it to act....MORE

Sunday, August 20, 2017

Cory Doctorow's 'Fully Automated Luxury Communist Civilization'

From Reason Magazine:

The author of Little Brother and Walkaway on dystopia, the end of scarcity, and what's going to get him arrested
Cory Doctorow, of BoingBoing and Electronic Frontier Foundation (EFF) fame, has returned to adult fiction after a long stint in the young adult hinterlands (Little Brother, Homeland). His new novel, Walkaway (Tor), circles back to the theme of his first novel, 2003's Down and Out in the Magic Kingdom: the question of what a post-scarcity world might look like. A fascinating cadre of John Galt–style opters-out form the core of the new novel, but the story is concept-driven, not character-driven.

As usual, Doctorow's politics permeate his writing. And, as usual, they're just heterodox enough to provide moments of delightful confirmation bias and squirm-inducing challenge for readers of nearly every ideological stripe.

Doctorow, a civil libertarian who identifies with the political left, has staked out a broad and eccentric territory for his fiction and nonfiction beats, covering topics from privacy to drones to Digital Rights Management (DRM) to open-source software creation.

The Walkaway audiobook is a particular delight, featuring guest appearances from a ramshackle celebrity cast, including Amber Benson, Justine Eyre, Amanda Palmer, and Wil Wheaton. All versions of the novel are free from distribution-restricting DRM protections. The downside is that standard providers like Audible won't carry it.

When Doctorow stopped by Reason's D.C. office in April, he handed out credit card–shaped USB drives loaded with the audiobook on his way out the door. Hardcover review copies also shipped with a similarly sized multitool. These little flourishes bring readers a few inches closer to Doctorow's subversive worldview, where it's always possible, even admirable, to thumb your nose at the rules imposed by governments, tech companies, and just about everyone else.

Reason: Let's talk about the word dystopia. It's a word no one knew 10 years ago and now everyone says all the time about pretty much every novel ever. Is this a dystopia in Walkaway, or a utopia?
Doctorow: I think that we mistake the furniture for the theme. We tend to think of books in which things are in crisis as being dystopian novels. But really it's a very hard job to write a dramatic novel—especially in the kind of pulpy science fiction tradition—in which things aren't going wrong. So for me, the thing that cleaves a utopia from a dystopia is what [essayist and critic] Rebecca Solnit says cleaves a disaster from a catastrophe: It's what we do when things go wrong. Do people pitch in and rise to the occasion? Or do they turn on their neighbors and eat them? That's the dystopian vision. The most dystopian thing you can imagine is that, but for the thin veneer of civilization, it would be a bloodbath.

Is Walkaway a prequel to Down And Out in the Magic Kingdom? It seems like a similar universe. Has the political take-away that you would want people to get out of those two books shifted, either because your views have changed or because facts on the ground have changed?
I think science fiction is not predictive in any meaningful way.
It's certainly not great at it.
We're Texas marksmen: We fire the shotgun into the side of the barn and draw the target around the place where the pellets hit. We just ignore all those stories that never came true.

But I also think that prediction is way overrated. I like what Dante did to the fortune tellers. He put them in a pit of molten shit up to their nipples with their heads twisted around backwards, weeping into their own ass cracks for having pretended that the future was knowable. If the future is knowable then it's inevitable. And if it's inevitable, why are we even bothering? Why get out of bed if the future is going to happen no matter what we do? Except I guess you're foreordained to.

I'm not a fatalist. The reason I'm an activist is because I think that the future, at least in part, is up for grabs. I think that there are great forces that produce some outcomes that are deterministic or semi-deterministic. And there are other elements that are up for grabs.

What science fiction does is not predictive, but it is sometimes diagnostic. Because across all the science fiction that has been written and is being written, and all the stuff that's being greenlit by editors or has been greenlit by editors, and all the stuff that readers can find and raise up or ignore—there's a kind of natural selection at work. The stuff that resonates with our aspirations and fears about technology and our futures, that stuff gets buoyed by market forces, by the marketplace of ideas, and becomes a really excellent tool for knowing what's in the minds of the world.

So the book itself, considered on its own, is a good way to know what's in the mind of the writer. The books that succeed tell you what's in the mind of the world. And if there's a lot of this stuff coming to a prominence at this moment, I think it does say something about the moment that we live in, that there's a certain amount of pessimism. There's a fear that we are being stampeded towards a mutually distrustful, internally divided future where we end up attacking each other rather than pulling together. I think even the most cynical person understands that if civilization collapses and you run for the hills, you aren't going to be a part of rebuilding it. The people who are part of rebuilding are those who run to the middle and get the power plant working again, reopen the hospital, and get the water filtration plant working again.

This notion that my gain is your loss and that there's not enough to go around, and there's this big game of musical chairs and the chairs are being removed at speed, is a theme in a lot of the science fiction that's prominent right now.

