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February 20, 2014

A cool idea to reform the tax system

Filed under: Uncategorized — admin @ 2:11 pm

Over the years, I’ve learned a lot from interacting with people from various ideological backgrounds. And recently I came up with a novel idea — novel for me anyway. I wonder what you think of it…

Since corporations aren’t really people but a legal fiction, why not tax the corporations? Let them deal with all the bureaucratic crap. Here’s how I would propose reform the tax code:

Don’t tax the people themselves. But create sanctions for engaging in business personally without opening a company. Individuals would only be able to earn substantial amounts of money as employees. If you are an employee, your earnings wouldn’t be taxed. You wouldn’t have to go to the accountant, wouldn’t be subject to penalties for failure to pay, etc. True the company employing you would have to file various taxes, and pass the costs on to you, but the company would be able to do the accounting much more efficiently thanks to its economies of scale and greater knowledge of its internal operations.

However if you are self-employed, you’d have to start a corporation. If you take money “under the table” personally and not as a corporation (which has to pay you a salary as an employee) you can be fined, lose those earnings, etc. Naturally, people would be free to give each other gifts and engage in various in-kind transactions. But these would be limited by monetary amount.

That way people who don’t engage in business transactions on a large scale — which is most people — can voluntarily opt into taxation, by choosing explicitly to do business in a certain jurisdiction, and choosing the type of entity, and the jurisdiction.

In addition, if this was online the new business owners can be pointed to the right licenses they need to obtain, and best practices for that area, etc. They can even join other businesses doing similar things, and go to meetups. All because they explicitly formed the corporation. And if they don’t do it, they live FREE of taxes or penalties for not paying them, and no need to go to an accountant.

In other words – no income tax, no pass-through tax entities. Just corporations, for every kind of venture. It matches my motto: “People live lives. Companies do business.”

This recognizes the very real distinction between people and corporations: Corporations can be subject to unlimited market discipline, unlike people who need safety nets and can starve etc. Since corporations are able to hibernate or close without raising thorny moral issues, there wouldn’t be a need for a million exemptions for corporations. Welfare might get simplified, as well.

Thoughts?

December 4, 2013

Bitcoins have real value

Filed under: Uncategorized — Tags: , , , , — admin @ 3:07 pm

I recently happened upon an interesting blog post from neweconomicperspectives.org that claims the fair price of bitcoin is zero, and I think it behooves me to write a rebuttal. I’m interested in MMT and other economic perspectives, but at the same time I think it’s valid to point out that they’re shoehorning new types of currency into models that were designed to handle fiat money. The results obtained may very well be wrong due to the inapplicability of the model to this case.

I agree that bitcoins are commodity money, but I definitely don’t think their value is zero. Let me make another comparison of bitcoins to gold. In the subjective theory of value, the “value” of gold to anybody may vary depending on what they can do with it, and whether that benefits them. The market value of gold is what the gold will fetch on the “gold market”, accounting for all the various costs of transacting on that market. So let’s look at the value of bitcoins in this context.

If you read the whitepaper, you will see that bitcoins were designed to be the first method of payment online without trusting intermediaries. To pick one contrasting example, e-gold was backed by gold but had a single point of failure: the servers of “Gold & Silver Reserve Inc.” — in network theory, single point of failure is a risk that all communications are exposed to. If this central point went down — which it did — it killed the whole system. Now, the point does not have to be completely fail in order to jeopardize the system. Just a partial failure, or the risk that it can fail, introduces uncertainties. So the value of bitcoin is that sellers can accept payments without the uncertainty of:

  • chargebacks and other reversals
  • inflation and other fiat currency risks

as well as enjoying low transaction fees. This is REAL VALUE for real people, and in aggregate represents a tremendous market cap. Here is another way to look at it: before bitcoins, there was NO WAY that I could purchase things online without trusting an intermediary, such as a bunch of credit card processors, banks, and governments. The transaction fees in addition were high, and I paid them for the convenience of easily making the payment online. With a bitcoin wallet, I can save those transaction fees and pay only one fee: to the miners.

Think of bitcoin miners as full-reserve banks, which they will become roughly equivalent in the limit as the returns from mining are eclipsed by the fees. The fees are to cover running the system, they are in effect the cost of transacting, and instead of paying them to “your” bank you pay them to whatever bank happens to solve the block that includes your transaction. If that fee is too low, you’ll have to wait until some bank agrees to accept your transaction.

So bitcoins are a commodity which has real value — something that guys like Peter Schiff don’t seem to get or acknowledge when they hawk gold. Sure, gold has “intrinsic value” as a metal. But bitcoins have the value that comes from having in place:

  1. A powerful open source software client
  2. A presumably secure network protocol
  3. A growing network of merchants ready to accept the currency
  4. Not to mention future applications of the “timestamp server” such as proof of copyright, proof of signing contract, etc.

And by the way, #3 is the reason that new cryptocurrencies can’t just spring up and be worth the same amount as bitcoin. We have to consider here metcalfe’s law. Gresham’s law doesn’t really apply because no government is going to set the exchange rate between bitcoins and, say, litecoins.

In short — the value of bitcoins may be in a bubble, but underlying that is Metcalfe’s law. Even after the novelty wears off, there is real value in this commodity that is increasing, and the difference between bitcoins’ intrinsic properties and gold’s intrinsic properties are things like easy online payments anywhere in the world, low transaction fees, and lower exposure to various types of risks.

April 3, 2013

BitCoin – is it a bubble?

Filed under: Uncategorized — admin @ 12:21 pm

There were three times in my life when I felt sure enough of my financial reasoning to recommend a certain investment to all my friends. The first was when Google went IPO. The second was some obscure moment in Microsoft’s history, and the third is very recent.

