2nd Annual Lehman Brothers Award for the Creative Destruction of Wealth

Every year, my company selects an entity to recognize for their outstanding contribution to creative wealth destruction. Last year’s Lehman Brothers Award went to The DAO, a dumb smart contract that led to an even dumber bailout. We’ve since seen a whole bunch of copycat token offerings, each one bigger and stupider than the last. Pathbreaking pioneers, those DAO creators were.

This year, we chose to honor Google. Since 2014, Google has spent over $265 million on corporate diversity initiatives. After three years of unprecedented effort, Google’s gender gap and racial-demography gap are bigger than ever.

What an exemplary waste of resources!


But wait, there’s more! Google has unlocked many additional achievements deserving of recognition. In the past year alone, the company has received the following honors:

Well done, Google. In your futile quest to discriminate against nobody, you have instead managed to discriminate against *everybody*.

[sustained, thunderous standing ovation]

Our most heartfelt congratulations to Sundar Pichai, Eric Schmidt, and all the other executives who worked so hard to make this happen. In closing, I leave you with some inspirational passages to empower and motivate your workforce in the path forward.

A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers by Lawrence McDonald and Patrick Robinson

Joe Gregory was a regular, run-of-the-mill, ho-hum financial sycophant, devoted to his master, Richard Fuld, but with few of the necessary tools and instincts to serve as president of Lehman Brothers. He suited the boss fine, however, since he posed not even the semblance of a threat and would do anything in the world for the chief.

Joe’s fixation was a subject called diversity. He was consumed with it. His aim was the mission of inclusion. He had an entire department devoted to it, headed up by a managing director. Great rallies were staged in New York’s auditoriums, with free cocktails and hors d’oeuvres served for up to six hundred people, all listening to Joe or one of his henchmen pontificating. “Inclusion! That must be our aim!” he would yell, as if we were running a friggin’ prayer meeting.

In Joe’s view, it was the culture of the corporation that mattered. Joe believed that inclusiveness would carry us to victory. If the culture was right, then all would be right. Which was all very well, but down in the trenches, where a trader might sweat blood to make a couple of million dollars, most of us were a bit tetchy about Joe Gregory going off and spending it on a cocktail party for six hundred people.

That might not have been fair to him, but that’s the way it seemed to us. Especially when it emerged that the top dog in diversity was earning well over $2 million a year and that the diversity division had a bigger budget and more people than risk management!

The Devil’s Casino: Friendship, Betrayal, and the High Stakes Games Played Inside Lehman Brothers by Vicky Ward

Gregory’s diversity program was derided in part because it was as big and expensive to run as some of the revenue-producing divisions. It was more expensive and had more employees than all of risk management. Behind his back, senior executives called the program “Joe’s social science project.” Someone nicknamed him “the Oprah Winfrey of Wall Street.”

Gregory wasn’t dissuaded by such grumblings; he knew the attention and money that Lehman spent on diversity made for good public relations. Indeed, Harvard Business School would even publish a paper on Gregory’s diversity program and its accomplishments.

R3 Should Just Buy Ripple

Previously, we made fun of R3 for complaining about a billion-dollar Option Contract that Ripple decided to terminate. R3 should have used a smart contract!

Now we have the actual court documents (thanks @MrDuke67).

According to Ripple, the Option was given to R3 in exchange for a technology and commercial partnership. Ripple claims that they were fraudulently misled into the partnership, and that R3 failed to deliver anything of value. Not only does Ripple want the agreements declared invalid, they also want R3 to pay punitive damages and legal fees:

But according to R3’s complaint, the Option had no strings attached:

I can’t help but feel sorry for Ripple here. It’s hard to imagine anyone agreeing to a partnership with R3 unless fraudulently induced, and the Option contract does kinda look like a freebie (full text here).

To make matters worse, the Option contract is now worth over a billion dollars, which is almost certainly more than Ripple’s entire company valuation (They raised $55M in last year’s Series B).

So here’s a modest proposal that should make everyone happy:

  • R3 goes to one of its banking partners for a billion-dollar loan*, using the XRP Option as collateral.
  • R3 acquires Ripple for a mix of cash and stock, up to a billion dollars.
  • Withdraw the complaints, exercise the Option, sell the XRP, pay back the loan in full.
  • Burn Ripple’s business to the ground.

