People Love Complaining About Bitcoin Payments

Here’s a 2007 video of Howard Lindzon trying to buy food in Manhattan using Canadian dollars. He tells people that CAD is a commodity currency, backed by Canada’s oil and gold, and Americans should treat his money as a valuable asset. None of the street vendors want his Canadian dollars and it is all very sad.

CANADIAN DOLLARS HAVE FAILED AS A PAYMENT SYSTEM, is a blog post we might see in the WSJ.

Just kidding. But here’s the umpteenth article about how Bitcoin sucks because merchants don’t accept it and customers don’t use it. American merchants don’t accept bitcoin for the same reason New Yorkers don’t take Canadian dollars: They have to pay their employees and landlords in USD. Beyond that, everyone in this country has one very big US dollar creditor in common, and that’s the IRS.

Eventually Howard manages to get two raspberries for $20 CAD. He’s basically getting screwed, but the fruit vendor isn’t much better off. The vendor will have to go through the asspain of changing CAD for USD to pay his raspberry suppliers. The only reason this exchange can occur is because the fruit vendor values his time even less than Mr. Lindzon does.

A few years ago, retailers like Overstock and Microsoft made a point of adding bitcoin payments so that they could look cool and innovative. It was a good effort, but few customers ever chose the bitcoin option. When using bitcoin, the customer has to pay an extra transaction fee to the miners. With a credit card, the merchant covers transaction costs. On top of that, many cards reward their customers with airline miles for sticking it to the merchant. If presented with bitcoin versus credit card, a customer should choose the credit card every time — it’s cheaper!

A medium of exchange will only be successful if it lowers the transaction cost for both the customer and the merchant. Stripe is a payment processor that charges 0.8% to process a bitcoin payment, and 2.9% + 30 cents to process a credit card payment. A Stripe merchant could potentially offer a 2% discount to bitcoin users and still come out ahead, but that’s pretty weak. You don’t want your customers deliberating a 2% discount at the final stage of the checkout process.

Bitcoin will never become a mainstream payment system, because mainstream retailers already have access to low-cost payment processors. Spending bitcoin at Overstock is like trying to spend Canadian dollars in New York — it increases the transaction cost for both parties with no benefit.

Bitcoin isn’t competing on low-cost processing. It’s competing on settlement risk, which is a cost suffered by the merchant when a customer payment falls through. There are some businesses that mainstream payment processors refuse to serve, because of legal risk or because the business operates in an industry that sees a lot of fraud. Stripe gives a pretty good overview of high-risk industries here. Online pharmacies, crowdfunding, gift cards — This is where bitcoin adds the most value.

If you’re in the business of selling anonymity tools, you have a pretty high risk of being paid with stolen credit cards.

High-risk industries attract high-risk customers, which means merchants get a lot of payment disputes and chargebacks. That’s expensive. Bitcoin’s biggest benefit is that chargebacks are impossible. If you want to know how much this is worth to a merchant, check out some of the scuzzier parts of the internet: Online pharmacies typically offer discounts of 25% or more for choosing bitcoin. Bitcart sells Amazon gift cards for 15% off, and offers around 20% off for bitcoin. The customer gets a big discount, the merchant avoids the risk of chargeback, and everyone is happy.

Bitcoin is a perfectly fine payment system, just like the Canadian dollar is a perfectly fine currency. You just have to find the right place to spend it.

The first thing people do with stolen credit card numbers is buy gift cards to launder into cash. For this reason, many card processors refuse to serve gift card resellers.

See Also:
The Value of Settlement Finality

We’re all Turning into Cats

I have a cat named Kurt. Sort of. There’s this creature that comes to my yard every few days and meows plaintively until I feed him to go away. You might call it a shakedown, if Kurt was a cop.