About a month ago I started recommending to all my friends to get bitcoins – fast. My reasoning went as follows:

  • BitCoin is a currency
  • Other things being equal, the value of a currency is tied to to how many people and organizations will accept it for things others value
  • We are only at the start, and more merchants are going to be accepting BitCoin every day, especially as it gets easier to do so
  • Other people will realize this soon, which will drive up the price of the currency.
  • I am typically among the middle-early-adopter when it comes to techy stuff, so if there’s a bubble, it still has a long way to go as BitCoin articles go mainstream

That was a month ago. And if you got BitCoins in the last month, you saw them gain a lot of value on the exchanges. But the question now comes up: with charts like this, is it a bubble?

In my opinion: Yes, but more importantly No! The meteoric rise of BitCoin is related to network effects because it is a medium of exchange. It is not unlike the meteoric rise of facebook or of pinterest. While Metcalfe’s Law has historically been too optimistic in predicting the value of a network based on its size, something like n log n is not at all unreasonable.

The fundamentals of BitCoin suggest that it is poised to grow far beyond where it is today, since more merchants means more users, and more users means more merchants. However, the hype surrounding BitCoin may push the markets far ahead of its current growth. So that’s where the danger of the bubble comes in. This is like investing in facebook in its early days and asking if it’s a bubble. At the end of the day, I think BitCoin has all the fundamentals to legitimately go to $10,000 or even $100,000 a coin. Whatever price you’re probably paying for BitCoin today will seem a bargain a few years from now.

All this leads many people to want to take a long term long position in it, which will drive its prices even higher in the next few months. In monetary terms, BitCoin is going to be hoarded for quite a while and experience massive deflation, which will have an interesting effect on its adoption by merchants. It’s very attractive for a merchant to accept a currency for their products that will be worth more tomorrow, so in short, both sides are incentivized to try to get BitCoin as its prices rise and rise.

We’re just at the beginning of the BitCoin craze. Now you may even be able to cash them out using ATMs in Cyprus. There’s a lot of opportunity around BitCoin and making it easier to trade them for actual things, but also a lot of regulatory risk up ahead.

On the other hand, if you care about BitCoin as a currency, you should probably be careful of Gresham’s law.

March 1, 2013

The politics of Groups

Filed under: work — Tags: , , , , , , , — admin @ 2:50 pm

One of the great reasons why I started really looking forward to being with Groups and the Q framework for the next 5-10 years is the opportunity it will give me to design solutions to challenges in sociological and political and economic arenas. I believe in the power of tools to shape the way people form organizations, and affect their lives, and I can really make a difference in the world by putting the right tools in the hands of millions of people. More than a politician can, who has to work within an existing system and often is unable to change it. We are building the system, step by step, so we will have a lot of responsibility to do it right.

What do I mean by right? Well, people should be able to accomplish what they need, and we should minimize unfortunate situations where they can’t. We are lucky in that our tools are in the virtual world, so there are greater possibilities and smaller consequences in the real world if something goes wrong. Any real-world enforcement will still be done by actual governments / police / whatever people have. ūüôā

Anyway, that is the grand 5-10 year vision for what Groups and Q platform can be. I want to outline the guidelines for the system as I see them so far:
  • Individuals should be able to publish whatever they want, at their own cost — both monetary and in terms of reputation. If you can see a stream, you should know who is publishing it, whether it is a real person’s account, a pseudonym, or a group. That is why streams have a publisher_id, and why the publisher of a stream has complete rights to do anything with that stream. Publishing represents a greater degree of ownership than even admin_level=”own”. The publisher of a stream can never change, but a new “owner” can be assigned.
  • The tools that the individual used to create the stream are the various apps and plugins that they used. Those apps and plugins may have been published by others and simply help create / edit streams that the user publishes, but they may store some of the data for the stream, creating a need for the publisher of the stream to pay them in order to keep serving the data. Alternatively, the publisher of the stream can pay the developer of the app or plugin to get and install it locally, and create unlimited streams themselves. They would sign an agreement not to re-sell the plugin or app, or to contribute any revenue / forks / improvements back to the app owner. That agreement is up to them.
  • Groups should be able to form without “permission” from the government of some bigger group. This eliminates top-down bureaucracy, which may lose touch with the people “on the ground” in various areas of the community they manage. However, bigger communities may set up governments where they have “relations” with individual publishers and groups and other communities. In Q this accomplished via stream relations (which enable searchable indexes), and subscriptions. They may agree to automatically publish anything that any of the groups tell them about. They may subscribe to updates on every stream that they are listing in their index. This creates an aggregator/search engine for example. Certainly each search engine may blacklist any group/individual, but there will be no monopoly on this.
  • Although individuals are free to form any groups they want (e.g. on their own computer cluster), and publish anything they want (at their own cost), each user should have a unique ID. I have seen enough problems with anonymous commenting and other anonymous activities on the internet to know that in the absence of reputation, people start behaving irresponsibly. And when that happens, the entire community suffers the cost eventually, and becomes undesirable for others to join. If we are to create communities people like, one of the biggest signs is that others want to join them, and their own members don’t want to leave. This can be a major measure of how useful a community is.

So where does this leave us? Well, that is what the Q system already does. But it also gives us some information for how we should structure our applications in the coming years, taking advantage of certain Q features more than others. What do I mean?

Well, Q allows you to choose between “each individual publishes their own stream” and some degree of “centralized publishing” by management teams of groups. So who should publish a stream, the individual or the group?

If the individual – the risk is that the individual may have too much power over others who come to rely on the stream. They may suddenly stop publishing it, or cut off access to everyone, which would hurt many people. (I define hurt in terms of needs or strong expectations of people that form over time.)