Lo and behold, we’ve created shareholder value for all. Blockchains really are like magic.

*Better yet, tokenize the Option Contract and do an ICO.

Anti-Capitalist Propaganda in China

This is what Chinese people think America looks like:

We’re a bunch of greedy capitalists who objectify women and stomp on minorities.

This poster circulated around China in the 1960s. During that time, our National Education Program distributed pro-capitalist propaganda here in the States:

Fast-forward fifty years. Last week, I found myself in an impossible debate with a Chinese national over whether China allows greater freedom than America. He claimed that it was much easier to start a company or invest in business in his country, because they don’t have all the complicated regulations of the US.

That’s sort of true. China is free in the sense that you can litter everywhere and dump toxic waste in the water supply. There are fewer business-stifling regulations, but there are also fewer externality-preventing regulations.

I asked about censorship, capital controls, political prisoners. He replied that the government only did what was necessary to speed up economic growth.

China is basically an authoritarian regime, but two decades of progress have convinced the population that communism is the epitome of economic liberty. Meanwhile, a snapshot of our daily news feed looks exactly like China’s anti-capitalist propaganda from the ’60s. It seems that over the course of a half-century, the US and China have magically traded places.

Diversity and Inclusion for Bitcoin

No field of technology has accomplished as much as Bitcoin when it comes to promoting diversity and inclusion. Check it out — In recent weeks, we’ve learned:

  • North Korea spun up hundreds of Bitcoin (mining?) nodes beginning in May.
  • Japanese digital services company GMO is investing $90M in a new Bitcoin mining facility.
  • Putin’s Internet ombudsman is raising $100M for a Bitcoin mining farm. It will reportedly take advantage of Russia’s excess power capacity at deeply discounted rates.

Bitcoin’s strength lies in its jurisdictional diversity. Every transaction is created equal, no matter by whom or where. China’s concentration of mining power has been one of the biggest threats to Bitcoin, but if these new developments play out, we could see multiple state-sponsored server farms jockeying for power.

The biggest benefit of diversity is that every new idea is confronted with lots of competing opinions, so no decision ever gets done. This preserves the blockchain’s doctrine of immutability and permissionless access. The most inclusive state of the network is one in which every node is divided in a Mexican standoff.

I know, I know: People like to signal virtue by bemoaning Bitcoin’s lack of gender diversity. That’s okay. Signaling serves an important evolutionary function, and I have much respect for anyone privileged enough to expend resources on such an activity.

Still, diversity-driven virtue signaling is horribly misguided. Gender diversity is of zero concern for anything but the elitest of elite Western institutions. Bitcoin and its blockchain brethren are global: No other technological advancement so effectively serves state-oppressed Venezuelans as well as Silicon Valley software engineers. That’s the power of inclusion and equality.

Fiat Institutions in Virtual Worlds

Long before the age of billion-dollar Bitcoin mines, China was the world’s richest source of World of Warcraft gold.

WoW gold is a virtual currency that players use to buy weapons and animals for in-game missions. The currency is normally earned by completing challenges and killing monsters, but professional “farmers” spend their days performing rote tasks to acquire gold which they resell for US dollars. For a while, Chinese prison guards forced labor camp inmates to play Warcraft so that they could harvest the gold. Even Steve Bannon helped run a gold farming business.

There’s more: Each game server features an auction house, where gold can be used to buy tokens redeemable for digital goods and access to other Blizzard games. Tokens trade in a real-time market. It’s not that different from the ether-ICO economy, except that central banks haven’t tried to ban World of Warcraft.

A number of countries now want to control how people invest their digital currencies, but they will fail. Fiat authority is not transferable.

Just like money is a shared hallucination, so is authority. It makes no difference whether players are using virtual gold to buy virtual swords to join virtual guilds; or if they’re using virtual ether to buy virtual tokens issued by virtual companies. The only way to assert authority over a Warcraft realm is to become a max-level paladin, and the only way to assert authority over a decentralized currency is to control 51% of the nodes.

As a reminder, here is a handy guide from Mircea Popescu on how to interact with fiat institutions that attempt to claim jurisdiction over virtual realms.

See Also:
A history of World of Warcraft’s gold economy –Memory Insufficient