Walkaway is in some ways a prequel to Down and Out in the Magic Kingdom. I certainly reread Down and Out in the Magic Kingdom with a pen and a highlighter and some post-its and made tons of notes before I started work on Walkaway, and I have a whole file of themes that I wanted to pick up.
Some of that is the understanding that I've come to in the 15-plus years since I wrote it. And some of it is wanting to respond back to the people who read Down and Out in the Magic Kingdom as a utopia and who didn't understand that there were dystopic elements.

It was a very mixed future. Reputation economics have the same winner-take-all problem—the Pikettian [problem that says the] rate of growth is always less than the rate of return on capital—and that produces insane runaway wealth disparity and dysfunction with misallocation of resources.
In Down and Out in the Magic Kingdom, your ability to run Disney World is based on how much esteem people hold you in. And so literally you can walk in and start handing out tickets. And if the people treat your tickets as though they're the right tickets, then you get to be the Czar of Disney World, which is the premise of the book.

Yet I'm sure you get people coming up and saying to you, "Oh my God, you basically predicted Uber's reputational system!"


Yelp Review: Theater

From yelp:

Abe Lincoln "Would Not Recommend" Ford's Theatre

"Technological Revolutions and Financial Capital"

From the now-defunct NYU class blog "Experiments in Digital Economics".

And to the FT's Izabella Kaminska* right up front:

je lui tire mon chapeau for pointing out that it might be worth keeping track of Perez.

From Experiments in Digital Economics, Feb. 12, 2014:
Carlota Perez argues that the economy is a structurally engineered system of collapse and reward. Every half century capitalism produces a chain of events that repeat themselves time and time again. First, an innovative, disruptive technology comes into the world that essentially causes a revolution and upends the current infrastructure/establishment. This rupture enables a financial bubble to build. Once it grows to an unsustainable, overwhelming size, it bursts and the economy collapses. Upon collapse, a fertile ground comes out of the destruction, which leads to a “golden age”. Once the excesses of the “golden age” take root, political unrest arises.

Why is the economy intentionally built as a house of cards? Tech revolutions replace one technology with another, which leads to massive change and a subsequently explosively volatile period in markets (and potentially massive profitability). The new wealth that accumulates at one end is often more than counterbalanced by the poverty that spreads at the other end. With enough discrepancy in wealth, as noted, political unrest boils over. In theory, the practical task of setting up an adequate regulatory system / safeguards would seem essential to minimize suffering and instability. But the safeguards that exist are only present as to the extent that they enable the continuation of the system that they are designed to oversee.

Perez cites Schumpeter’s “Creative Destruction” theory (destroy old to forge new) as pivotal. Tech revolutions lead to paradigm shifts, which result in inclusion-exclusion mechanisms. Then, Perez writes of an “installation period” that is divided into two sections known as “irruption” and “frenzy.” How are these maintained? The first tech revolution enables the subsequent revolutions. Again, a product of design. Most of core assets of tech revolutions already existed. Every revolution combines truly new tech with others that are simply redefined. Big bang events initiating the revolutions are also bringing cost-competitive or cheaper options to the surface, which leads to investment, lending etc.
  • 1st, Industrial rev > led by Britain (1771)
  • 2nd, Age of steam and railways > led by Britain, then USA (1829)
  • 3rd, Age of steel, electricity and heavy engineering > led by USA then Germany (1875)
  • 4th, Age of oil, the car and mass production > USA > (1908)
  • 5th, Age of info and telecommunications > USA > (1971) 
She explains the technological revolution requires an entire network of interconnected services and infrastructures in addition to the primary technology that enables the new technology to take hold. An example would be when automobiles were invented, the subsequent services that need to be in place for the proliferation of automobiles would be gas stations and mechanics, but for these secondary services to be profitable, there would first need enough cars on the road. Additionally, people need to be educated with how the technology works, a social assimilation of the technology, transitioning it’s use into second nature. This period is painful for those who are awaiting the profits from the new technologies. The “excitement” at the beginning of a technological revolution “divides society” by “widening the gap between rich and poor” because of the frenzy of investment, and a “rift” occurs between “paper values and real values,”  though mentions nothing about how or why she thinks this happens.
   Characterizing the surge of a technological revolution can be divided into four main phases with a turning point at the center of these phases: Irruption, Frenzy, the turning point, Synergy, and Maturity. Irruption is when the new technology is introduced, the “techno-economic split,” with unemployment and the decline of the old industries. Frenzy is a time where there are “new millionaires at one end and growing exclusion at the other,” and mentions protests as almost a natural feature of this inequality, but that eventually fades. Other features include intense investment in the revolution, and decoupling with the whole system, and this is when the financial bubble happens. The Turning Point is “neither an event nor a phase; it is a process of contextual change,” when regulations balance the excesses and unsustainable features, and where the institutional recomposition and the “mode of growth” is defined. Synergy is known as the Golden Age, with coherent growth with increasing externalities, marked with production. The final phase, Maturity, fades into the Irruption of the next revolution, but is seen as the socio-political split, with market saturation of the last products and industries, and disappointment versus complacency. The first two phases fall within the Installation Period, where the last two are in the Deployment Period.