If the group – then managers may come and go, but the risk is that if the group is too big, it may be out of touch with the individuals. The bigger risk is that the individuals are forced to go along with the group, which may also create a lot of frustration. For instance, the group may give rise to into three sub-groups. They are deciding where to go, but some people want to go bowling, others want to go to the movies, others want to volunteer in a soup kitchen. Even though everyone belongs to the group. Who should publish these activities?

So I think when it comes to publishing streams that others can join, there should be some combination of groups and individuals. And it should reflect the best practices of what happens in the real world: one person starts a group that may later become bigger than him. Then this group grows, gets managers etc. After a while this person may leave. In the future, other individuals may want to start their own groups and invite some members of the old group to join. They may establish relationships between each other, subscribe to each other’s streams, pay each other money, etc.

I think that would be a really good structure for a tool. Q is going in the direction to support all this, except for one thing: if an individual publishes a stream, there is no way to hand it off to a group later. The individual publisher is the complete owner of that group and can dissolve it at any time. That is why I think groups should not be published by individuals. Each group should have its ¬†own publisher. The “contacts” table of this publisher would contain the management team for that group, whether it’s the federal government or a small firefighters union. Neither one should have to care about the entire list of managers of the other. They just need to have relations between each other and get stuff done based on their own, internal policies.

Starting a group is like starting a company. We probably need to provision another user_id for the group, for the central authority, so its identity and reputation is consistent throughout the world, preventing “anonymous abuse” once again. But its internal activities may be hidden and it has full control over what it publishes. Members may come and go, etc. And the group may keep its entire history … it may have started as a chatroom about chess, and became a big society of chess enthusiasts, creating tournaments etc. And we can see by the messages posted in the group’s streams what it history was, if it chooses to preserve it ūüôā

So at the end of the day, Q already is already on its way to supporting everything I spoke about above, except we don’t have any mechanisms for individual publishers to join into a group and copy their streams to the group. If a new group forms, then we need to think what its members can “legally” and “easily” contribute so it can get off to a running start. They shouldn’t be able to just take anything from anywhere, but it would be nice if they could contribute something to the group that they join, set up a management structure, and invite/accept new members.

PS: As I’m learning more about economics and the role of money, I’m starting to form a picture of a new system of currency, related to our ideas about reputation and credit. I will write more about this system in an upcoming post. While having a medium of exchange is very useful, and has seen innovations such as BitCoin that decentralize the system, I think it would be interesting for everyone to issue their own currency on their own credit — both groups and individuals. It might actually better reflect what actually happens when “unofficial money” is used, and may be more humane as communities with very little money but compassionate hardworking people will be able to get things done. As it is now, people may hold money drawn on the credit of some larger institution, which may have elements of cronyism or nepotism which this new system might mitigate.

I think this is interesting stuff to think about, and eventually it can help me to fulfill the idea of “tikkun olam”, originated by Jewish rabbis.¬†http://en.wikipedia.org/wiki/Tikkun_olam#The_role_of_ethical_mitzvot

December 20, 2012

Fine. Let’s have a discussion about gun regulations.

Filed under: Uncategorized — Tags: , , , , , — admin @ 11:26 pm

A simple mathematical analysis of repealing all gun regulation:

X1 = fraction of people in USA who own conceal-carry weapons, legally or not
Y1 = fraction of people in USA who took steps to shoot at least one innocent person
Z1 = fraction of people to have shot at least one innocent person
N1 = average number of innocent people who were shot by a gun owning maniac

Right now, X is low, Y is even lower, Z is really low, and N might be like 3 at most.

Now, let’s say we let anyone legally own a conceal carry weapon and use it any time they wish.

X2 will now be much bigger (gun rights people claim this is even desirable, ok… let’s see)

Y2 will now become bigger as well. Now, I will give gun rights activists the maximum benefit of the doubt here. I won’t say that Y2/Y1 = X2/X1, because I will assume that while a flood of perfectly disciplined people will get guns, the majority of undisciplined “future murderers” already have them, and therefore will grow at a lower rate than the total gun ownership. This is the dampening factor to reflect the argument that “gun control keeps the guns out of the hands of law abiding citizens but doesn’t deter criminals”. Note that the same people making that argument would agree we can’t tell ahead of time who would become a murderer (otherwise many of them would be for gun regulation). So they should expect the number of potential shooters to go up with the number of people owning guns, albeit less than proportionally. So I will say that Y2/Y1 = (X2/X1) * 0.1

So Y2 has become bigger than Y1 by 0.1 times as much as X2 has become bigger than X1.

Now, after everyone can carry these weapons, we will have let’s say 20% of the population owning one

X2 = 20% … so X has increased by 200x

So with a huge benefit of the doubt being given to gun rights activists, we will have the number of potential aggravated shooters increase only by 20

Y2 = 0.2%, or 600 THOUSAND PEOPLE

These are people who might have been great neighbors, students, workers etc. but due to some circumstances wanted to shoot someone.

So even with very generous assumptions we have increased the number of people taking actual steps to shoot someone by 20x.

To be effective at reducing the gun murder rate, this policy should have the impressive effect of reducing N1, the average number of people shot, by MORE THAN 20!

But remember, N1 is already 3. An average gun murderer can’t shoot less than 1 person by definition. The only way that repealing gun control regulations will reduce the gun murder rate is by increasing the deterrent factor.

D = Y2/Z2 — the number of people who took steps to shoot someone but didn’t

This factor must be increased by anywhere from 7 to 20 times (7 if N2 can be brought down to 1, meaning never more than one person shot per shooting.)

QED!

