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Writing Without Apology, Investing in Crypto, & Triple-Entry Accounting (Reading/Study Notes 6.2.18)

Resource: Throat clearing isn’t necessary
Link: http://sethgodin.typepad.com/seths_blog/2018/06/throat-clearing-isnt-necessary.html

Quotes:

“Begin in the middle. The first paragraph, where you lay out what’s about to happen. The half-apology you use to preface your comments at the meeting. The email that takes a paragraph or two to get to the point…You can skip those. Throat clearing is a good way to make sure that people are looking at you. And an even better way to give yourself time to collect your thoughts, to indulge your fears or to get yourself warmed up. But we’re already looking at you. We’ve clicked through to your link, given you the microphone, read your note…Say all that stuff in your head, but, we’d really like to hear the best part first. Begin in the middle.”

Reflections:

Say what you’re here to say without wasting time with prolonged prefaces.

Whatever preamble or apology you think you need to say can be said later on. When you begin, however, begin with the most compelling part.

Resource: Mastering Shitcoins: The Poor Man’s Guide to Getting Crypto Rich
Link: https://hackernoon.com/mastering-shitcoins-the-poor-mans-guide-to-getting-crypto-rich-2e469b762ba9

Quotes:

“The price to becoming a good trader is really, really high. Most people never make it. To get great at trading you have to lose a bunch of money fast and fail to outperform the market before turning it around. If you’re lucky, you learn those lessons and wind up a savvy trader who trades well whether the market is up or down. But the odds are against you. Human nature is against you. Emotions are against you. Everything is against you. And yet there is hope. You didn’t miss the boat. Well not totally. You can still swim out to it if you paddle real hard. It’s not over.”

“A mere 1% of people own crypto. Crypto can solve dozens of previously intractable problems, like digital identities, supply chain integrity, data breaches and many, many more. But it’s going to take awhile. The crypto superhighway is still under construction. They’re paving the roads and pouring the cement. Nobody is living in the McMansions yet.”

“Most people can’t see the future. It’s a total and complete blind spot to them, like staring into a snow crashed TV. As a futurist when I talk to people at parties they know I’m interesting and smart but they can’t hear a word of it. It’s like I’m the teacher in Charlie Brown. While innovators live in the bright light of future possibilities, the rest of the world lives in the here and now. Inventors and futurists are the shaman and medicine men of the global tribe. The rest of the tribe are hunter-gatherers. And hunter-gatherers are 100% focused on the present. They have to be. There is no time for the future when you got to find the next meal. And that’s why to the tribe self-driving cars are not real and will never exist. Virtual reality is joke. Bitcoin is a joke and a bubble and fraud. To the tribe, the Internet looked like a joke to them only twenty years ago, even though they live on it today. Self-sovereign money and privacy and decentralized blockchain voting are absolute mirages to them now. But if you want to get crypto rich, they better not be mirages to you.”

“Patience and long term vision is the key….No trading. No watching charts…Now I don’t recommend you borrow anything to do this and you should only invest what you can afford to lose. Don’t mortgage your house or you deserve everything that is coming to you when the bank comes calling. Do not be an idiot. If you think you’re the exception the percentages say you’re probably not so just put your money in the mattress because it’s a lot safer there. But if you’re willing to have patience and do this the right way, there is a decent chance that you come out ahead in the future.”

“Cryptocurrencies give you the chance to do what venture capitalists do. Up until now it’s been the exclusive right of people with lots and lots of money to invest in early stage companies. But now it’s the little guy’s turn too. The statistics on companies that succeed or fail in a venture capitalist’s portfolio would terrify the average present focused tribe member. 80% fail outright. That’s right. They will be worth zero.”

“Right now coins are starting to split up into three major categories: Currency, Platform, Utility. There is a fourth kind of coin: a security token. In a year or two, people will be overrun with companies putting their shares on the blockchain. But that can’t happen until regulators get out of fear mode and start putting together the right rules for it.”

“Let’s start with the currencies. These are the simplest coins. They’re programmable money. They’re looking to become a medium of exchange for goods and services. Either that or they’re a store of value like gold or silver. Some are deflationary, some inflationary. Some are meant to move fast and others are meant to hold so you can buy things with it later.”