Governing these phases of the technological revolution are the those who control Financial Capital, and those who own Production Capital. Financial Capitalists possess wealth in money or other “paper assets”, acting only to increase wealth, and always seeking to make their money grow; making money with money. Production Capitalists seek to create new wealth by borrowing money from Financial Capital to produce goods and services,  and by innovating and expanding, seek to reap as much wealth as possible off of the laborers. The relationship between these two sets of people changes through the phases of the revolution. During Irruption there is a love affair with Financial Capitalists with the revolution....MUCH MORE 
HT Value Investing World, August 17, 2017

Also at EDE, LazyCoin:
A new currency that stores non-value.
1....LazyCoin is a currency that quantifies lack of activity. With LazyCoin, the more you do nothing the more value you create. 
2 The Minting Process: Proof of Non- Work
Minting new LazyCoin requires participation from at least two parties: one or more Generators, and one Verifier. The role of the Generator is to do nothing. The Verifier observes the Generator to ensure that he or she is doing nothing. When the Generator finishes producing LazyCoin, the Verifier signs a blank LazyCoin, making note of the date and the amount of LazyCoin produced. The Verifier gives the newly minted, certified LazyCoin to the Generator to complete the minting process....
...MORE, but be forewarned, from here it descends into madness

*A couple of Ms. Kaminska's refs to Carlotta Perez:
Davos: Historians dream of fourth industrial revolutions
In the future, we will all be rental serfs

And an Alphaville guest post by Perez:
How to forward a new golden age

HBS: The Revolution in Advertising: From Don Draper to Big Data

From Harvard Business School's Working Knowledge blog:
Advertising in the digital age bears little resemblance to the Mad Men depiction—the Don Drapers of advertising have been replaced by big data and the people who work with it. Professor John Deighton, the author of the case "WPP: From Mad Men to Math Men (and Women)," and Sir Martin Sorrell, founder and group chief executive of WPP and the protagonist in the case, discuss how WPP has been successful in the new advertising world order, where algorithms and robots rule.

TRANSCRIPT: Edited for length and clarity. Conversation recorded in March 2017

Brian Kenny: He's a handsome, hard drinking, chain smoking ad man with a shadowy past, that charms his clients and cheats on his wife. If this is your image of advertising executives then you must be a fan of the show Mad Men, whose lead character, Don Draper, leads an ad firm on Madison Avenue during what some would claim was the Golden Age of advertising.

Advertising in the digital age bears little resemblance to the Mad Men depiction, but those who are in the business today might argue that we are in the midst of the next Golden Age, one marked by the delicate balance of art and science, creativity, and analytics. Today we will hear from Professor John Deighton, the author, and Sir Martin Sorrell, the protagonist, in the case study, entitled, "WPP: From 'Mad Men' to Math Men (and Women)." I'm your host, Brian Kenny, and you're listening to Cold Call.

Sir Martin Sorrell is the founder and group chief executive of WPP, the world's largest communication services group. Professor John Deighton is an authority on consumer behavior and marketing, with a focus on digital and direct marketing and big data in marketing. Thank you both for joining me today. This is a new thing for Cold Call. We typically only interview the author of the case, but we were very happy today to have the protagonist join us as well.

Sir Martin Sorrell: You'll get the other side of the story.

Kenny: We’ll get the truth today. John, can you begin just by setting up the case for us?

Deighton: I think the title does the best job of setting up the case. I had been working for several years on the topic of big data in marketing. Marketing is changing fundamentally from the era of broadcast to the era of one-to-one. I was reading the WPP year-end report and saw the phrase, "From Mad Men to Math Men." This is the revolution that is taking place. It is a revolution from the Don Drapers of the world to people who work with data. I said, "I just have to have a case with that title." It tells the whole story.

Of course, Sir Martin is the embodiment of the last 30 years. The transformation from the celebrity, star, creative agency--the Ogilvy or the Leo Burnett--into the agency holding company. It's truly astonishing how well it's been performed. Now comes another radical transformation. So we'll see how that one goes.

Kenny: Sir Martin, can you give us the back story to WPP, starting with the origins of the name?

Sorrell: Wire and Plastic Products. A wire basket manufacturer. Some people said we made supermarket trolleys, we couldn't figure out how to get one basket on top of the other. It was actually shopping baskets. I wanted to start my own business so I bought with a stockbroker 29.9 percent -- which means we didn't have to make a takeover offer -- of a small shell company worth 1 million pounds. Today we're worth 23 billion, 24 billion pounds. But we've had our ups and our downs. There have been some faults along the way. It's been cyclical, everything is cyclical. In fact, one of the problems is when you believe your business is not cyclical.

We've gone through two revolutions, evolutions. The first was at Saatchi, the second was at WPP. The strategy was very much built around four pillars, or four principles. The first is horizontality, which is a terrible word, but really is about trying to create one firm. That's one of the big differences because we are multi-branded, largely to deal with conflicts between clients, whether they're in package goods, autos, pharmaceuticals or wherever it happens to be. So, horizontality is the first. Creating one firm rather than 12, 13, 14 verticals.

