Coyote Blog

Felix Salmon, guest-blogging for Kevin Drum at Mother Jones, had a post yesterday titled "Bitcoin's Problem with Women."

Men make up an estimated 96% of the Bitcoin community, which means that if Bitcoin does end up succeeding, as its adherents think it will, and if the people who own Bitcoin see their holdings soar in value, then all of the profits will end up going to what Brett Scott calls the "crypto-patriarchy." Not many men, to be sure: as Charlie Stross says, the degree of inequality in the Bitcoin economy "is ghastly, and getting worse, to an extent that makes a sub-Saharan African kleptocracy look like a socialist utopia." But it's not many men, and effectively zero women.

I guess I don't get it.   Is this the result of some sort of active discrimination, or is it just one of those choices that tend to skew male or female (like the decision to become a lumberjack or a health care worker)?   I know most of the cryptography world is dominated by paranoid men, and many of these same folks were the early adopters of Bitcoin.

Beyond one lame anecdote (where one random guy at some Bitcoin function mistook a female VC for a girlfriend of the real VC), the author does not seem to present any evidence of systematic discrimination and exclusion.  Knowing some of these Bitcoin and cyptography people, though, many are from the family of guys who are socially inept and were shunned by girls in high school, so I would not be surprised if they are awkward around women.

If anything, much of his post seems actually be an exercise in gender stereotyping, arguing that men care about politics and ideology and women about community and practicality.  Seriously, under the guise of somehow defending the equality of women, he bares his gender assumptions:

If you talk about Bitcoin with the people who use it, the language they use is always about technology and finance. Bitcoiners tend to think in terms of how things work, rather than how they're used in the real world. Buying and selling Bitcoin is still much more difficult than it should be, despite many years of development, which implies that people aren’t concentrating enough on real-world ease-of-use....

That's a product design job, and frankly, it's a product design job well-suited for women who aren't approaching the problem while grinding the ideological axes so widely held inside the Bitcoin community. As one woman involved with Bitcoin put it to me, "Money is a political issue for Bitcoiners. It's a human issue for everybody else."...

Let's say you wanted to build a mobile savings app in sub-Saharan African. If you asked male Bitcoin developers to build such a thing for a target audience of young African girls, they might have talked about how to maximize the amount of money saved. But, working on the ground in South Africa, the Praekelt Foundation came from a different perspective. Apps like these aren't really about maximizing savings, so much as they're about empowerment. If you can build a product for girls that ratifies their identity and individuality and gives them self-esteem, then you're creating something much more valuable than a few dollars' worth of savings: you're keeping them in school, and you're keeping them healthy, and you're helping themto not get pregnant. That's the kind of way that cryptocurrencies could change the world. The problem is that the men in Popper's book just don't think that way.

But I digress.  The key point is this:  Bitcoin is a freaking open source, anonymous platform.  Anyone can work with it.  No one even has to know your gender (like the old internet joke about no one online knows you are a dog).

Throughout the piece he talks about the "Bitcoin community" as if it is some structured body, the membership in which is required to work with Bitcoin, like saying that one has to be a long-standing member in good standing of the Communist Party to join the Soviet Politboro.  But the Bitcoin community is no such thing.  A better definition of it is "people who happen to be working with Bitcoin today."  You no more need to be a member of the current bitcoin community, or even be known or liked by them, to create your business or service model in Bitcoin than you need to be pals with Tim Berners-Lee to be able to create an Internet company.

The whole point of why we wacky (male) libertarians get all excited about bitcoin is not that it somehow ends gender or racial or any other sort of discrimination, but that it helps makes all of these more irrelevant.  I won't pretend to read Salmon's mind, but if I had to guess, he is frustrated because he sees the capability of Bitcoin to help end discrimination.  If that is true, great.  But many of us assume that bad people with bad motives will always exist, so we seek out anonymous currencies and cryptography so we can live our lives without the permission or even knowledge of these people.

