Tuesday, August 22, 2017

"Estonia could be the first country to do its own initial coin offering"

As noted in the intro to 2013's "The World is Going Artisanal-- Caffeine: The Magazine":
It was in 2005 that I first started hearing normally sober and reliable people discuss the economy in terms that, loosely translated, said: Everyone will make their fortune by swapping real estate and selling each other "Tall half-skinny half-1 percent extra hot split quad shot lattes with whip"....
It appears I'll have to add ICO's to the equation: "In the future everyone will make their fortune by selling coffee to each other, trading real estate back and forth and buying each other's crypto"

From City AM:

Estonia proposes estcoin, a government backed cryptocurrency, issued via an initial coin offering (ICO) after e-residency success
Estonia is living up to its digital reputation and setting tongues wagging with its latest idea: its very own digital currency issued via an initial coin offering (ICO).

The buzz word of the moment in the heady world of cyptocurrencies, ICOs, are being used to raise cash via a digital token that's issued to investors.

What investors get back in return depends what the company offers, much like crowdfunding, but can be some sort of stake in the company or merely being able to use the blockchain-based software it's building.

But what's on offer in a potential ICO of a nation state? That's exactly what Estonia wants to work out.
The head of its innovative e-residency programme has said the country is considering what the issuance of "estcoin", the country's very own digital currency, would look like.

In a blog post, Kaspar Korjus said: "Estcoins could be managed by the Republic of Estonia, but accessed by anyone in the world through its e-Residency programme and launched through an Initial Coin Offering (ICO)."

And the man behind the most succesful ICO to date which kicked off the trend is involved. Vitalik Buterin, the founder of Ethereum, (now the second most valuable cryptocurrency in the world) is offering his feedback on the project and suggest it could be a way for the country to attract international investment....MORE

A Vision of the Amazon/Whole Foods Future (AMZN)

From Fast CoDesign:

A Wild Vision Of The Future Run By Amazon And Whole Foods
Drones. Shared refrigerators. Hydroponic garages. And never setting foot in a grocery store again. 

Since Amazon bought Whole Foods for $13.7 billion, consumers have been left wondering what that partnership will ultimately look like. Will Whole Foods stores just become another face for Amazon’s anonymous distribution centers? Will Prime memberships include access to more local produce? Or will retail, as we know it, fundamentally change, as Amazon’s hyper efficiency mixes with the Whole Foods fresh, local mentality to create something entirely new? 
Austin-based design firm Argodesign is betting on the latter. As a thought experiment, the studio mocked up a provocative series of concepts suggesting what an Amazon Foods could look like, if powered by drones, Echo refrigerators, and a sharing economy model reminiscent of Airbnb or Uber.
Meet The Echo Fridge
Right now, you might order groceries through your Echo personal assistant, or reorder something through an Amazon Dash button. These items might arrive in a few hours or a few days. But what if Amazon/Whole Foods could move its stock from distribution centers and store shelves to your shelves, predictively, and adaptively?

That’s the idea of the Echo Fridge. It has an exterior-facing door. In suburban houses, it’s large, allowing a small vehicle to pull up. In urban areas, it’s a box about the size of an AC unit. Through this door, the fridge would take deliveries of food Amazon believes you will want. But you don’t pay for them unless you use them.

On the kitchen side of the Echo Fridge, you might see two doors. The door on the right would have Amazon’s suggested items, ready to eat. Move them to the left door–your personal space–and they’d be purchased automatically. Leave them, and they might be removed, delivered to a neighbor who wants that bag of oranges or bottle of ketchup. 

“When we started looking at the whole problem, we started from the high level: improving distribution through robotics, and this centerpiece idea of making the refrigerator the point of sale,” says Mark Rolston, founder of Argodesign. “If you start with that point of logic, because of improved distribution, availability of robotics, and support of drones, you start to realize, the inventory in the store starts to not really matter. And the store doesn’t matter as it does today to host inventory.”
This is the fundamental shift of the concept–the store is no longer the store. Your home is now the store. And while, yes, it’s a slightly unsettling thought to not own everything in your fridge, where Argodesign takes this idea empowers the individual–as much as it enslaves them to Amazon’s will....MUCH MORE

The Journal Peer Review Process, Illustrated

From Digitopoly:

News from Management Science (Business Strategy)
I recently took over from Bruno Cassiman as the Department Editor for the Business Strategy section at Management Science. This seemed like a good opportunity to reflect on some changes being made — that is, implementing some of the ideas in Scholarly Publishing and its Discontents — as well as some things I have learned that may assist you if you are thinking of submitting here.