Second is fast-growth markets, which is a third of our business. Asia, Latin America, Africa, Middle East, Central and Eastern Europe because that's where the next billion consumers are going to come.
Third is digital, which is almost 40 percent of our business. You go back four years or so ago, fast-growth markets were 10 percent. They're now a third. Digital was virtually zero and is now, I would say, approaching 40 percent of our business.

Last but not least, akin to digital, is data. Which is 25 percent of our business. Five billion out of $20 billion of our revenues come from first-party data. This is not stuff we buy from other people. This is stuff that we work on with our clients. It could be panel data, it could be custom data, semi-syndicated data, syndicated data that we develop with our clients.
Those four principle pillars are the strategy that we're operating currently.

Kenny: I want to read a quote from the case, from you: "Average people are cooperative. The better the people the harder it is to get them to work together." I would imagine it's a huge challenge given all the firms that are now under the brand, the umbrella. How do you get them all to work together? How much do you want them to work together?

Sorrell: With difficulty, is the answer to that. What clients want are the best people working on their business. We have 200,000 people in one way or another in 113 markets.
Let me give you a good example, because it happened about 24, 48 hours ago. We signed an agreement with Walgreen Boots Alliance, which is a large health and wellness...chain of retail and wholesale [stores] throughout the United States. With Walgreens, Duane Reade, Boots in the UK…And Stefano Pessina and Ornella Barra are the two principles at the company who are driving the growth of that retail and wholesale operation around the world. They'll expand in other parts of the world.

What we did there was an agreement between WPP and WBA, which stands for Walgreens Boots Alliance, to consolidate all of their marketing activities. That's media, creative, digital, everything, into our organization. The basic premise is we would provide them with the best access not just to one vertical--to J. Walter Thompson, Ogilvy and Mather, Young and Rubicam--but to the organization as a whole.

That is happening more and more. Whether it's Ford Motor Company, which is our largest client, or Colgate, which is in our top ten, where they have consolidated similarly like WBA. I would say 85, 90 percent of their marketing activity is with us. We can do two things better. One is we can ensure that we have the best people working on the business... We can provide more effective, better work, at a lower cost....MUCH MORE

", Inc. Is About To Lose The Worst Patent Ever" (AMZN)

From LearnBonds, August 19:, Inc.(NASDAQ:AMZN)  has shown time and time again that serious reform is needed in how the states regulate commerce. From its avoidance of sales taxes-something it finally gave up fully earlier this year-to its wily navigation of anti-trust law, the firm’s exploits are as insightful as they are attention grabbing. One of the worst ways the firm ever took advantage of the system, though, is soon going to be taken away.

Quartz’s Keith Collins reported on Saturday morning that the, Inc. (NASDAQ:AMZN) patent on 1 Click buying is going to expire on September 11th. The firm applied for the patent in 1997 and it was granted in 1999. It doesn’t protect specific lines of code, or even a specific step by step approach to buying online. Instead it protects the general concept of buying something with just one click using pre-loaded payment and delivery details.

Amazon got the world’s worst patent
In the age of software design, patents are important but the system around them is cumbersome. The Amazon patent makes it costly for another other firm to adopt this part of the shopping experience. It certainly weighs in favor of Jeff Bezos firm, simply because they decided to patent it first.

Many firms have licensed the “technology” since the patent was granted. Apple is a famous example cited by Collins. The Quartz author also cites a legal case against Barnes and Noble over the book sellers use of a one click store design.

The problem with the 1 click patent, and this was deeply important when it was granted, is that it opens the door for a broad range of “ideas” to be patented. That’s something that appears to be negative to innovation rather than a guarantor of it....MORE

Somehow missed this one: "Uber, Seeking a Female CEO....

...has narrowed the list to three men.

That's the Washington Post a couple weeks ago.

Here's the latest, from recode, August 19:

Jeff Immelt has emerged as the front-runner to become Uber’s CEO 
Sources said a board vote is expected within two weeks.
Former General Electric chairman Jeff Immelt has become the front-runner candidate to become CEO of Uber, according to numerous sources with knowledge of the situation.

While the tension on the board of the car-hailing company remains high — due of late to an ugly lawsuit that one of its major investors, Benchmark, is waging against its ousted co-founder and CEO Travis Kalanick — sources said that a majority of the board is coalescing around the experienced Immelt.

That could certainly change, said sources, and there are two other executives who are also still being considered, neither of whom is a woman, as some had hoped. Sources said a vote of Uber’s directors is likely to happen within the next two weeks, which does not have to be unanimous, although most directors are hoping it will be.

In any case, Immelt has pulled ahead, said several sources. 

One of Immelt’s earliest and strongest supporters on the board is Arianna Huffington, said sources, but he is also the top choice of several directors. Others still undecided — including Benchmark, which has weakened its status because of the lawsuit and ensuing publicity — have become convinced that Uber needs to hire someone who can quickly deal with a number of pressing and problematic issues and consider Immelt fully capable of handling that well. 