Ray Lane of VC Kleiner Perkins is seen in this video trumpeting how the Obama Administration is, for the first time in his memory, succesfully making investments in private companies.  His main example:  Solyndra!

The reason this is particularly timely and fascinating is that just a few weeks ago, Ray Lane took delivery of the first Fisker Karma electric car, financed with $529 million of our tax money and promoted with $7500 of our tax money on every sale,  Mr. Lane and Kleiner are investors in Fisker (and Lane is Fisker's Chairman) and therefore huge beneficiaries of Obama's largess, and Mr. Lane got the first Karma as a big thank you for his political connections that helped score the cash.

Of course Kleiner (who also hired green Crony-in-chief Al Gore) is going to be thrilled with the government money. Nothing is worse than being a VC in with a large early round position in a company and being unable to get the next stage of investment. Since it appears they could not get any private investors to fund this, the taxpayer money probably saved their investment .... at least for a while.

Update: Ray Lane is apparently ticked off by the negative publicity surrounding the Fisker Karma and the money they received from taxpayers. Tough. Surely he is used to his investors being ticked off about bad outcomes. Well, now he gets to see how REALLY ticked off his investors can be when their money was taken against their will, even without their knowledge. At least he can tell his institutional guys, when things go bad, that they came in with eyes open. What's his response to taxpayers?

For those who have not seen it, my article on how the Fisker Karma, even on all electric, uses more fossil fuels per mile than an SUV is here.

From my own state of Arizona (emphasis added)

A group of small-business proponents is asking the Legislature to guarantee startup money for Arizona enterprises.

The backers of a so-called Arizona Fund of Funds made their pitch to a handful of lawmakers Monday, saying businesses need government help to start hiring again.

That help should come in the form of tax credits, said John Kowalski, who is promoting the idea through the Arizona Growth Foundation, a group of venture capitalists working to bring more investment to the state.

The credits would be a safety net to encourage venture capitalists to invest in a pool of money that would be distributed to emerging businesses, said Kowalski, a former executive with the Arizona Small Business Association....

The government's role is to serve as a guarantor, through the tax credits, in case the investments don't yield the projected results.

While this is being sold as something for small business, what it looks like to me is just more of the same socialization of bankers' losses that helped get us into this financial mess.  I suppose this "profits are mine if it makes money, losses are the governments if it loses money" never grows old for investment bankers and VC's, but why is anyone taking this seriously anymore?

Amanda Carey via the Daily Caller:

For a variety of reasons that have a lot more to do with subsidizing preferred business interests than energy or environmental policy, Congress has fallen in love with biofuel subsidies and mandates.  We've talked quite a bit on this site about ethanol.  Here is another example, via Mark Perry:

It sounded like a good idea: Provide a little government money to convert wood shavings and plant waste into renewable energy.

But as laudable as that goal sounds, it could end up causing more economic damage than good -- driving up the price of raw timber, undermining an industry that has long used sawdust and wood shavings to make affordable cabinetry, and highlighting the many challenges involved in decreasing the nation's dependence on oil by using organic materials to create biofuels.

In a matter of months, the Biomass Crop Assistance Program -- a small provision tucked into the 2008 farm bill -- has mushroomed into a half-a-billion dollar subsidy that is funneling taxpayer dollars to sawmills and lumber wholesalers, encouraging them to sell their waste to be converted into high-tech biofuels. In doing so, it is shutting off the supply of cheap timber byproducts to the nation's composite wood manufacturers, who make panels for home entertainment centers and kitchen cabinets.

The federal government can provide up to $45 a ton in matching payments to businesses that collect, harvest, store and transport biomass waste to an authorized energy facility. That means sawdust or wood shavings may be twice as valuable if a lumber mill sells them to a biomass energy company instead of to a traditional buyer.