Now what would cause D to increase so sharply? Gun rights activists claim it is that “anyone might have a gun, for example you don’t go into a police station”. But it’s not just about owning a gun, it’s about the procedures at the police station, and the training they have! How many would-be shooters would be deterred from carrying a concealed weapon by the fact that a single classroom teacher may be armed, more than they are now by the threat of being caught by the police? Many shooters seem sacrifice their own life anyway. Also, consider that many gang members often are packing heat, and yet street gangs and mafias have some of the highest rates of shootings. The correlation seems to be more with sociological factors (youth, social norms, etc.).

http://usatoday30.usatoday.com/news/health/story/2012-08-11/guns-public-health/56979706/1

There is one arbitrary factor up there, and that is the 20% figure. I don’t actually know how many more people will opt to get guns if it was completely legal, but it does affect the threshold for D proportionally.

How do you think the number of people owning a gun correlates to the number of people shot in a given year? What does the curve look like?

I would like to hear from anyone — libertarians, conservatives, progressives — about this argument.

From a practical point of view, looking at this spreadsheet, we might be able to suss out some correlations:
https://docs.google.com/a/qbix.com/spreadsheet/ccc?key=0AonYZs4MzlZbdGhycDRPQlN1dTBoMzJWOTk0Uk9DRVE&hl=en#gid=10

Further reading:
http://en.wikipedia.org/wiki/Incorporation_of_the_Bill_of_Rights#Selective_versus_total_incorporation
http://www.guardian.co.uk/news/datablog/2011/jan/10/gun-crime-us-state
http://en.wikipedia.org/wiki/List_of_countries_by_intentional_homicide_rate

August 8, 2012

Solutions to Security, Privacy, Identity and Censorship

Filed under: Uncategorized — admin @ 12:06 pm

A couple days ago I came across The Digital Imprimatur, an article from 2003 warning about the dangers of restoring user identity on the internet. Not realizing it was nearly 10 years old, it aroused some serious concerns in me about the possibility of requiring every user to be authenticated. But then I sat down, and thought about the technology of it, as well as the economics.

FUD had clouded my thinking.¬†Here is what the founder of AutoCad, who wrote that document in 2003, was missing: both users and networks have a choice. Once again, the solution is decentralization. And that is largely what happened — in nature, as in human affairs, centralization is very hard to maintain.

Here are my positions:

  • For one thing, I like that there is a dichotomy of users and servers. For many things, this is important. But I would rather say that there are users, and there are networks.
  • I don’t like anonymity for everything because it has serious drawbacks (spam, people can create unlimited accounts, engage in illegal trafficking etc.)
  • But at the same time I don’t like the possibilities that arise from everyone being forced to use some officially issued certificate.

And here are the conclusions I arrived at:

1. Eliminating Spam: Any network, which is concerned about user account spam, simply needs to tie them to something expensive (e.g. a cell phone line that can receive SMS). But it doesn’t have to be traceable — for example, it can be tied to bitcoins or some other currency based on solving difficult mathematical problems with a finite solution space. Anonymity of the account’s owner can still be preserved while eliminating spam.

2. Reputations: A user can still create fake accounts (e.g. for the purposes of anonymity), but each account will have a reputation and be traceable throughout the network where the account exists. So the cost to this user of ruining their reputation (by trolling, or being dishonest, or a myriad of other drawbacks of untraceability) would rise the more the user invested into their account.

3. Verification: A user account on a network can be marked as “verified as who this user is” — for example Twitter’s verified accounts, or Reddit’s IAMA. The network declares the user’s identity, and can store other private things about the user (such as their gender, medical history, etc.) with various degrees of certainty. Internally, the network can use this information about the user. For external consumers, the network may have a privacy policy that the user would rely on when voluntarily divulging private information, such as their identity or medical history.

** HERE, by the way, we should have law enforcement for demonstrable breaches of privacy and security policies. Notice that privacy and security is closely tied to identity. For example, Apple and Amazon recently had major security problems stemming from their policies about identity … I say we need law enforcement rather than merely just some anarchist idea of reputations because small, fly-by-night companies may not care about their reputation and may violate their privacy policies more frequently than large corporations like Apple **

4. Certificates: It is the networks that should have certificates, so the users know who they are connecting to.

Any network could obtain its certificate from an agency that the USERS TRUST. This is already happening with e-commerce. It doesn’t have to be a government, necessarily. At the end of the day, though, the more people trust the agency that issues the certificate, the more people will trust the certificate.Networks such as google that become well-known enough can issue their own identity certificate, acting as their own certificate authority.

Networks would use their certificates to sign information they believe to be true at the time of signature, so that anyone can verify this information without having to query the network, even years later.

5. User certificates: All the verification described in step 3 can be exported by the network to others using certificates. The user can download a certificate showing that they are indeed “Bill Gates according to Google’s verification” or that their medical history is indeed “verified by hospital X at some Y point in time.”

In fact, these signatures can verify entire histories from various different users on various different networks — with entries such as “doctor X saw medical history at point Y and made diagnosis Z.” At point Y, the doctor trusted your medical history from other networks / institutions they respected. They signed not only their diagnosis but the fact that they are doctor X, and they saw your medical history at point Y, etc.

6. Signed software: Certificate holders would be able to sign software that they release. Operating systems and browsers would be able to revoke trust in the software if it is found to be malicious or contain serious security bugs. There would be accountability for software writers who write viruses, have irresponsible security etc. proportional to the cost of obtaining another identity in a trusted network.

In the App Stores (pioneered by Apple, and now cropping up everywhere), software is signed before being “put on the shelf”. This is just the beginning, but in the future, there could be lots of competing app stores and networks certifying software for every platform. Antivirus companies would have a valuable role in testing for security / malicious software and recommending revoking this or that certificate that the software is safe.