“We know it is never going to be a perfect choice, but everyone is becoming exhausted,” said one person close to the situation....MORE
Uber has become a parody of Uber.

The WaPo also informs us: [Uber named most improved brand this year. Really.]

See also, if interested: As With Anything Involving Uber, Follow The Money (plus Karl Marx swings by).

Das Boot: The New Mercedes-Maybach Electric Concept Is a 20-Foot-Long Convertible

From Bloomberg, August 18:

It's the first full-sized, open-top, true Maybach the company has produced in decades.
Measuring almost 20 feet long, the Vision Mercedes-Maybach 6 Cabriolet uses the classic proportions of art deco design with its extremely long bonnet.
Tonight, at a private estate on Pebble Beach Golf Course in Carmel, Calif., Mercedes-Benz unveiled its latest concept car: the Mercedes-Maybach Vision 6 Cabriolet. Like the Vision Mercedes-Maybach 6 concept that the company unveiled prior to the Pebble Beach Concours d’Elegance last year, the Maybach 6 Cabriolet is an electric car that’s nearly 20 feet long, has a drive system that gets 750 horsepower, and has a range of more than 200 miles on one charge of the battery stored under its floor. It’s the same engine as its predecessor, this time in open-air form. 

But you won’t be able to buy it. The car is a one-of-one example of Mercedes’ vision for the cars it’ll make in 2035 and beyond. 

In terms of performance, Mercedes says the Maybach 6 Cabriolet will be able to go from zero to 60 mph in fewer than four seconds, with a top speed of 155 miles per hour. Using a special new “super” charger Mercedes has developed, the car can achieve 60 miles of range in just five minutes’ charging.
The contrast between the dark blue paintwork, in “nautical blue metallic,” and the chrome highlights the organically shaped wings and the chrome trim elements.
All of that would make it the most luxurious, grandest electric car on the planet. But it’s the design that really distinguishes the Maybach 6 Cabriolet. “It’s about beauty,” said Dietmar Exler, the president and CEO of Mercedes-Benz, noting that while the car will not go into full production, it’s certainly possible that, given time, it could end up on an awards stand of its own. “It’s not difficult to imagine that 30 years from now, our car might take top honors at the Pebble Beach Concours d’Elegance.” ...

Saturday, August 19, 2017

"Facebook’s willingness to copy rivals’ apps seen as hurting innovation" (FB)

Yes, astute yet wary reader's impression is correct, we have a bit of a theme on the blog today.
It wasn't intended but sometimes that's how things work out.
Just consider me your little ray of sunshine zeitgeist reflector.

From the Washington Post, August 10:
Four years ago, Facebook spent over $150 million on a free app used by millions.
Today that app, called Onavo, has become a little-known weapon in Facebook’s massive expansion strategy — helping the ­social-networking giant determine what is gaining popularity among consumers. It can then bring similar features to its own products, according to five people familiar with the effort who spoke on the condition of anonymity because it involves internal corporate strategy.
The Onavo app, called Onavo Protect, is what is known as a virtual private network, which means it disguises the traffic of smartphone users as they browse the Internet and use apps. But while it advertises itself to users as a way to “keep you and your data safe,” Facebook is able to glean detailed insights about what consumers are doing when they are not using the social network’s family of apps, which includes Facebook, Messenger, WhatsApp and Instagram.

The technology shows how far Facebook is willing to go as part of its aggressive strategy to reach into new areas beyond social networking, often by rapidly acting to mimic the most successful features of rival companies’ apps. Facebook did this most recently by replicating a key element of the Snapchat app. It also has done so for many other businesses, including a recent online fundraising tool, food delivery, offline meetups and its “On This Day” feature, which shows Facebook users pictures of what they did on the same day a year earlier.

Nobody has claimed that what Facebook is doing is illegal. But interviews with two dozen top investors and entrepreneurs suggest it is having a profound impact on innovation in Silicon Valley, by creating a strong disincentive for investors and start-ups to put money and effort into creating products Facebook might copy.

“It’s what we did at Microsoft,” said Scott Sandell, managing partner of the prominent venture capital firm New Enterprise Associates, who was product manager for Microsoft’s Windows 95 until 1995. The Justice Department brought a landmark antitrust case against the company in 1998. “Whenever we saw a threat, boy, did we pounce on it.”

Facebook declined to comment but noted that roughly 100 million apps and businesses use Facebook’s developer tools or have a Facebook page that drives installations to apps.

Unease about Facebook’s influence comes when the balance of power in Silicon Valley has been shifting away from start-ups toward four dominant companies — Facebook, Apple, and Google.
With their app stores, Apple and Google — which recently was fined $2.7 billion by the European Union on antitrust concerns — are the gatekeepers for millions of new businesses. Forty-three percent of all online retail revenue now flows to Amazon, according to the market research firm Slice Intelligence. (Amazon chief executive Jeffrey P. Bezos owns The Washington Post.) And Facebook counts one-third of the world’s population in its monthly user base.

