Is social upheaval good for Bitcoin?

Is social upheaval good for bitcoin? I asked Nick Szabo.

Note: This is the second in a series of questions. See Also: Could Cypherpunks have done cool stuff without in-person interactions?

A collapse in societal trust will generally increase demand for trust-minimized assets like gold and Bitcoin. People may come to realize that the trusted third parties they were relying on are not as reliable as expected.

For example, people are learning the hard way that police have no legal duty to protect you. Banks, exchanges, and custodial wallets are also security holes. You and your account are just bits to these operators, who will freeze or seize your assets when political winds shift strongly enough against you.

Bitcoin has what I call “deep safety”, in that it’s secure against legal and political threats. As opposed to an asset like Treasury bonds, which avoids volatility risk while being vulnerable to everything else. A situation that creates legal and political instability might be good for Bitcoin, but will be bad for the world in general.

Personally, I would rather not have societal collapse, even if it is good for Bitcoin. Only a sociopath would be in favor of massive death and destruction for the sole purpose of making a number go up.

Could Cypherpunks have done cool stuff without in-person interactions?

Tech conferences are on hiatus, and virtual ones just aren’t the same. Could cypherpunks have done cool stuff without in-person interactions? I asked Nick Szabo. His response is summarized below.

Note: This is the first in a series of questions. Others will be posted pending correspondent approval.

Cypherpunks was a creature of internet mailing lists, a virtual place to exchange ideas. The main purpose of hosting in-person events is to build trust and suss out the sock puppets. Interpersonal trust is important for a subversive discussion group.

It’s possible to do this without local meetups. List membership was generally by invitation — people invited those they had met through other Usenet groups.

That created a self-selection process. In the early 90s, few people had internet access, and fewer still could get on Usenet. AOL served as a honeypot for normies, a shiny diversion where people could feel like they were using cutting-edge technology without getting in the way of hardcore nerds who were actually trying to build things. Kind of like Ethereum.

Cypherpunks were motivated by cool technology rather than money. We were coders, not traders. Today, you have investors assembling mailing lists full of big important people for the sake of discussing Big Ideas, but they end up trying to impress each other or schmooze. You end up with Davos, but on the internet.

Highly motivated individuals don’t need a shared physical space to get stuff done. Most of the cool stuff was done remotely. Lance Cottrell was in San Diego when he wrote the Mixmaster anonymous remailer. Julian Assange first became widely known by his posts from Australia. Adam Back occasionally visited California, but mostly developed hashcash in England. Nick Szabo’s bit gold was inspired and informed far more by mailing list conversations and university library research than by face-to-face meetings.

It also helped that the topics of discussion were mostly abstract and mathematical, reducing the need for empathy and nuance than if you were to discuss, say, blockchain governance.

«Record Scratch»

When you discuss topics of emotionless objectivity, there is no need for empathy and nuance. It’s just logic and math, right?

I asked Nick about the lack of diversity on the Cypherpunks mailing list (I’m woke like that), at which point he hung up on me. But the last statement didn’t seem quite right. People argue about seemingly objective topics all the time, and quite emotionally so — just look at all the Bitcoin forks!

I’m reminded of an interview with Max Levchin, co-founder of Paypal. (The transcript seems to have vanished down the memoryhole.) Levchin attributes Paypal’s early success to the team’s lack of diversity. You don’t waste time arguing about frivolous stuff if everyone thinks just like you do. You also don’t worry so much about empathy and nuance if everyone comes from the same background. Those who complain about a “toxic culture” are probably just too diverse to fit in.

Facebook Discovers That The World is Flat

Good news! Employees of Facebook will soon be able to work from home FOREVER!

Not only will Facebook save money on office space and in-house perks; they can reduce salaries to account for lower cost of living as employees flee to the exurbs.

Facebook’s campus is like Disneyland. It has catered meals, a climbing wall, an arcade, and an ice cream shop full of cupcakes and candy. And the bathrooms have bidets! It’s like IBM’s country clubs, but for millennials.

In the early aughts, tech companies like IBM and Cisco realized they could save hundreds of millions a year by outsourcing their jobs to India. A lot of people complained about this, but three-time Pulitzer Prize winner Thomas Friedman took the initiative and actually visited an IT offshoring firm in Bangalore.