Let’s move on to the platforms. This is where things get really interesting. Platform coins are looking to do things that are the sole domain of servers and clouds right now. They want to power decentralized applications, run smart contracts as law and power everything from identities to storage to voting. The platforms have the longest way to go. They have to solve incredibly challenging scaling problems, maintain security, create whole new programming languages and deliver a fantastic user experience. None of this is easy. It will take time. But these platforms are the foundation of the decentralized internet of the future.”

“The last choices are utility coins. These are the hardest to pick. The problem with most utility coins is they have no utility. You’re supposed to use these coins to consume services like identity lookups or decentralized DNS lookups but there is no platform to use these coins yet, so they’re some of the riskiest because they have to survive long enough to service the dominant platforms. By the time that happens those services might already be incorporated into the platforms or get up and running for free. This should be the smallest portion of your bag. Expect utility coins to make up a significant portion of the post dot-com crypto bubble burst list.”

“However one style of utility coin is here to stay: Fintech coins. These are coins that are designed to move money around the world for major institutions like banks.”

“So how do you do you pick your coins? Ask questions and demand good answers. The questions you want to ask are: Does this coin/project have a purpose? If so what? Can they solve a real problem? How good is their team? How long have they been around? How strong is their code base? Do they have a road map? Are they transparent?”

Reflections:

The crytpo space may very well be a bubble, but “bubble” doesn’t mean “a total failure.” Very valuable assets emerge from bubbles. Amazon and Apple are examples of this.

We’re still very early in the crypto space. Only 1% of the world’s population owns/uses crypto. There’s still plenty of time to learn about crypto assets and profit from investing in them.

Don’t day trade. Do your research and find assets that have good fundamentals, that solve a real problem, have a real use case, and has good/consistent development behind it. Then hold for the long term.

Don’t spend more than you can reasonably afford to lose.

Resource: Why Everyone Missed the Most Important Invention in the Last 500 Years
Link: https://hackernoon.com/why-everyone-missed-the-most-important-invention-in-the-last-500-years-c90b0151c169

Quotes:

Why accounting matters:

“Without accounting, you wouldn’t be reading this article on your iPad, or driving to work in a new car or listening to music on Pandora. Without accounting there’s no commerce, no trade. Without commerce there would be no planes, no trains, no tractors, no steam engine, no skyscrapers or computers. There would be no nation states, no boats, no shipping containers traveling all over the world ferrying goods from the far corners of the Earth. In fact, without accounting you’d still be subsistence farming or hunting in the forest.”

How single-entry accounting changed the world:

“The first breakthrough was single-entry accounting. Before that we were running around the forest chasing animals, following the moon or farming. Our prospects were limited. You lived with your tribe or clan and you hunted and gathered. Your parents before you did the same thing and theirs before them and theirs before them in an endless cycle down through the years. Accounting broke that cycle. For the first time we had the ability to bootstrap ourselves into a different kind of life, one that didn’t involve every single person on the planet living hand to mouth.”

How single-entry accounted expands the possibilities of trade:

“Once you can keep track of who owns what, trading starts to happen at a much larger scale. That’s why the kings and queens of ancient times could build castles and establish professional armies and create great wonders of the world.”

Blockchain is still at the beginning:

“We’re only at the caveman stage of what we can do with blockchains. We’ve been playing around with funny money, making currency and trading it, but the utility of these currencies in the real world has so far remained limited to speculators and early adopters. But blockchains can do much, much more, as can the cryptos that drive that innovation.”

How triple-entry accounting works:

“Triple-entry accounting and by extension blockchains and crypto are a way of agreeing on objective reality. It’s not the objective reality. That’s a philosophical black hole we’ll ignore for now, but it’s an objective reality. It’s two parties agreeing on a version of past events. The third entry in the system, entered into the blockchain, is both a receipt and a transaction. It’s proof that something happened between two parties, which goes beyond the receipts that each party holds in double entry.”

How the blockchain can change voting:

“We have tons of problems with voting today that we’ve hedged against in advanced democracies and completely failed to deal with in banana republics, third world countries and authoritarian regimes the world over….Blockchains can change all that by ensuring that votes are provably correct and publicly auditable.”