“The dominance of these companies is choking off the start-up world,” Roger McNamee, an early investor in Google and Facebook and founder of the investment firm Elevation Partners, said of the two companies. “I helped create a monster, and I regret it.”...

"Is our economy still dynamic? A long-read Q&A with economist Fredrik Erixon"

From Pethokoukis at AEI, August 4:
Looking at the Silicon Valley today, you might think the US is poised for a technological explosion. That expectation is certainly animating many of the fears of mass joblessness once artificial intelligence arrives in the workplace, and why many people are beginning to advocate a universal basic income. But my podcast guest believes these techno-optimists have far too rosy of an outlook.
Fredrik Erixon is an economist and the director of the European Centre for International Political Economy, a Brussels-based think tank. He’s also the coauthor of the recent book, “The Innovation Illusion: How So Little is Created by So Many Working So Hard.” He joined me to discuss why we’re no longer as innovative as we used to be, why we’re not close to recapturing that dynamism, and what policymakers can do about it. Listen to our full conversation at Ricochet, or read an abbreviated transcript here.

PETHOKOUKIS: I’ll give you a chance to lay out your thesis, which I will try to sum up briefly. As the title suggests: innovation is not what we think it is. In fact, it’s been getting worse and worse, decade after decade since the 1970s. I wonder if you could explain that. Now, keep in mind that I would rather live — and I think this may argue against your thesis — in 2017 than in 1967, 1977, or 1987. And frankly, I’d probably rather live in 2017 than last year. So that to me suggests that maybe things are getting better. How can you say innovation, change, and progress have been slowing down for decades?

ERIXON: Like you, I would pick 2017 over any other year that you could come up with. The argument of the book isn’t that I’d prefer to live in the 1970s or 1940s or even 2006 or 2007 before the big economic crisis in the West. The point is basically that the innovation acceleration, or the pace of change in Western economies, has slowed down and that this slowdown is connected to our increasing inability to actually change our economies. And to change our economies in a way where we increasingly incorporate much more technology, much more human capital, and get people to stop doing things that they did yesterday in order to do something better tomorrow. That’s the whole point of the book. The point is to say we need more innovation, we need faster innovation. The illusion that the book is trying to counter is this perception, which has been spreading like wildfire over the past year, that we’re living in the most innovative age ever.

What we’re trying to say in the book is no, that’s an illusion. If you actually look at the pace of innovative change throughout history, you’re going to find lots of periods when change happened faster, when people were prepared to change in a way most people today aren’t. And the other part of the illusion is this perception itself provokes a lot of political reactions. It provokes human reactions and fears about technologies that are about to demote us to permanent low economic expectations. That we’re going to get unemployed because intelligent machines, robots, are going to eat our lunch, and perhaps our dinner as well.

And if you listen to Elon Musk, they might eat us as well. Or at least kill us. Before we go forward or even look at where we are today, just take one step back. So when was the golden age of innovation? And, whenever that was, why was it? Why can’t we just do what they did and follow that same recipe today?
The concept of innovation has basically two elements. The first one is technology creation; that we have scientists and inventors that generate new and bold inventions that are going to help to solve problems in better ways. That’s the first component. And I would argue at least that I’m not capable of making a judgment whether the technology creation we’re seeing today is better, worse, or similar to what we’ve seen in previous parts of history. But the other component of innovation, following the concept of innovation from economists Joseph Schumpeter and many others, is about the economy, and it’s about the capacity of the economy to basically take the technologies that are being created and run with them and make them basically ripple through the economy in a way which forces everyone — labor, capital, investors, governments — to perform better. And it’s in that second part where I think we’ve seen, in many parts of our modern economic history, we’ve been much better and where our economy has been much better equipped in order to run with these technologies and actually make something out of them.

So the problem here isn’t that we need to reinvent our economy, or start to come up with different economic systems. My argument is basically that we’ve had a system called capitalism which has been extraordinarily good at generating this type of economic change that I’d like to see more of. The problem that we’ve seen gradually growing over the past 50 years is that core concepts of capitalism have been eroded. And we have less of them in our economy today than we’ve had in the past. And that is the main reason why the economy isn’t generating that much innovative change or productivity growth as it did in the past.

You’re dividing things up. Maybe you have invention, the ability to come up with new ideas, new technologies, new ways of doing things. And then there’s the diffusion of those ideas throughout the economy, so they’re broadly helpful and broadly productive for people. So are you saying there’s a time when we did that better? These technologies or inventions or innovations, as you said, we were able to run with them better? When was that time? And if there wasn’t a time then maybe that’s just the way things are. When did we do it better? The 50s, 60s, 20s?
I think we can point to specific periods in economic history going back to the early 1800s, and point to decades or perhaps longer periods where we’ve seen faster change in our economy and our society. I think the period — it depends whether you look to America or Europe — before the early 1900s was a period of immense change in the European economy. We had the period just after the Second World War, a period when America as well as Europe saw enormous innovative change in the economy. Partly because the economy got better at exactly the thing you pointed to — diffusing all the new technologies that already existed and making organizations use them. I can think about my pretty short life, I’m just 43 years old, but I can point to periods when I think I’ve been living in far more exciting times than I do today. I’d say 1990s and 1980s was such a period, where the propensity of people to actually change and do something different than what they were doing was much greater than it is today....