There, he discovered that the Indian IT workers were using computers and software made by Compaq and Microsoft, drinking beverages made by Coca-Cola, and the firm itself was 90% owned by American investors. Contrary to the popular opinion that offshoring was leaving Americans jobless and poor, it was in fact making Americans fabulously rich. Different groups of Americans, but all white people look same.

There was a time when IBM employees were treated like family. Would you dump Grandma on the street once her maintenance costs exceed her productive value? No! That’s why IBM had a no-layoff policy, along with corporate country clubs and family-friendly Christmas parties. Then the internet came along and made offshoring feasible, the end of the Cold War made globalization politically correct, and post-Bretton Woods financialization made foreign investment attractive. IBM laid off workers, sold the country clubs, and, well, it’s hard to have a Christmas party when the majority of your workforce is in India.

Facebook is an H-1B dependent company, meaning over 15% of its employees are on temporary visas. The obvious thing is for Facebook to send all the H-1B workers back home and have them work from overseas. But I’m reminded of this passage from Antonio Garcia Martinez’s Chaos Monkeys:

Large but unexciting tech outfits like Oracle, Intel, Qualcomm, and IBM that have trouble recruiting the best American talent hire foreign engineers by the boatload. Consultancy firms that bill inflated project costs by the man-hour, such as Accenture and Deloitte, shanghai their foreign laborers, who can’t quit without being eventually deported. By paying them relatively slim H-1B-stipulated salaries while eating the fat consultancy fees, such companies get rich off the artificial employment monopoly created by the visa barrier. It’s a shit deal for the immigrant visa holders, but they put up with the five or so years of stultifying, exploitive labor as an admissions ticket to the tech First World. After that, they’re free. Everyone abandons his or her place at the oar inside the Intel war galley immediately, but there’s always someone waiting to take over.

Strictly speaking, H-1B visas are nonimmigrant and temporary, and so this hazing ritual of immigrant initiation is unlawful. Yet everyone’s on the take, including the government, which charges thousands in filing fees. The entire system is so riven with institutionalized lies, political intrigue, and illegal but overlooked manipulation, it’s a wonder the American tech industry exists at all.

Zuckerberg is a smart guy. He’s also the co-founder of FWD.us, a lobbying group that wants MOAR visas for temporary workers. If employees in Bangalore were just as effective as employees in Menlo Park, Zuck would have enabled remote work ages ago. Immigration is part of the compensation package.

It’s the high-maintenance regular employees that will be sent home. You know, the ones that require a living wage and gender diversity, and stage protests if an exec appears to support Trump. The average tenure of a Facebook employee is only 2 years, so it’s a convenient way to shed some cruft from the workforce.

I guess Facebook is going the way of IBM, but with better marketing.

Education

As a lifelong student, I have a keen interest in post-pandemic education. Based on my Twitter feed, homeschooling is the future (and the past). Here’s Bryan Caplan with a rundown of how to do it and why.

Instead of subjecting his offspring to the one-size-fits-all curriculum known as Common Core, Caplan sends them to play group with Robin Hanson, Alex Tabarrok, Tyler Cowen, Garett Jones, and Nathaniel Bechhofer. Here’s Tyler Cowen describing his efforts to help homeschool Caplan’s children, presumably because Cowen has no children of his own.

Most parents probably don’t have a team of world-renowned economists at the ready. Their most talented coworkers are low-level wage serfs slinging code all day. Come to think of it, what does an economist do? I get that they hold high-ranking positions at government agencies and think tanks, but what is it that they do all day?

Ancient Romans believed that chickens had oracular powers, because roosters crow before daybreak to portend the sunrise. Senators and generals consulted with chickens in an elaborate ritual where a sacred hen was placed in a circle sectioned to represent the alphabet, with grain spread around the circle. The hen’s scratching and pecking patterns were then recorded and interpreted by priests to inform public policy decisions.

The chicken’s magic doesn’t come from its ability to randomly scratch and peck; it comes from people’s ability to convince themselves that the bird knows exactly what it’s doing. Maybe the chicken has a PhD, or maybe it holds a faculty position at Harvard, or maybe it’s a Nobel Laureate. That’s why we should trust the chicken, we reason.