Expanded Editorial Board
At Management Science, referee selection and the main decision are handled by Associate Editors. I wanted to expand that board for Business Strategy and was fortunate to find many people willing to serve. Here is the new board.

Juan Alcácer, Harvard University
Kevin Boudreau, Northeastern University
Jennifer Brown, University of British Columbia
Meghan Busse, Northwestern University
Leemore Dafny, Harvard University
Andrea Fosfuri, Bocconi University
Maria Guadalupe, INSEAD
Neil Gandal, Tel Aviv University
Mara Lederman, University of Toronto
Hong Luo, Harvard University
Fiona Murray, Massachusetts Institute of Technology
Evan Rawley, University of Minnesota
Michael Ryall, University of Toronto
Rachelle Sampson, University of Maryland, College Park
Timothy Simcoe, Boston University
Catherine Thomas, London School of Economics
Rosemarie Ziedonis, Boston University

New Editorial Statement
There has been much concern about whether top journals are taking sufficient risks. So I wanted the editorial statement to reflect a weighting of ‘scientific impact’ more than ‘immediate managerial application.’...MORE
...Your best bet not to get desk rejected is to state in a cover letter what your contribution to business strategy is, taking into account what has been written in the editorial statement. Also, don’t have titles with more than 4 buzz words. Believe it or not, it happens alot and ‘atell’ for me.

Second, we are going to aim for one round of revisions. Sometimes this can go for many rounds. The goal is to have the second revision be a straight up or down, accept/reject decision....


Target Corp. Cuts Ties With Hampton Creek: Just Say No to Just Mayo

From Bloomberg:
Target Corp. will no longer sell products made by food startup Hampton Creek Inc. after an internal review, the latest major blow to the beleaguered maker of Just Mayo eggless mayonnaise and other plant-based foods.

The retail giant decided to end the relationship about two months after receiving what it described as “specific and serious food safety allegations about Hampton Creek products.” Target pulled the San Francisco company’s products from shelves in June while it looked into the matter and shared the claims with the U.S. Food and Drug Administration.

Hampton Creek has said its products are safe and comply with FDA rules. The FDA has said it won’t investigate unless it receives reports of consumers getting sick and has “no safety concerns with Hampton Creek at this time.”

“Although the FDA is not pursuing this further, we used the opportunity to review our portfolio, as we regularly do, and decided to reconsider our relationship with Hampton Creek,” Jenna Reck, a spokeswoman for Target, wrote in an email Friday. “We are not planning to bring Hampton Creek products back to Target and have openly communicated our decision with the Hampton Creek team.”
Last week, Hampton Creek released a statement saying the FDA had concluded its products are safe and that the company hoped to resolve the issue with Target soon. Hampton Creek said its public statement was to blame for the retailer’s decision. “Target informed us that sharing with the public the FDA’s conclusion that our products are safe violated Target’s vendor communication guidelines,” Andrew Noyes, a spokesman for Hampton Creek, wrote in an email.

Target said the statement was one of several factors. “There were multiple reasons we terminated our relationship with Hampton Creek and all of the reasons were clearly communicated to Hampton Creek,” Reck said by phone. She declined to elaborate, saying Target doesn’t discuss details of its business relationships....MORE

The Consulting Biz

From Dilbert.com:

Dogbert's Unreliable Research Company - Dilbert by Scott Adams

K@W: "Why Automation Is Killing the Property Appraisal Business"

From Knowledge@Wharton:
Property assessment has long been a solid industry with steady work for those willing to undertake the education and training required to enter the field. But that stability is changing thanks to automation. The number of appraisers is shrinking as software gets more accurate at valuing property and is increasingly integrated into the sale process. Benjamin Keys, Wharton professor of real estate, and Stan Humphries, chief analytics officer at online real estate marketplace Zillow.com, recently appeared on the Knowledge@Wharton show on SiriusXM channel 111 to discuss the changes and where the industry is headed. (Listen to the podcast at the top of this page.)

Following are key takeaways from their conversation:

The margin of error is decreasing as automation improves.
Zillow offers a tool it calls Zestimate that uses input factors to determine the worth of a property. The Zestimate, which has been around since the website’s inception in 2006, cannot be considered an official, certified appraisal. But it’s a start, said Humphries. It’s also getting better as the company pours more resources into research and development.