The “Quantum Internet” Is Just a Decade Away. Here’s What You Need to Know.

From Futurism:
In Brief
As China moves closer to building a working quantum communications network, the possibility of a quantum internet becomes more and more real. But what does having a quantum internet mean?
The Next Level
The word “quantum” sounds so advanced and complex that people tend to get hyped up about anything attached to it. While not every quantum breakthrough elicits a positive response, in the case of a so-called quantum internet, people have a reason to be excited.

In the simplest of terms, a quantum internet would be one that uses quantum signals instead of radio waves to send information. But let’s explain that a bit further.

The internet as we know it uses radio frequencies to connect various computers through a global web in which electronic signals are sent back and forth. In a quantum internet, signals would be sent through a quantum network using entangled quantum particles.

Following what Einstein called “spooky action at a distance,” entangled particles exist in a special state that allows information carried in one to be instantaneously reflected in another — a sort of quantum teleportation.

Researchers have recently made significant progress in building this quantum communication network. China launched the world’s first quantum communication satellite last year, and they’ve since been busy testing and extending the limitations of sending entangled photons from space to ground stations on Earth and then back again. They’ve also managed to store information using quantum memory. By the end of August, the nation plans to have a working quantum communication network to boost the Beijing-Shanghai internet.

Leading these efforts is Jian-Wei Pan of the University of Science and Technology of China, and he expects that a global quantum network could exist by 2030. That means a quantum internet is just 13 years away, if all goes well.

Quantum Web Surfing?
So, what does a quantum internet mean for regular internet users? As far as typical internet surfing goes, probably not much.

It’s highly unlikely that you’ll be using the quantum internet to update your social media feed, for one. “In many cases, it doesn’t make a lot of sense to communicate quantum mechanically,” University of Washington physicist Kai-Mei Fu told WIRED. For such things, regular internet communication is enough....MORE

"The Dangerous Rise Of Unproductive Entrepreneurship"

From Techdirt:
from the this-is-bad-news dept
For many years now, we've talked about Andy Kessler's concept of political entrepreneurs vs. market entrepreneurs. In Kessler's telling, market entrepreneurs are the kind of entrepreneurs that people usually think about -- the ones creating startups and high growth companies and the like. While not everyone appreciates it, those entrepreneurs tend to provide a lot more to the world than they take away. They may get filthy rich in the process, but they tend to make the world a better place by creating lots of value. The "political entrepreneurs," on the other hand, are those who basically look to abuse the system to create monopoly rents and to limit competition. Those entrepreneurs may also get filthy rich, but they tend to do it by limiting value and locking it up so that only they can get it.

Obviously, one of those is a lot better for society than the other.

Of course, this idea certainly didn't originate with Kessler, either. Just recently, we had James Allworth on our podcast where we talked about this issue in response to an excellent article he'd recently written about how prioritizing profit over democracy was actually damaging American entrepreneurship. In that article, he referred back to the work of William Baumol, who wrote a paper back in 1990, entitled: Entrepreneurship: Productive, Unproductive, and Destructive. As you can see, that one divides entrepreneurship into three categories. Productive loosely maps to "market entrepreneurs" in Kessler's world, while "Unproductive" loosely translates to "political entrepreneurs" as well. Baumol also includes destructive entrepreneurs, who are actively making the world worse -- and getting rich off of people's misery (think drug dealers, and such).

But part of the point of Allworth's article is that it feels like too many people are just focusing on "profit" as the end goal, and thus either unwilling or unconcerned with determining if the entrepreneurship that drives the profit is "productive" or "unproductive." And, now the Economist has weighed in on this issue as well, noting that we're seeing more and more unproductive entrepreneurship in America, and that's a problem. The article focuses on the work of two economists, Robert Litan and Ian Hathaway, who are building on Baumol's concepts and are concerned about where things are heading. One interesting thing: they find that the issue can't be neatly put into the category of "too much regulation" or "too little regulation," but rather find that both of those situations can create the same rise in unproductive entrepreneurship:...

"US lawmakers and advocates on both the left and right are increasingly calling for regulating Google, Facebook, and Amazon" (GOOG; FB; AMZN)

From Axios:

The walls are closing in on tech giants 
Tech behemoths Google, Facebook and Amazon are feeling the heat from the far-left and the far-right, and even the center is starting to fold.

Why it matters: Criticism over the companies' size, culture and overall influence in society is getting louder as they infiltrate every part of our lives. Though it's mostly rhetoric rather than action at the moment, that could change quickly in the current political environment.
Here's a breakdown of the three biggest fights they're facing.