This is bad news for the composite panel industry, which turns these materials into particleboard and medium-density fiberboard, and outranks the U.S. biomass industry in terms of employees and economic impact, with 21,000 employees and annual sales of $7.9 billion, according to 2006 U.S. Census data.

The article poses this as a dueling jobs situation, but the result not only leaves us worse off economically, it leaves us worse off environmentally.   And the explanation is all Hayek and the limits on information possessed by a few individuals in Congress vs. 300 million market actors.  It is pretty clear to me that, to whatever extent Congress even thought at all about this legislation, they must have assumed that wood shavings were "waste."  What happened, most likely, is some entrepreneur and his VC backers came to Congress saying that all this sawdust is just wasted and if you give us a fat subsidy, we can build a valuable business burning it for power.

But in fact, businesses (no matter how much environmentalists believe otherwise) abhor waste.    When a tenth of a percent on margins is important, a lot of people have financial incentives to either reduce the waste or do something productive with it.  Which is why there is a whole industry using sawdust and chips already to make various building products.  And I won't go into the math, but trust me that this kind of use for waste is far more efficient, both economically and environmentally, for the waste than just burning it.

Not good, but not really a surprise:

The estimate by Orin Kramer will fuel investors' concerns over the deteriorating financial health of US states after the recession. "State and local governments are correctly perceived to be in serious difficulty," Mr Kramer told the Financial Times.

"If you factor in the reality of these unfunded promises, their deficits will rise exponentially."

Estimates of aggregate funding requirement of the US pension system have ranged between $400bn and $500bn, but Mr Kramer's analysis concluded that public funds would need to find more than $2,000bn to meet future pension obligations.

Kenneth Anderson asks:

Two trillion dollars?  One question about these obligations is whether taxpayers will stick around to pay them, or instead will vote with their feet.  ("Vote with their feet" is something that has been discussed in various ways at VC "” as an aspect of a federal system and states with their own laws.)  Many of these pension obligations have been incurred by municipalities and others by states, and in some cases the obligations are intertwined.  But what happens if voters-taxpayers move out?

The assumption has long been that taxpayers are stuck, on account of jobs and other circumstance.  But query whether that is necessarily true as the baby boom generation retires.  In that case, it might find itself far more mobile, in circumstances where rising taxes at every level make relocation a more valuable decision at the margin.  For that matter, if otherwise desirable locales manage to tax their businesses away, will the baby boomers' kids and grandkids have reason ever to locate in places that lack jobs?  They might have been raised there "” but would they go back?

Would people leave California? They are leaving now, true, but would they leave in the future specifically for this reason or generally on account of the tax burden, particularly as retirees?  Or New Jersey?  What about the city of Oakland?  Or even smaller cities, such as the towns in California "” not large at all, small towns, that have already declared bankruptcy over pension obligations?  It's easy to move out of those towns.

My guess is that the Feds are going to pick up a lot of these state and local obligations, making it effectively impossible for taxpayers to escape them short of leaving the country (and creating the mother of all moral hazards, by the way).  After all, if the current administration will bail out Wall Street banks with whom they have little ideological sympathy, they certainly will do so to keep SEIU-represented government employees in jobs.

From Henry Payne:

Rent-seeking is the new venture capital model, Kleiner Perkins managing partner Ray Lane explained to an electric car-conference here Wednesday.

In an extraordinary speech, Lane laid out how market socialism can guarantee profits for politically connected VC firms like Kleiner -- far more preferable to the old model of "throwing a dart at a dart board," as Lane has put it. While Silicon Valley-based Kleiner made its reputation as a financier of tech startups like Netscape, Lane confided that they are inherently risky ventures in uncertain, fast-moving markets.

By contrast, Lane expressed admiration for communist governments like China and market-socialist economies like France where government determines new markets, thus providing a more certain investment climate for rent-seekers. With Kleiner partner Al Gore lobbying for federal mandates from wind to electric cars, Kleiner would be assured of a return on otherwise risky investments like Fisker Automotive, a California electric car company.