How E2E voting systems can verify voting while preserving privacy:

“What we’ll see in the not too distant future is the merger of what’s called E2E voting systems (end-to-end verifiable voting, and blockchain-based systems. E2E means that everyone in the entire population, down to the individual voter, can verify the results. Every individual knows his or her vote was recorded accurately and they can check it themselves. They don’t have to trust someone to tell them it was correct like we do today. They can also see that everyone else cast their vote with certainty. But despite this amazing transparency, it still preserves the all-important secrecy of ballots, which prevents coercion and group-think.”

How triple-entry accounting can minimize stock fraud and eliminate Enron scenarios:

“We can issue stock and you can check your stock against the blockchain. Now you don’t need access to their books to verify that you actually have 10%. You can look at the chain, see that there were 10 million shares issued and that you have a million, so you have 10% for realz.”

How bitcoin differs from tulips:

“Tulips actually had no inherent value. They were just flowers. They were pretty and that was about it. Bitcoin is founding an entirely new method of frictionless transactions, spawning new decentralized app platforms that you’ll be using every day in three to five years.”

Bitcoin is not just for nerds:

“But only nerds like cryptos! You mean like when computer geek Jeff Bezos was starting a little company called Amazon to sell books on this thing called the Internet that nobody but nerds understood? I mean there are all these book stores I can go to, why would I need that? Or how about when Steve Jobs and Woz were hacking together a computer in their garage? What the hell is a computer people asked? Only nerds need that. Neither the Internet or computers had much value then. But those pioneers were smart enough to see into the future, projecting out far enough with intellectual curiosity and seeing the potential while people still scoffed at them. That’s what us geeks see in Bitcoin and cryptocurrency and blockchain right now, even if others are missing it.”

Why the instability of bitcoin is not the whole story:

“But…But It’s Unstable. You know this story too. Cryptos are unstable. They can go to nothing overnight. You can lose a lot of money. This argument tells you absolutely zero. Anything can go to nothing over night. Nothing is immune. Not central markets or decentralized ones. Housing crisis anyone? Stock market crash in the 20’s, 80s, 90s? That’s what trading is. High risk, high reward. But while everyone else is worried about wild swings, traders love it. They know that downward spirals are opportunities while novices cry about market manipulation and unrealistically expect things to go up forever.”

Why undervalued assets are key to investing:

“Investing when everyone else thinks something is worthless, and hanging on tight when everyone else is losing their minds is how it’s done. That’s why Warren Buffet is rich and you’re not. He bought Coke when everyone else though it was going bankrupt. That’s what he does. That’s all he does. He finds good companies that are undervalued and buys them up while others are fleeing.”

Why the “it’s backed by nothing” argument fails:

“One of the biggest and most ridiculous claims against cryptos like Bitcoin and Ethereum is that they have no inherent value except that we believe they do. I can’t tell you how many times this shows up in comments on any article written on this subject. Read my lips: Nothing has any inherent value except the value we put in it. Well maybe food, water, shelter does, but beyond those basics, what else? Not much. Even gold and diamonds are just some shiny shit we dug out of the ground and we liked it because it shimmers. No real value and barely any utility. Your USD is backed by nothing. It only has value because we all agree it has value.”

On how trust is a moving concept:

“We tend to think of trust as a fixed trait. It’s not. Trust is a moving concept. If my government was stable for fifty years and then a bunch of morons get elected who do stupid shit, that trust is now worth shit, as is their backing. A backing by a central entity is no guarantee of anything. At multiple points in history, currencies from major industrialized nations have gone into a tailspin despite that backing. Think Germany before WWI, which led directly to WWII. It can even happen here. And it has. J.P. Morgan once bailed out the U.S. Treasury because they were broke.”

On how the dollar is in trouble:

“The US dollar’s long-term trend is down. It bleeds value little by little, slowly eroding your purchasing power like cancer eating away at you for years without you seeing or feeling it. It’s called inflation. One day you will wake up and find your dollar is worth a lot less than it once was because it’s designed to decrease in value over time.”

Reflections:

The blockchain is the underlying technology that powers bitcoin. The blockchain has much greater application than cryptocurrency.

Trust is not a static thing. Trust in government can rise and fall.

No currencies are back by anything other than trust and agreement.

Any asset can go to zero, nit just cryptocurrency.

Bitcoin is a form of triple-entry accounting.

In order to invest, you have to find things that are undervalued. That is, you have to value things that you think most people are wrong about in the present.

Bitcoin is different from tulips because it has actual use cases and application.

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