Revoking the certificate of certain software does not mean that the users have to lose all confidence in the vendor. In fact, the app store or security company or white hat hacker can contact the vendor with the vulnerability, and allow them to quietly fix it if they believe the vendor to have made a good-faith mistake and did not intend to write a virus / spyware. A responsible time frame for an update can be set before the security flaw is publicized. If the vendor releases the update in time, then all users will see is that version X has a security flaw (and threat level), but there is already a newer version submitted by the vendor. Thus, the vendor’s reputation may actually increase because of their responsiveness, and software will not need to be “pulled off the shelf”.

7. Software on the web: Currently, the way web browsers work, we have to trust whatever is delivered to our web browser by the server. Browsers should start being able to verify the signature of web resources they download. If the server claims that a given resource has been verified by some network, the browser should be able to verify it with that network’s certificate.

In addition, users can be tricked into providing their credentials (such as passwords) to any malicious web site, which simply emulates an interface from their trusted site (such as a facebook login). Right now, this is solved with popups, but a much more elegant solution would be to allow some iframe to have the highest z-order (i.e. “be on top of everyting”) so nothing can hijack the user’s input into it.

I make both proposals here in more detail:
http://news.ycombinator.com/item?id=2024164

In fact, right now entire operating systems like the MacOS have the same problem. Any application can spoof the system’s administrator credentials dialog and capture the user’s root password, using it to take over the system. This can be easily fixed by having the system ask you to enter some favorite phrase of yours when you first install it, and then showing it back to you in the credentials dialog. All Apple would have to do is make sure the dialog is on top of everything, and apps can’t capture a screenshot of what’s inside — just like they do for DRM movies.

An aside: I once emailed Steve Jobs about this, but didn’t hear back… if there was a security company for operating systems, I would report it there and Apple would have a time frame in which to fix this exploit before it was publicized ūüôā

8. Patents and Governments: Well, since things are decentralized, and patents/copyright rely on centralized systems (governments) and agreements between them (treaties, etc.) the situation is a toss up. I would say that, in general, since in any given system ultimately trust is usually concentrated in at most a few popular entities that have the resources to actually verify the software (e.g. all competing App Stores for mac), it won’t be tough for a government to intimidate these entities into revoking a software’s certificate.

Unless, of course, we combine part 2. untraceable accounts with reputations, with part 6. signing software, and get “shadow organizations with reputation for verifying software for security holes” … which might be useful for verifying things like whether freenet or perfectdark is still secure. Then, governments wouldn’t be able to stop the distribution of the software, nor force these untraceable organizations to revoke the certificate — fooling the users — and yet the software can still be audited in a meaningful way by the community.

In any case, all these things are side effect of centralizing trust in people/companies with good reputations — whether they are traceable or not. In the future, we may figure out better ways to distribute trust across the entire network. Bitcoin is an early step in that direction, I think.

In Conclusion

When I first read the¬†The Digital Imprimatur, I thought¬†was a recent article. It certainly could seem that way, given the concerns we have today, almost 10 years later. With today’s discussions about government¬†spying on its citizens with¬†drones and¬†other things, the right of the people to¬†peaceably assemble must be protected,¬†and indeed some non-democratic governments were¬†overthrown as people used the internet to organize. In repressive regimes,¬†darknets can be used by people to communicate freely, and the same tools are used by people for¬†notorious purposes such as trafficking drugs. Suppose human trafficking took place and we couldn’t find out who was doing it.¬†How much anonymity should a system allow? These are difficult questions.

When copyright gets involved, the USA and other parties to the Berne Convention sometimes propose (and pass) draconian regulations, or simply take down websites irresponsibly or take down entire businesses before a trial has taken place. Technology such as DRM certainly has some legislative muscle behind it.

But as long as there are alternatives available to people, as long there are decentralized choices, we should be fine.

I hope that some of the suggestions in this article are ultimately implemented, because I think good things await us if we move in those directions.

– Gregory Magarshak

July 10, 2012

My predictions for innovation in the next 3 years

Filed under: Uncategorized — Tags: , , , , , — admin @ 12:12 pm

All I can say is that I see some very simple stuff here on the ground in NYC.

People’s jobs have been eliminated, by a combination of outsourcing and then automation. Big businesses figured out how to cut out employees and get the same job done. The public sector is also laying people off (still better than 2008 though). The businesses that are really hiring are ambitious startups. Mostly in the tech sector.

So I believe the JOBS act will help a lot in funding the startup. Until then, what will happen is that people without the right skills will sit around with their parents, be unemployed for longer, and spend less on consumption. They will accept jobs for lower wages because it’s a big risk to go back to school and waste another 4 years of their life on something (like a law degree, which I keep mentioning) that may not give them any more money on graduation, but give them even more debt.

I can see it with my friends. And for the time being, the above should explain why our economy is stagnant.

Now here are my predictions based on logic and what I observed:

Innovation in Finance

It would make sense that low interest rates discourage savings and therefore stimulate investment. We already have zero savings but basically they are supposed to stimulate more lending by banks.

The problem is, the banks don’t have much incentive to lend at low interest rates. They can just sit there with little activity, along with the rest of the economy.¬†What this really does is cuts out the banks as the middlemen. The banks will do precious little compared to before, while interest rates are low. They don’t have as much money being saved in their money market accounts and they won’t be lending a lot.

What is really going to happen is that the financial intermediaries will be cut out, or at least take the form of kickstarter / angellist. Basically we will enter a new age starting in 2013 of investment funds, where anyone can invest in companies. Also people-to-people lending on prosper.com and lendingclub.com was already possible, but I think it will increase as well. In short, we will have INNOVATION in the financial intermediaries, besides banks.

And the JOBS act is a step in the right direction and I applaud it.

Innovation in Education

Since lower and middle class consumers will earn less money they will have less credit — and their demand won’t be the main driver of the economy.¬†The rich people however will be more able than ever to get loans from the banks which are looking for lending opportunities. They will pick up the slack from the poor and middle class because they have more savings in the banks.