Battle over content: Both sides are increasingly wary of the outsized role that Facebook and Google play as moderators of public discourse, as was seen following the violence in Charlottesville. In the White House, Steve Bannon has reportedly argued that Facebook and Google should be regulated like public utilities.
  • Right-wingers worry the progressive-leaning companies aren't going to give their views a fair shake. Recently they opposed Google's firing of an engineer whose internal memo questioned women's aptitude for engineering jobs. They've also criticized YouTube policies meant to combat offensive speech. They see a company with the ability — and, in their eyes, motive — to sideline their views.
  • A policy memo quietly circulated earlier this year by activist Phil Kerpen recommended rules to keep online platforms politically neutral, potentially subjecting platforms that violated that neutrality to government enforcement actions. In an email obtained by Axios, Kerpen said the general strategy would "get us on offense and scare the hell out of Google, Facebook, Twitter." (Kerpen told Axios that the "unpublished draft memo represents preliminary thoughts on complex issues.")
  • Sen. Ted Cruz told Axios that he's worried about "large tech companies putting their thumb on the scales and skewing political and public discourse." He asked during a June hearing whether "these global technology companies have a good record protecting free speech, and what can be done to protect the first amendment rights of American citizens."
  • On Monday, Fox News host Tucker Carlson said that since Google "has the power to censor the internet, Google should be regulated like the public utility it is to make sure it doesn't further distort the free flow of information."
  • The left's fixation on whether fake news impacted the election has ensnared Facebook and other platforms in investigations into Russia's influence during the campaign. Top Senate Intelligence Committee Democrat Sen. Mark Warner has spoken about fake news with Facebook staffers multiple times this year in both Silicon Valley and Washington, a source said.
  • There's also frustration that Facebook didn't remove the event page for the white supremacist rally in Charlottesville until right before it happened.
Battle over liability: Big tech firms are in a panic about a bi-partisan bill that would let sex trafficking victims sue web platforms that hosted content implicated in the crime....

"It’s now possible to map a person’s lifetime exposure to nutrition, bacteria, viruses, and environmental toxins—which profoundly influence human health"


Mapping the Human Exposome
Our genetic blueprint charts the course for our life, yet we rarely achieve our full genetic potential, because of external forces that continually steer us off course. Many environmental influences are beneficial—good nutrition, education, and socialization—while others, such as malnutrition, pollution, and poverty, contribute to ill-health and the woes of humankind. We can now measure and utilize over a billion features of the genome—the sequence of DNA, epigenetic changes that turn genes on and off, and how genes interact with the biochemical machinery of cells—and that knowledge is enabling powerful new insights and therapeutic approaches. But genetics can explain less than 25 percent of most major disorders. And at present our ability to measure the complex environment in which we live and its impact on our bodies is very limited.

One measure of the potential environmental impact on health is the registry of nearly 80,000 industrial chemicals that is maintained by the Environmental Protection Agency. The interaction of each of these chemicals with living organisms can generate multiple chemical markers, which could be used to assess exposure and potential harm, if we knew what they were. One example that has generated widespread concern is the class of phthalate chemicals used as plasticizers in a wide range of products, from infant lotions and powders to credit card purchase receipts, markers from which are found in virtually every United States resident, and which have been implicated as hormone-like endocrine disrupters that can affect sexuality. Those aren’t the only powerful chemicals in consumer products—think suntan lotions and beauty creams, preservative additives in food products to extend shelf life, pesticide residues on fresh produce. Food itself generates many different metabolic chemicals found in our bodies, both directly and as a result of processing of food by our microbiome—the colony of bacteria that inhabit our gut and our skin and are very much part of who we are. Add in air pollution, workplace hazards, the markers left by allergens and disease agents and immune system reactions to them, the medicines we use—they all leave a biochemical marker. The number of such markers in our bodies is estimated to be as many as 1 million, but what they are and which ones indicate conditions or exposures harmful to health is still for the most part unknown.

As it turns out, there is no reason for knowledge of the environmental mediators of disease and health to lag so far behind that of the genome. When the concept of the exposome—the totality of our exposures from conception onward—was first put forward in 2005, it seemed an impossible challenge: How could we detect and measure a million different chemicals? But just as a single sample of blood contains the core of our genetic data (in the DNA within white blood cells), so that same blood sample contains hundreds of thousands of biochemical markers. And because of advances in high resolution mass spectrometry and high throughput screening, it is now possible to identify, catalog, and understand each marker, each constituent of the exposome, and link it to the process or environmental factor that produced it. Mapping and annotating these biochemical markers, creating reference databases that define the human exposome and to which individual profiles can be compared, using big data techniques to correlate genetic and environmental factors—all of this portends a revolution in how we understand the complex chemistry of life. That knowledge in turn is likely to lead to more specific insights into how environmental factors affect human health and how we might intervene to protect and enhance it. Within a decade, potentially, a truly precision approach to personalized medicine could be possible....MORE
The biochemical markers of the Exposome
The Exposome includes hundreds of thousands of biochemical markers from many different sources, including those shown here. 
Currently, only about 20,000 of those have been mapped and categorized.