“Back when we launched, we put in about 43 million homes and had a median error rate of close to 14%,” he said. “Today, we value about 100 million homes every single night and our error rate is down to 4.3%. So, we’ve made a lot of advances in the accuracy of valuing homes.”

Zillow is pushing for even greater precision. The company is offering a monetary prize for its teams that can get the algorithm’s error rate down to 2% or 3%.

“Computerized models are going to get very accurate, although in the end there’s probably some role for human beings to be involved there,” Humphries said. “The question is, what is that role of that human being? Right now, appraisers are professionals. They have a high degree of discretion, and there’s a bit of an art to what they do. In the future, there is a role to make sure that the facts the computer is using are accurate, but that’s more of a technician type job as opposed to professional.”
Keys credits Zillow for improving virtual assessment methods and said automation is an undeniably growing part of the industry.

“I think it’s only a matter of time until the technology is strong enough and cheap enough, from the standpoint of the lenders and the buyers, to cut out the humans from this process and move to more of an algorithm-based process,” he said.

Digital appraising can reduce confirmation bias....

Walmart-Amazon Battle of the Blimps (AMZN; WMT)

We've looked at a half-dozen Amazon patents over the last year but this is the first time we've had one from WMT.

From Übergizmo: 

Walmart Patents A Floating Blimp Warehouse

Amazon isn’t the only retailer that’s looking into drone delivery. Walmart appears to be working on a similar concept but its solution might be a bit different compared to Amazon’s. Walmart has filed for a US patent for a floating blimp warehouse which will make delivers via drones. The idea is to have a floating warehouse up in the sky from where Walmart can instantly ship products to customers using drones.

According to the patent filing, the blimp-style floating warehouse would fly at heights between 500 and 1,000 feet. It will have multiple launch bays for sending drone deliveries. The blimp itself will either fly autonomously or be remotely controlled by a human pilot.

This solution could help Walmart lower the cost of fulfilling online orders, cutting down on “last mile” costs to a customer’s house which is normally handled by a logistics company...MORE.
From our Aug. 6 AMZN patent roundup:
"Amazon Wants to Build a Network of Mobile Drone Maintenance and Delivery Platforms" (AMZN)

...I do like the steampunk-retro Montgolfier Bros/Henri Giffard stylings of the the Amazon airships:

And one we missed.
Another Amazon Patent: Shipping Label With Built-in Parachute

Lessons in Asset Valuation: the Great Warrants Bubble of China

From the Naked Hedgie:
Investors exert a great deal of intellectual effort to determine the correct valuation of securities. Economic value is central to our decision making and it plays a major role in our intuitive psyche. In daily life, when we buy a loaf of bread or a tank of gasoline, we tend to have a good idea about what we think is cheap and what’s expensive. We like bargains, don’t enjoy being ripped off, and just as we are inclined to shop for value as consumers, we find value investing intuitively appealing. But here’s the critical difference between buying goods and investing: shopping for investments is speculative while buying stuff isn’t, and speculation activates the part of our mental circuitry that can heat up to a boiling point and overwhelm any rational consideration of value.

On aggregate, speculative activity frequently produces price trends and in some cases bubbles. Here’s how this dynamic shapes up: in making investments, our rational goal is to obtain the best possible return with the least risk necessary. If we buy a house or a stock for investment, we want to receive a stream of rents or dividends and to have the opportunity to sell the asset for a price that’s higher than what we paid. Since those outcomes depend on other market participants, we are obliged to reflect on what they might do. Thus, if house prices are going up we infer that people are keen on investing in real estate and that rising demand would push future house prices even higher. If we are convinced that this is the case, we might disregard the fact that houses are already expensive. In effect, led by the actions of others, we might accept inflated house prices and proceed with the investment anyway.

This dynamic was demonstrated empirically in a clever experiment designed by Colin F. Camerer at Caltech’s Experimental Economics Laboratory [1]. In this experiment, a group of students were asked to trade shares in a hypothetical company during 15 five-minute periods. The students were not allowed to discuss their actions and only communicated via buy and sell orders. To start with, each student received two shares and some money with which to buy more shares. At the end of each of the 15 periods, the shares paid a $0.24 dividend for a total payout of $3.60 per share throughout the experiment ($0.24 x 15). This provision removed any uncertainty about the shares’ value: at the start of the experiment, the maximum value of one share was $3.60 and this amount diminished by $0.24 after each round, since that amount of dividend was already paid out. The highest price any player should accept to pay for a share should not be one penny more than what that share would yield in remaining dividends.