We can already see this because the average savings is zero but we know the lower and middle class are highly in debt (at least until they default, in which case that money disappears from the system and the foreclosed properties drop in value).¬†Basically there will be a growing disparity between the rich and the poor, unless we are able to reform the educational system and align it more with the jobs that will be needed in 4 years. And that’s a tough thing to do.

The thing I really am looking forward to is udacity, coursera, udemy and others disrupting the education sector. College should be mostly about socializing and certifications. It shouldn’t be spending its money on lectures, which is wasteful — one great professor teaching only 300 students while mediocre ones teach the rest. Students missing out when they go to the bathroom or zone out. No, lectures should be delivered at home, the classroom should be inverted. Then education will be much cheaper. Students and professors both want this, it will happen.

f only we can also reform education and invert the classroom, we can help get this economy back on track.

So here is what we really need in the coming few years, and the stage has been set

  • Innovation in the financial intermediaries
  • Innovation in education systems

If you’re a developer or investor and want to do something about it, reach out to me. I have some plans in the works ūüôā

April 1, 2012

A challenge to Christians

Filed under: Uncategorized — Tags: , , , , , , , , , — admin @ 1:19 pm

As many of you know, I think there are very good reasons to think that some or all of the supernatural things described in the Bible weren’t actually supernatural, but instead the result of myth making.

However, I have debated with many Christians and they all insist that the resurrection is historically well attested to, and the most likely explanation is that it happened.

Fine, let’s say it happened and “Christianity” is the right religion. Perhaps as C.S. Lewis said, “Mere Christianity”. My question is, what does one actually have to do as a Christian? Once they pray for salvation to God, and repent of their previous sins, and accept Jesus’ free gift of full payment for your sins on the cross, then what? Are they saved no matter what they do?

If Paul says that “we are dead to the law” and “the old covenant is obsolete” then what guide *do* we have as to what to do?

Specifically in the areas of masturbation, pornography and premarital sex, can Christians continue to engage in these things as long as they are consensual from all parties?

I challenge any Christians to simply answer these questions in a way that anyone can clearly understand. They should

1. be able to understand what your answer MEANS in specific, actionable terms, for example a vague answer such as “You Must Do God’s Will” can and has been interpreted in a myriad different ways by Christian groups all throughout history, many of which vehemently disagreed with each other

2. be able to trace HOW you derive your answer. Was it from something Jesus taught? Paul taught? Is it based on a translation? Is it something a pastor seems to get out of nowhere?

3. be able to respond to follow-up questions regarding the meaning of terms, and how their answer is affected by things such as: accurate translations of the original text, strong positions on these issues by people in the New Testament, and so forth.

It’s okay if you are not able to do 3, perhaps another Christian will be able to. The goal is to find out what Christians actually have to do, and why they have to do it, without being so vague as to mean practically anything. Things like “you are rebelling against God” can and have been co-opted to support all sorts of positions from war to abortion to persecution of homosexuals.

In short, we don’t want the following situation:

Picking and Choosing Christian Values

Picking and Choosing Christian Values

We want knowledge and reasonable explanations!

March 30, 2012

SOPA could have had a compromise.

Filed under: Uncategorized — Tags: , , , , , , — admin @ 11:29 am

I have never really done this, but I’d like to respond to Paul Graham blog-style on here.

Paul, I have read many of your essays, and I’ve witnessed the “let’s break hollywood” initiative that you started, and I pretty much know where you stand on the SOPA issue. I also read your interesting analogy between content on the internet and air on the moon/earth. I feel you, I have been in the internet industry myself for many years.

BUT, I wanted to suggest to you what I think is a balanced / practical view of the matter, because you are a man who has a lot of great influence in the startup community, and I think your stance on the copyright issue makes a lot of difference. If any of my viewpoints resonate or affect your position, I think would help everyone.

Our society has grown up with this notion of “copyright” and “patents”. (I do not call them intellectual property because that is a loaded term.) They are simply government-granted monopolies to the authors and inventors, and their original goal is to promote the PROGRESS of science and the useful arts. The goal is to benefit the public.

Today, the situation has largely changed. Software patents in particular should be abolished (as I argue here: http://news.ycombinator.com/item?id=2948724 ). However, copyright is quite useful:

* It gives some recourse to blatant plagiarism. I do not think our society is ready for a completely wikipedia-style approach to art. Even Creative Comments licenses have attribution.

* It allows authors to feel that their “intellectual property” will be protected and frees them up to work on it. As a result there is less fear of freeriding — and yes, economic viability. Copyright makes the proprietary publisher / record label / magazine / news outlet model work.

(Note: this reason in no way justifies extending existing copyright durations forward or backward in time. We must fight that practice.)

* Copyright is what gives teeth to copyleft! If you want the biggest reason I think that copyright should exist, it is this: if enough “copyleft” type activities are organized over time, there is a competition between the open source (group-based) products, and the proprietary products like the ones you built with ViaWeb back in the day. Overall society wins from this competition. Over time, open source software can copy everything that the proprietary software does, provided there are enough people to put in this work. In fact the reason we can abolish software patents is because software is already copyright-protected, so to rip off a proprietary app, you need to write it from scratch! So the freerider problem is already solved for software.

Now I get into the one that causes the big controversy: Big Content.

* Copyright can be leveraged to justify big-budget productions, such as hollywood movies, and TV shows. The whole industry has grown up around this. Now, granted, they can command ridiculously high margins, withhold movies for years, and so forth. But this is the free market allowing them to do it. If you want to fight price fixing, fight the cartels that they form. At the end of the day each movie is a product that competes with any other movie. Just because we want to watch a movie, and get instant gratification does not change the economics of it. If the movie cost $20M to make, those bankrolling the movie should expect to have a chance to make a profit. Forcing the content industry to change their entire business model misses the point that laws are supposed to apply across the board. Copyright is certainly useful for helping small indie productions make a profit. You would have to lobby to have the law changed for the big budget productions, and justify why.