Over time, people realized that chickens were far too delicious to use for policy consultation, and thus the profession of Economist was born.

I don’t mean to pick on economists here. I’m sure a chicken could similarly do the job of a journalist, management consultant, or any of the “experts” trotted out by political entities. Yes, including climate scientists and epidemiologists. Here’s an NBER working paper that examines just how wrong the COVID-19 epidemiology models were (very!), and the policy implications of such wrongness. The conclusion is that we should leave the job to economists next time — presumably the health economists from Harvard and MIT who authored the paper. Or maybe just use a chicken.

Bryan Caplan’s scratchings and peckings are likely correct in this case. The future of education will look a lot like the past, where children of big muckety-mucks hang out with other muckety-mucks and continue each generation in their designated caste. We hide the nepotism of higher education under layers of elaborate rituals to convince the plebes it’s a meritocracy.

In the pre-pandemic era, well-to-do families in China would send their children to study at American universities if they couldn’t test into a top Chinese university. China’s college admission is based entirely on the National College Entrance Exam; no preferential admits for big donors or recruited athletes. It’s really embarrassing if you’re Xi Jinping and your daughter ends up somewhere like Shanghai Normal University. That’s the kind of thing that brings great shame to your dynasty.

On the other hand, Harvard would gladly take the unqualified child of a bigwig.

Colleges in the US are suspending standardized tests as an admission requirement and imposing quotas on Asian admits, frustrating Tiger Moms everywhere. Smart, competitive kids will realize the futility of fighting each other for the privilege of paying a six-figure sum to attend a school that values wokeness over substance. They’ll put the time they would have spent studying for the SATs towards studying for 高考 (Gaokao), or Единый государственный экзамен, the Russian equivalent. Brains will drain to elite universities in the unwoke parts of Asia and Eastern Europe, where they might actually learn something. Those who don’t care to learn will keep doing what they’re doing, and be revered as sacred gods.

Disrupting the House and Home

The local stores and gas stations have closed their restrooms to the public. Makes sense; public bathrooms are disgusting petri dishes.

But what if I’m out and about and I gotta go? I have an aviation friend who removed a seat from his Cessna 310 to retrofit a portapotty and sink for passengers. Maybe I can install the same in the back of my Ford Escape.

What makes a house? Four walls and a roof? Electricity and plumbing? A place to sleep, a place to eat, a place to poop? Then I realized they already make cars you can live in. They’re called RVs, and they’re parked all over the Bay Area because that’s the only way service workers can afford to live. Turns out Silicon Valley has been disrupting housing all along.

But that’s not what housing is about. Housing is, first and foremost, a form of wealth. For most Americans, it’s the majority of net worth, a line of credit, and a retirement plan. A house can’t create wealth by itself; you have to build a pyramid scheme around it. Impose scarcity through zoning regulations, then incentivize jobs to create increasing demand for the few homes that exist. Hence the “Twitter tax break” for tech companies in SF.

If Silicon Valley wants to disrupt the housing market, the solution isn’t to build more homes. It’s to create a new source of liquidity.

Here’s a NYTimes column promoting the idea that women should be paid for the work they do as wives and mothers. That got me thinking. Right now, the only path to compensation is to sue for child support and alimony in the event of a divorce. Until then, spousal transactions are untraced, untaxed, and contribute nothing to the GDP. Why are we leaving so much potential wealth locked up in illiquid marriages?

When lockdown ends, divorce rates will skyrocket. We already saw this happen in China. After sheltering in place for three months, children will sue for emancipation. Those who keep their families intact should be able to borrow against that asset. Loans create wealth!

Maybe this is the economic stimulus we need. You might think that familial relationships are too subjective to securitize, but remember — a house used to be a nonconvertible asset too. The Federal Housing Administration was created in 1934 to encourage people to take out mortgages and boost the Depression-era economy. It was only after homes were appraised and collateralized that they became a path to wealth creation.

RVs may be a terrible place to house a family, but as a bachelor or bachelorette pad, they’re downright adequate. If building homes is good for the economy, wrecking homes must be even better. Okay, I’m a Keynesian now.