However, Camerer’s experiment showed otherwise. When the experiment started the share price immediately jumped to $3.50, close to the shares’ rational value. But rather than steadily declining with each new round, the price remained near that level almost to the very end of the experiment. Even when the value of each share fell below $1, students were still willing to pay $3.50 to buy them. When the experimenter asked the students why they bought the shares at prices that obviously far exceeded their value, the students would reply that, “Sure I knew that prices were way too high, but I saw other people buying and selling at high prices. I figured I could buy, collect a dividend or two, and then sell at the same price to some other idiot.”[2]

A strange confluence of circumstances produced this very same dynamic in a real-life experience that became known as the Chinese Warrant Bubble, described in a remarkable paper by Princeton University’s Wei Xiong and Columbia University’s Jialin Yu [3].

Chinese Warrant Bubble
In an effort to develop China’s financial derivatives market, from August 2005 the China Securities Regulatory Commission (CSRC) started introducing a small number of warrants – financial instruments similar to options, issued by publicly trading corporations. Firms were allowed to issue call or put warrants. With call warrants, issuing firms granted investors the right to buy stock from them, and put warrants gave them the right to sell stock back to the issuing company at a specified strike price and time period during which investors could exercise their option to buy or sell stock shares.

Between 2005 and 2008, 18 put warrants with maturities from 9 to 24 months were issued to the public. During this very period, Chinese stock market experienced a strong bull run and its index vaulted from 1,080 points in June 2005 to 6,124 in October 2007. This rally quickly pushed most put warrants so deep out of the money that they became worthless. In spite of this, feverish speculation on these securities produced an extraordinary financial bubble, unique in history of bubbles because warrants continued trading at spectacularly high levels of turnover and very inflated prices, even as it became evident that their value clearly dropped to zero.

Consider the case of a Chinese liquor producer, WuLiangYe corporation.....MORE

"TEU Tokens and Blockchain Could Shape the Future of Container Shipping"

Good grief, don't give DryShips any ideas.
From gCaptain:
Blockchain initiative 300cubits has created a new type of cryptocurrency to solve liner shipping’s US$23bn “booking shortfall” conundrum.

Named TEU, the de-facto industry currency is distributed as tokens on the Ethereum network and will be tradeable on various global cryptocurrency exchanges.

300cubits claims the tokens will help to eliminate shipping’s “trust issue” by reducing the counterparty default risk, caused by shipper ‘no-shows’, and by carriers ‘rolling’ cargo.

According to New Jersey Institute of Technology’s Professor Michael Erlich, the impact of this booking shortfall can be quantified as 5m teu a year, which costs the industry $23bn when knock-on effects, such as carriers’ lost revenue and shippers’ additional inventory costs, are calculated.
300cubits’ solution is to use TEU tokens as booking deposits. The tokens are coded with a set of immutable conditions to create blockchain-enabled smart contracts to govern the booking transaction.
“Once committed, neither party can alter what has been agreed,” said 300cubits.

“Both the container lines and their customers will be given TEU tokens that will be held as deposits with conditions, and paid out later, upon the execution of the shipment booking.

“The container lines will be compensated with the TEU tokens if the customer does not turn up with cargo. Likewise, the customer will be compensated with the TEU tokens if their cargo is rolled.”
The no-show issue is clearly a pressing one for shipping lines. In June, CMA CGM introduced a $150 per teu cancellation fee for booked services to the Indian Subcontinent, Middle East Gulf and Red Sea ports.

However, according to 300cubits co-founder Johnson Leung, cancellation fees and other penalties can cause further inefficiencies.

“Shipping companies are already putting in a lot of resources and spending millions on this lack of trust issue,” he told The Loadstar....MORE

"Zinc's Supply Surge Is Coming"

The party in zinc, it's all anyone can talk about, may be coming to an end.

From Bloomberg Gadfly, Aug. 18:
Zinc is on a tear.

After aluminum, the metal used in galvanizing steel and sunscreens has been the best performing of the London Metal Exchange's six main contracts so far this year. Over the past week, the price chart has gone vertical -- busting through the $3,000 a metric ton level for the first time in a decade with a 5.4 percent jump Wednesday.