(Copyright makes movies, songs, etc. into “products”, which creates a mismatch: physical products have physical distribution and limited supply at each retailer. Songs and movies are just content and can be copied easier than ever. Government has to enforce this unnatural monopoly. But the problem is that for the little guys, copyright does protect them. It is true that every copyright holder, including the big guys with the popular movies, can withhold the content they create from us and artificially control the supply. But this is only painful because we crave their big budget movies, because they are not as interchangeable as we may like.)

. . .

Look, the entertainment industry may have lied about the number of jobs they are creating. The individual may be stuck in the past with their business models. All this is valid criticism. But what we must do is focus on their cartels, their old boys clubs, their culture of trying to sue grandmas with conglomerate agencies like RIAA and MPAA. We should discourage the price fixing they do to get huge margins. With today’s tools, more content can be created by less people, and more cheaply. That means there should be plenty of people competing with Hollywood soon, with Adobe AfterEffects and other new tools helping them. The question is only about the cartels and breaking into the industry. And frankly speaking, similar things exist in the tech space with Google/Facebook/Microsoft buying up companies, and VCs bankrolling startups. It’s just that in tech, there is much more variety and opportunity to do good, besides just delivering content to passive viewers.

If by “let’s break hollywood” you mean let’s break their ego-based, old-boys-club cartels, by all means we should challenge that. But if you mean that we should go after their copyright protections, I do not think there is a way to do it without huge collateral damage to our society.

PS: One last thing – about SOPA.

We all know it sucked. But the concern of the copyright industry was this — US produced movies were being downloaded by US citizens, from foreign sites more and more. Citizens that “might” otherwise pay for the movies (nevermind that they were screwing Netflix and taking their movies away).

I think there is a valid issue here, of enforcement and jurisdiction of the US government. There is a reason a “pirate bay” can’t grow to that size here in the US. It’s because the government takes down domestic sites dedicated to “intellectual property theft” if they are large enough to go after. That is part of the copyright protection.

But, of course, there must be due process. An insignificant pirate hub doesn’t become big overnight, and by the time lots of people know about it, the site can be brought to the attention of the government, and it can be sued. It may have taken years for the site to become that big. What’s another 30 days for due process to take place.

Similarly with SOPA! Personally I called my congressman and suggested the following amendment to SOPA:

When the dept of justice (or whoever is tasked with prosecuting these sites) finds a site, they contact it and issue a invitation to participate in domestic proceedings, and the invitation is good for a certain period (30 days for example). During this time, the site can respond, realize the problem, maybe make amends or reach a settlement. If they do not respond within the time period, then they are considered in default, and US financial institutions, search engines etc. could be compelled block them. However, at any time they can start legal proceedings within the US, and try to get reinstated, until the statute of limitations runs out (a few years).

This would have introduced the proper concepts of due process (inviting them to participate and offer them an opportunity to resolve the matter before taking drastic measures), jurisdiction (only US financial companies would be compelled to stop dealing with them, and possibly search engines, etc.) And IMHO it would be a good compromise.

To everyone reading this — thanks for getting to the end. I guess this letter is as long as one of pg’s essays. I have felt like many people ¬†in the startup community, and I have tried to be open minded and get all the facts. I feel it is vital to bring this to pg’s attention as he and his batch of YC companies have a lot of effect on the world ūüôā

February 10, 2012

Long Term Trends for Capitalism

In the past few years, as the economy faltered, the capitalism-socialism discourse has come out in high relief in American politics. Fiscal conservatives (republican and libertarian alike) decry many government programs as “entitlements” and often equate social welfare with “socialism”. Progressive taxes, and ending tax breaks for the rich are met with the catch-all term “wealth redistribution”, something that is a slippery slope to be avoided. I have described only the conservative views here, largely because they seem to me to be quite ideological, ironically enough like the communists in USSR with their intense distrust of capitalism, with its seductive excesses, corrupting the moral character and turning the proletariat into slaves. I am not trying to say that government programs are a paragon of efficiency, but that the discourse — often framed in terms of individual freedom vs the tyranny of the collective — has been used to attack everything from taxes to government investment in alternative energy (with Solyndra proving to be quite a tasty target).

Courageous and forward-thinking libertarians like Ron Paul follow the idea to its logical conclusion. They decry the “quantitative easing” by the fed (claiming its meddling causes malinvestment by those eager to find alternatives to government bonds), the crony-capitalism (as a result of lobbying and government favoritism), and the increased borrowing by the government (causing long term inflation), in an effort to correct the current perceived problems.¬†The solution, they say, is taken from the pages of oft-overlooked Austrian economics. Trust in the invisible hand of the market — allowing cycles of booms and busts — is preferable to government regulations attempting to solve collective action problems — even the ones that seek to outlaw insider trading, front-running, excessive “vulture” speculation, and so forth.¬†And for the most part, they could very well be right.

However, I want to talk about something else. Something deeper, that has to do with long term trends. The conclusions below are taken from what I wrote to my friends lately, and represent what I’ve come to think on the matter.

The challenge is automation

A lot of our problems today — unemployment, high cost of education, medicine, etc. — can be traced back to automation and increased efficiency by employers. They are problems today, but it is better to frame them as challenges. Since I will speak about long term trends — 10 to 30 years out, what I say below might sound a bit far fetched today.

Socialism in some form is inevitable as automation progresses. The Luddites were right, but they were a few hundred years off. As things become more automated, we will not require people’s services in more and more areas. Robots will become cheaper and more efficient even than workers in China. So, eventually the “jobs” will return to the USA, but in the form of robots.