There’s a theory that cats were domesticated for their infantile faces. Wild felines don’t meow, but housecats evolved to do so because it makes them sound like fussy babies. Over tens of thousands of years, humans selectively bred the ones that were most pitiful and convincingly helpless. I don’t like cats, but I can see how a childless spinster might be moved by something like this:

Speaking of learned helplessness, here’s a new Stanford admit whose college application essay was nothing but #BlackLivesMatter copy-pasted a hundred times. The rest of the application was a treatise on his lifelong struggle to overcome systemic oppression as a Muslim. The kid’s father runs a billion-dollar hedge fund, but don’t let that detract from his disadvantaged status.

A racist hate site that I never visit is praising the kid’s incredible ability to convince the world of victimhood despite living a life of privilege. They point out a similar student in China during the Cultural Revolution. Zhang Tiesheng (張鐵生) was a former Red Guard who moved to a rural commune as a production brigade leader. In 1973, Zhang went to take a university entrance exam to get the hell out of the countryside. Zhang didn’t know the answers to the exam questions, so he left the answer sheet blank and on the back wrote a statement about how entrance exams are a tool for the educated elite to oppress honest laborers like himself. The statement was reprinted in all the papers, 張鐵生 became a national hero, and today he’s a multimillionaire who somehow acquired New Zealand citizenship despite always living in China.

That’s what happens when you feed the cats.

A competing theory is that cats were domesticated to chase out rodents, but I don’t buy it. If early humans needed a mouser, they would have bred a dog to do it. We have pickle-shaped dogs that can dive into rabbit burrows and drug dogs that can smell a joint in my pocket. Chinese merchant ships carried hairless dogs for rat control. The lack of fur reduced disease-carrying fleas, which is why you would want to kill rats in the first place.

Despite their utilitarian superiority, Chinese rat-catching dogs aren’t very popular because they’re ugly.

Just kidding. All dogs are beautiful.

Progressive Regression

Before it became politically incorrect to do so, census workers used to record whether people were deaf, dumb, blind, insane, or idiotic. These are perfectly reasonable statistics for measurement – it helps the states determine funding allocation for insane asylums.

Now, obviously an insane idiot cannot accurately diagnose himself for the census marshals. Thus the questionnaires provided instructions to the workers [1]:

The fact of idiocy will be better determined by the common consent of the neighborhood, than by attempting to apply any scientific measure to the weakness of the mind or will.

The problem was that society had a poor understanding of what it meant to be insane, or an idiot. Unwed mothers were frequently sent to mental hospitals under the rationale that moral failings were a sign of feeble-mindedness1. Or, more likely, their family members were embarrassed of them. As a result, state institutions turned into holding bins for burdensome relatives and socially redundant women. By 1904, the US had 150,000 patients institutionalized — about 0.2% of the population.

During the Progressive Era, people got it into their heads that the most compassionate thing we could do for our growing population of idiots and lunatics was to sterilize them. Indiana became the first state to enact sterilization legislation in 1907, with Washington and California following shortly thereafter.

Eugenics supporters on Wall Street

The principle that sustains compulsory vaccination is broad enough to cover cutting the Fallopian tubes… Three generations of imbeciles are enough.
–Justice Oliver Wendell Holmes, Jr.

In the 1927 case of Buck v Bell, the Supreme Court ruled that eugenics-based sterilization was indeed constitutional, and opened the door for compulsory sterilizations at mental institutions nationwide. Progressive California led the way, performing over a third of the sterilization operations in the country.

Southern California Asylum for the Insane and Inebriate

Those with institutionalized family members were not necessarily pleased. While it might make sense to have a relative committed to keep them from inheriting the farm, most people don’t want to go so far as to see their family members neutered (see also: The Selfish Gene).

People began hiding their idiots and lunatics from the census workers. Later versions of census instructions warn:

It not infrequently happens that fathers and mothers, especially the latter, are disposed to conceal, or even to deny, the existence of such infirmities on the part of children. In such cases, if the fact is personally known to the enumerator, or shall be ascertained by inquiry from neighbors, it should be entered on the schedules equally as if obtained from the head of the family.