Zinc's moment in the spotlight has been a long time coming, but bulls should watch out -- it may be short-lived.

For much of the past decade, the metal was considered among the least attractive on the LME. Because of supply that's widely distributed among a large group of producers and a tendency to occur geologically alongside other metals like lead, copper and silver, few miners are dedicated to maintaining profitable supply and demand in zinc.

No Control
The top 10 zinc miners account for only about a third of global annual production

Go back five years, and disinvestment was the order of the day. Mine closures, such as Vedanta Resources Plc's Lisheen pit in Ireland and MMG Ltd.'s Century in Australia, would yank about 1 million tons of annual supply from the world's 13 million-ton-a-year zinc market between 2012 and 2020, MMG's CEO Andrew Michelmore said in a 2014 presentation. New projects would fill less than half the gap, he said.

Sure enough, output dipped severely last year, particularly after Glencore Plc cut output at its McArthur River and Mount Isa mines in Australia in response to slumping prices in 2015. With China's pre-Communist Party Congress construction boom providing a boost to demand, the market has now run short: Exchange inventories last month touched their lowest levels since 2007....MORE

Meanwhile, in Northern China

We last visited Harbin in Aug. 6's "ICYMI: So this Worm Eats Plastic and Poops Antifreeze".

From Soylent News:
Researchers have improved the design of Cylindrical shaped Hall thrusters (CHTs), a type of ion drive used in spacecraft:
Researchers from the Harbin Institute of Technology in China have created a new inlet design for Cylindrical shaped Hall thrusters (CHTs) that may significantly increase the thrust and allows spaceships to travel greater distances.
[...] The researchers injected the propellant into the cylindrical chamber of the thruster by a number of nozzles that usually point straight in, toward the center of the cylinder. The angle of the inlet nozzles changed slightly, sending the propellant into a rapid circular motion and creating a vortex in the channel.
They then simulated the motion of the plasma in the channel for both nozzle angles using modeling and analysis software called COMSOL that uses a finite element approach to modeling molecular flow.
This resulted in a gas density near the periphery of the channel is higher when the nozzles are tilted and the thruster is run in vortex mode.
According to the study, the vortex inlet increases the propellant utilization of the thruster by 3.12 percent to 8.81 percent, thrust by 1.1 percent to 53.5 percent, specific impulse by 1.1 percent to 53.5 percent, thrust-to-power ratio by 10 percent to 63 percent and anode efficiency by 1.6 percent to 7.3 percent, greatly improving the thruster performance.
More likely to be deployed than EmDrive.

Effect of vortex inlet mode on low-power cylindrical Hall thruster (open, DOI: 10.1063/1.4986007) (DX)

Hurricane Watch: "Atlantic tropical activity forecast above-average over next two weeks"

This is our first heads-up of the season. Although we are 83 days into it, the season is still around three weeks from the statistical peak. From NOAA:


From Unisys the Sea Surface Temperature anomaly map:


The extreme anomaly we saw along the US eastern seaboard in May has dissipated a bit but is still running above the 30-year average.
Meaning storms that get to, say South Carolina, will have fuel to intensify.

Probably more interesting is the west coast of South America at the equator and extending out to the Dateline: that damn near looks to be a budding La Niña.

Anyhoo, on to the headline story, From the risk transfer intelligence mavens at Artemis:
The tropical Atlantic is forecast to see activity levels of greater than 130% above average over the next two weeks, according to forecasters from the Colorado State University. The CSU team highlight a number of possible tropical storm or hurricane threats as we approach the peak of the 2017 Atlantic hurricane season.

Activity is measured based on accumulated cyclone energy (ACE) of named tropical storms and the CSU forecasters, led by Philip Klotzbach, believe that ACE will run at least 130% above the norm over the coming fortnight.

First, tropical storm Harvey has formed and is now threatening the Leeward Islands of the Caribbean, before it tracks into the deeper Caribbean and takes aim on Central America. Harvey is currently not forecast to reach hurricane strength, but with waters warm and the possibility of a shift into the Gulf, the chances of intensification cannot be completely discounted.

Second, the National Hurricane Centre (NHC) and other forecasters are predicting that tropical waves in the Atlantic have a reasonable chance of development, one a high chance the other medium.
The tropical wave with a high 70% chance of development is forecast to take a path along the top of the Caribbean towards the Bahamas, which puts its current forecasted path dangerously close to Florida. At this stage it is too early to forecast potential strength, or even whether this will become tropical storm Irma, but this is definitely a disturbance to watch for insurance and reinsurance interests.