Capitalism makes sense when things aren’t automated, when the employer honestly needs his workers and the value of their labor is above their cost of living. However, things change with time, as more and more things become automated. The less people are needed to run a company, the more supply there is of available workers, the more wage repression there is for the majority of people (workers). You can try to inject life into their economic lives by borrowing from the future (credit cards, coincidentally taking off in the 80s, gave regular consumers debt instruments to mitigate their situation), but at the end of the day their wages will simply go down, and there will be an ever growing divide between the rich and the poor. This plutocracy will happen because there won’t be enough jobs for average people, and only jobs for highly qualified people. So the average people will have to be supported in a different way than wages.

As usual, stuff has to find its way to the people, to satisfy their needs: air, water, food, shelter, sex, fun, etc. Some people have a very small economic footprint, and these people need a welfare economy to get their needs met. Just because you are not in that group right now, you might think, “out of sight, out of mind”. But as more jobs get automated, a lot of people (especially uneducated people) will become completely redundant in the workforce and they will have a very small economic footprint (not producing or earning much). So inevitably, social programs will grow as technology improves. That doesn’t mean you can’t have capitalism on top of the safety net. It just means no one will die in the street from a preventable disease as a result of not being able to find a job.

We can see some of it today

People who lose their jobs, or don’t have a college degree, find it harder and harder to get new jobs. They just aren’t qualified enough for the new marketplace and its demands. But college education is now too expensive. If only they could learn on the internet (like they increasingly can in many technical fields), and get qualified enough to enter job sectors in which there is a lot of demand… but the universities are currently the gatekeepers for the degrees in many non-software fields, and companies look for these degrees, so I would say the main blame right now can be put on the lack of reform in education.

Do you notice that the cost of everything is becoming ridiculously high in the USA? Take two high-profile professions:

isn’t it a mystery?

Education is tremendously more expensive than before, and some unconventional libertarians have been pointing it out for years.¬†I think it mainly has to do with wage repression, and it’s only going to get worse. Here is an illustrative example:

An average middle-class family sends their kid to med school or law school or whatever. They get student loans they can never even discharge in bankruptcy. So then when they become doctors or lawyers, they start out trying to charge a lot to cover their loans. And the places compete to offer them these positions. Their salaries just go up and up, even though there are tons of unemployed lawyers now.

This feeds a bubble of education, as people try to get those high salaries and go into law school. But it’s unsustainable … there are too many people trying to become lawyers now, who may not have jobs when they graduate. Not only that but automation will make the manual work that lawyers do less and less necessary, so you will have even less jobs for lawyers.

So where will these out-of-work lawyers go? They will live with their middle class parents or do something else. Their services are not required at the moment. They might move out, take a low-paying position and defer their loans as far as they can. At the end, though, something’s gotta give. They will probably pass a new law allowing you to discharge your student loan in bankruptcy and lose your law degree as a result. The lenders will stop lending. And the education bubble will burst. Either that, or middle-class families will realize that the job prospects for a law school graduate aren’t as great as they used to be, and the bubble will gradually fizzle out that way. But it will leave less jobs in that sector, and the question will again arise … where are the jobs?

Long term basically (10-30 years), automation WILL make wage repression so high that more people will have to switch to an economy that will support the majority of the population in some other way, besides wages.

Welfare?

In a society where the value of individual human labor is not that high compared to the work automatic systems perform, people will have to sustain their costs of living with something other than work in redundant positions. They can become entrepreneurs, they can sell products for the entertainment of others. Capitalism will always be alive and well. But below, it a social safety net will grow, one that supports the unemployed and gives them access to increasingly cheaper (or free) medical care (by robots), food, education and information (internet), and who knows (sexbots?), we will move closer to “socialism”, an economy where every can enjoy a minimum standard of living without having to work. This will usher in true social freedom. Not having to work to survive, people can focus on enjoying a healthy lifestyle, getting enough sleep, traveling, spending time with each other, great entertainment, and bettering themselves by getting a much more in-depty education, even if it is for free via a vastly superior education system. Women won’t have to choose between career and children.

But, as experience in ghettos has shown, it may also lead to more restlessness and a feeling of uselessness in society, and more violence. People want to feel needed. Perhaps some will satisfy it with entrepreneurism or space explorations. But most will have to be content with raising their family and bringing up the next generation with love. Men will no longer need to serve society as most men’s services will literally not be required. I wonder what will happen then. In ancient times, men went to war, and not all came home, and that’s how polygamy made sense.¬†Perhaps sex selection through genetic engineering would once again bring that about. (I will stop going off into left field now.)

The Freedom to Innovate

As technology accelerates innovation in various fields, the elements of an economy built for an older time will start getting in the way — as they already are in the software industry. Patents will become an increasing burden, a tool wielded by companies relying on old business models to protect their profits, something that is already happening with the powerful copyright lobby. Patents have been a great tool and contributed to the success of society over the last couple hundred years, but as an industry accelerates, free access to knowledge becomes more and more important. The watershed moment in an industry comes when a group realizes how to outperform systems built in “proprietary” silos, such as WebKit vs Internet Explorer, Wikipedia vs conventional encyclopedias, or eventually Linux vs Windows. They haven’t figured it out yet, but once this happens, the group will become a formidable force for innovation. At that point, patents only serve to slow everyone down and impose an innovation tax on the industry and the public. Perhaps “individualism” and “greed” will not always provide the most fertile soil for innovation, as they admittedly have been up until recently. With greater connectedness, people will have great education. With better tools, they will be able to accomplish more together. Movements built on free innovation through¬†patentleft will give the proprietary silos a run for their money.¬†And then, we will have to re-evaluate our economy.

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