After World War II, eugenics pretty much fell out of favor in society, as did the idea of labeling anyone as mentally defective. The US Census Bureau stopped asking questions about the blind, deaf, insane and idiotic, and by 1955 the accepted treatment for mental affliction was to take two Thorazine and go live on the street.

Today we have fewer than 50,000 patients in psychiatric hospitals, despite the population increasing over fourfold since 1904. The 12,000 homeless people in San Francisco are just temporarily embarrassed millionaires, I guess.

“According to the Human Betterment Foundation [of Pasadena], during the last quarter of a century California state institutions have sterilized more than 11,000 insane and feebleminded patients . . . Eugenic sterilization in this form represents one of the greatest advances in modern civilization.” (1937)

1. Don’t blame us, we were only copying the UK! In 1913, Parliament passed the Mental Deficiency Act, which labeled women with illegitimate children as “moral imbeciles.” Here’s Winston Churchill eloquently arguing in favor of eugenics.

1. Measuring America: The Decennial Censuses From 1790 to 2000. US Census Bureau
2. Bureau of the Census Catalog, 1790-1972

How to Solve the Engineering Shortage

In between taking my geritol and feeding the pigeons, I came up with a brilliant idea to solve the tech industry’s talent shortage AND its diversity problem: Hire more old people.

The rationale behind “diversity” in any organization is to bring contrasting perspectives to the table. A really easy way to get diversity of opinion is to look a generation above. Try talking to your parents, or grandparents, about any matter of social and political import. See?

Yesterday, the internet collectively soiled itself over VP Mike Pence’s policy of never dining alone with women who aren’t his wife. But anyone born before 1963 would find that behavior perfectly reasonable*! The problem is that the internet, and the internet industry, is restricted to a narrow cohort whose formative years were shaped by the same series of world events.

Silicon Valley is known for putting employees out to pasture by age 35. The median age of Facebook employees is 28, and at Amazon and Apple it’s a Methuselean 31. Prime working age in this country runs from 25 to 54, which means that a reasonable company median ought to be closer to 40.

I get it, no one wants to work alongside Grampa. The Soylent cabinet will have to be stocked with Metamucil, catered dinners will move up to 4pm, the foosball table will make way for shuffleboard, and company team-building exercises will consist of bingo night.

But it’s important to bring an older perspective to the industry. Older employees can make sure that VR goggles properly support bifocals, self-driving cars remain safely below the speed limit, and Siri and Alexa will know better than to talk back to their elders.

Okay yeah maybe there’s a reason why Facebook keeps getting voted the best place to work in the US.

*It looks like those born after 1992 might agree as well.

Uber isn’t Woke

Uber has gotten a lot of flak for alleged sexism in the workplace, but according to its Diversity Report, 15.4% of Uber tech employees are women. That’s about on par with Facebook, and Facebook has been the best place to work in the country for four years running, according to BusinessInsider and Glassdoor.

Uber is the only one getting ripped on because it’s simply not woke. Here’s Lyft President John Zimmer in a recent interview about competing with Uber:

We’re woke. Our community is woke, and the U.S. population is woke… We’re not the nice guys, we’re a better boyfriend.

Statements like this make me wish I had Lyft installed on my phone, because I really want to #deleteLyft right now. If Uber’s company culture is considered hostile to women, I suspect that Lyft’s culture is hostile to anyone over the age of twelve.

Lyft employees doing woke stuff.

For all the lip service Silicon Valley pays to Diversity Issues, the industry has a very peculiar way of defining its goal. Diversity in Silicon Valley means having equal representation from women who think the same way you do, people of every color who think the same way you do, each of the LGBTTQQIAAP gender identities who think the same way you do, and so on.

Despite Lyft’s claims of wokeness, Verge says that Lyft is Not actually Woke, because Peter Thiel is an investor and Carl Icahn is a board member. Thiel and Icahn are advisors to the Trump administration — Guilty by transitive property #NotWoke.

It sure is hard to be woke.