The medium chance disturbance is expected to curve further north, if it can become a named storm....MORE
Finally from Ryan Maue, Weatherbell meteorologist and keeper of the Accumulated Cyclone Energy stats:

Harvard Medical School: "Your brain on chocolate"

“…For, after all, I had been into cocoa a bit myself. That was back when The Great Winfield had discovered cocoa trading. Occasionally in those more leisured days I would sit with him lazily watching stocks move, like two sheriffs in a rowboat watching catfish in the Tennessee River….”
-'Adam Smith', Supermoney

We'll probably be looking at cocoa a bit more over the coming weeks $1883/tonne, down $9.00.

From Harvard Medical School:
Did you know that places where chocolate consumption is highest have the most Nobel Prize recipients? It’s true, at least according to a 2012 study published in the New England Journal of Medicine. Of course, that could be a coincidence. But is it possible that intelligence or other measures of high brain function are actually improved by the consumption of chocolate? A new review summarizes the evidence and concludes with a resounding “maybe.”

Keeping your brain healthy
When it comes to preserving and improving brain function, let’s face it: we need all the help we can get. With age, diseases that cause dementia, such as stroke, Alzheimer’s disease, and Parkinson’s disease, become more common. And since we have an aging population, predictions are that dementia will become much more common in the near future. Yet despite decades of research, there are no highly effective treatments for dementia.

As for preventive measures, the best recommendations are those your doctor would make anyway, such as regular exercise, choosing a healthy diet, maintaining a normal blood pressure, not smoking, and drinking only in moderation. “Brain exercise” (such as challenging math problems or word games) and a variety of supplements are unproven for long-term preservation of brain function or prevention of cognitive decline. While some studies suggest that antioxidants, fish oil, stimulants such as caffeine, or other specific foods may help improve brain function or prevent dementia, these benefits are hard to prove and studies have been inconclusive at best.

What’s the scoop on chocolate and the brain?
A new review published in the May 2017 edition of Frontiers in Nutrition analyzed the evidence to date that flavanols (found in dark chocolate and cocoa, among other foods) may benefit human brain function. Flavanols are a form of flavonoids, plant-based substances that have anti-inflammatory and antioxidant effects. Here’s a sample of the findings:
  • Short-term consumption may be helpful. For example, a 2011 study of young adults found that two hours after consuming dark chocolate (with high flavanol content), memory and reaction time were better than among those consuming white chocolate (with low flavanol content). However, other similar studies showed no benefit.
  • Long-term consumption may be helpful. One 2014 study found that among adults ages 50 to 69, those taking a cocoa supplement with high flavanol content for three months had better performance on tests of memory than those assigned to take a low-flavanol cocoa supplement....

HT: Economic Policy Journal 

Monday, August 21, 2017

"U.S. grains: Corn drops to nearly one-year low"

From Reuters via Ag Canada:

Wheat down to contract lows on hefty global supplies
U.S. grain prices fell about one per cent on Monday, with benchmark Chicago Board of Trade December corn sinking to a nearly one-year low, on technical selling and easing concerns that dry weather would reduce harvests.

Several CBOT wheat futures contracts dropped to lifetime lows, while soybeans notched small declines.

Soyoil and palm oil futures both gained ahead of the U.S. Department of Commerce’s expected announcement at midday Tuesday of countervailing duties on imports of Argentine and Indonesian biodiesel.

“There’s not many areas left in the United States that will have substantial drought impact, and there’s a lack of bullish news (in wheat),” said Futures International analyst Terry Reilly.
Rainfall was expected to benefit soybeans and corn in the top growing state of Iowa, INTL FCStone said in a client note.

Scouts on an annual U.S. crop tour found variable yields for corn and soybean crops in parts of Ohio and South Dakota on the first of a four-day swing through the Midwest.

The U.S. Department of Agriculture after the close of trading increased U.S. soybean good-to-excellent crop condition ratings, matching analyst expectations. Spring wheat ratings also increased when analysts predicted flat ratings while corn crop conditions were unchanged.

“Climatic conditions have improved, and whatever threat there is to some crops has already been priced in,” said National Australia Bank agribusiness economist Phin Ziebell....MORE

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 BTC.com, 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