John Tamny in TCS Daily:

In a recent Los Angeles Times op-ed, "Overselling Capitalism,"
University of Maryland Professor Benjamin Barber wrote of the "crisis"
in the capitalist mindset, where the "'Protestant ethos' of hard work
and deferred gratification has been replaced by an infantilist ethos of
easy credit and impulsive consumption that puts democracy and the
market system at risk."

Wow, I must not have gotten the memo.  Here I have been plugging negative numbers into my 1040 for three or four years in an attempt to build a business and some future wealth, and it turns out that deferred gratification is out of style.   (TJIC also did not get the memo)

Here is a big reality check for professor Barber:  The fact that a few mortgage companies got overly generous in extending mortgage credit does not mean that the work ethic and entrepreneurship is dead.  In fact, they are virtually unrelated topics.  If the price of something is reduced, more is going to be consumed.  Suppliers of credit reduced the price of credit, too far as it turned out to make a profit, and more was consumed.  This does not represent so tragic change in the human makeup, it is just supply and demand at work, like normal, and some bad business judgement. 

In fact, I can't get over the class-based condescension that seems to fill every nook and cranny of the commentary on the mortgage bubble bursting.  When in the late 1990's, rich VC's provided too much money too cheaply to yuppies running Internet companies, I don't remember anyone lamenting a shift in human motivation or a failure of capitalism.  But when banks provided too much capital too cheaply to lower income people for home mortgages, suddenly all those lower-income people are representative of the failure of capitalism and the work ethic.

As I wrote before, the new Democratic Congress try to end certain subsidies received by major oil companies.  All fine and good, at least as long as it is really a subsidy and not just an contract obligation they would like to get out of.

One might be led to believe that the Democrats were finally going to address the corporate welfare issues they have been promising to deal with for years.  Unfortunately, it appears that they are really only looking for an excuse for some populist demagoguing against Exxon.  Subsidies still appear to be A-OK:

The Cato Institute's Jerry Taylor and Peter Van Doren are all in favor of eliminating energy subsidies.  By that measure, they find
the House Democrats' 100-hour energy legislation -- H.R. 6, the
Creating Long-Term Energy Alternatives for the Nation Act (aka the
"CLEAN Energy Act") -- to be quite a disappointment.

Energy subsidies, of course, have been a historical disaster.  If you have ever traveled around California, a common site you will see is 1) Windmills that are not working and 2) Rooftop solar fixtures that appear badly broken.  That is because these facilities were installed cheaply as subsidy magnets, rather than actual, you know, investments that made any sense.   Here in Arizona, every third rich persons SUV has this Arizona environmentally-friendly license plate that says the truck is dual-fuel.  When I moved here, I though that was kind of cool.  I know several countries that have good CNG (compressed natural gas) economies in their transportation sector.  It turns out, though, that none of these vehicles actually fill up with anything but gasoline.  Several years ago Arizona had a subsidy for buying dual-fuel trucks that exceeded the cost of conversion, so that everyone did the conversion as a money-maker. 

And these are far from being the worst.  How many billions have been sunk into R&D rat-holes that have produced nothing except some professor's tenure?  Remember that alternative energy and energy conservation technologies are among the hottest sectors in venture capital nowadays.  The VC's I know can't get enough of these projects, and are project rather than money limited.  This means that every subsidy and grant for energy can only go to one of two places:

• Projects that are already going to be privately funded, so that all they do is displace private funding, which makes them a total waste of taxpayer money
• Projects that were rejected for private funding as uneconomic or unpromising, such that the spending is a waste unless you assume Congressmen and government bureaucrats are sharper than VC's in picking investments.

My observation is the two political parties differ on subsidies only in terms of style.  The Democrats appear to have no problems with subsidies as long as they go to sympathetic and fashionable companies (e.g. Google via net neutrality) rather than companies they have deemed to be unfashionable (e.g. Exxon).