Thursday, December 07, 2017

Bye Bye Bitcoin Bubble

It's all about the mackerel.

In the American prison system, prisoners use packages of mackerel as a medium of exchange because 1) the supply is inherently limited because prisoners can only buy 14 "macks" per week, and 2) no one wants to eat it.

In other words, prisoners collectively decided to use a useless item as a medium of exchange and store of value because its supply was inherently limited.  Sound familiar?

In a real sense, Bitcoin is even more useless than prison mackerel because at least prison mackerel is used to process transactions.  Bitcoin is barely used as a means of settle transactions; all the action is in speculative investing.

As I write this, Bitcoin just past $16,000 in value.  I would bet any amount of money that on December 7, 2018, the price of Bitcoin will be below that value.*

Everything about the situation just screams bubble.  I'm very bullish on blockchain, but Bitcoin?


Now, just because a medium of exchange lacks any inherent value doesn't mean that it's doomed to crash.  Gold remains a valuable (though bad) investment even though its usefulness as a conductor and jewelry material doesn't justify its price.  But gold also has millenia of history as a valued medium of exchange, a luxury Bitcoin does not.

In contrast, mackerel became a prison currency because the prior currency, the cigarette pack, ended up getting banned by the prison system in 2004, which means its history is barely a decade old.  Which is why it wasn't surprising when the value of the "Mack" crashed at one prison:

"I'll never forget the day where the macks lost all their value almost overnight. Someone had a huge amount of money macks and they got confiscated and the administration left them sitting in a bucket. They essentially introduced hyperinflation. They flooded the market with money macks."

Bitcoin prices have been rising because speculators are buying Bitcoin in hopes that prices rise further--the greater fool theoryDuring my current trip to Japan, Bitcoin has risen from $10,000 to $16,000.  Not coincidentally, I was pitched two different ICOs at an event where I spoke.

Inevitably, Bitcoin is going to hit a limit as the market runs out of greater fools, a point that I think is fast approaching, and some of the big holders (the Winkelvii?) will sell, flooding the market, and setting off a downward spiral.

There's even a catalytic event--on Monday, the Cboe will start trading Bitcoin futures, meaning that people will finally have a chance to bet against the currency, once again proving that Trading Places is both one of the funniest and most educational movies of all time.

I'm off to buy some futures contracts!




* UPDATE: Someone must have posted this to Hacker News, because it went viral.  Scott Walker even offered to bet me $1,000,000.  I admire his conviction, though I disagree.  But he does make a good point that I'm not *really* willing to bet any amount of money; I just didn't think someone would offer to bet me $1,000,000.  Therefore, I'm going to cap the bets I take at $10,000 per bet.

** UPDATE: I have received legal assurance that this doesn't count as illegal gambling, provided no money is "pooled" up front, so it's game on!

*** UPDATE: It is now December 7, 2018, and the price of Bitcoin is $3,368.  Alas, none of the people who tweeted at me or offered to bet were willing to follow through by the time I got legal clearance from, I kid you not, a Las Vegas law firm with specialties in gambling law and crypto law.  I'll just have to satisfy myself with listing their Twitter handles here:

People who responded to my original tweet with skepticism:
@BitcoinBhoy @Hodlayheehoo @dbrizzy80 @georgepf84 @tracyarciaga

People who expressed interest in betting but never followed through
@qihu00 @ericsports @Bitcoin_Shill

People I DMed with about betting:
@jimmysong, who went the farthest towards making a bet with me, but ultimately didn't

@cryptocharlesh who was willing to make a longbets.org bet with me (which I was unwilling to do because I wanted to make money, not donate to charity)

@haralabob, who was game, but who is really rich and wasn't interested in a mere $10,000 bet.

Same for @scottwalker99, who immediately offered to bet me $1,000,000, but wasn't interested once I capped bets at $10,000 per person.

I want to give a special final mention to @allnewsfor, who wrote: "Btw the internet will remember if you are too scared to back up your empty words with action"

I hope that applies to those who refused to bet me as well!

Wednesday, December 06, 2017

Adventures in Tokyo

I'm currently in the middle of a week-long trip to Tokyo where I'm speaking about my books and meeting with startup and finance folks on behalf of the Women's Startup Lab.  While I'd been to Tokyo once before, in 1982, I was so young then, and the city has changed so much since, that it's really been like visiting for the first time.  Here are some of the adventures and observations from my time in the land of the rising sun:

Story Time: My visit to the Tsukiji Fish Market.

One my first morning in Japan, I found myself awake at 3 AM (which is 10 AM California time) and started catching up on phone calls.  During one of those calls, I was strongly urged to go check out the Tsukiji Fish Market and its famous tuna auction, which takes place at 5:30 AM.  Fortunately, the Women's Startup Lab founder, Ari Horie, was both awake and willing to indulge my quixotic desire.  Little did I know that it would become an object lesson in entrepreneurship.

You see, what I didn't realize is that Tsukiji had just announced that it was not going to be allowing non-professionals to visit the auctions from December 1 through mid-January.  And of course, I was going there on December 4.

Tsukiji is an accidental tourist attraction; it's a commercial fish market for fisherman and wholesalers, with millions of dollars changing hands every day.  So when we arrived, there was no entrance or signs.  I believe the assumption is that anyone who has a legitimate reason to be there already knows where to go and what to do.

Were I by myself, I probably would have skulked around the perimeter, and ended up slinking back to my hotel room.  Fortunately, I was with a real (and Japanese-speaking) entrepreneur.  "Follow me, and don't make eye contact with anyone," Ari said.  She then began striding purposefully into the dark, industrial-looking complex, which, I should point out, was covered with signs that read things like, "Do not enter.  Unauthorized personnel not allowed."

We made our way without having any idea where we needed to go, dodging both security staff (each time we saw an officer, we changed direction to avoid him) and the ubiquitous electric cards that zoom everywhere at about 20 MPH, carrying boxes and whole fish.  Each cart had a semi-circular metal cow-catcher to absorb impacts, and a distressing number were dented and worn.  I suppose I should be glad they weren't blood-stained.

Eventually, we made our way to the center of the complex, where, by peering under partially raised garage doors, we could just make out the preparations underway for the tuna auction.  Whole flash-frozen tuna were being lined up for inspection by an army of Japanese men with wicked-looking fish hooks.

Again, were I by myself, I would have contented myself with saying, "Well, I guess I got to see the fish!  Pretty cool.  Now I'd better get out of here before they catch me and beat me to death with their hooks."  Ari had other ideas, walking along the building until she found a door marked, "Do Not Enter" which opened when she tried it.

Once inside, we got a much better look at the tuna, laid out like a giant set of fishy chess pieces all over the concrete, ice-strewn floor.  That's when Ari went up to a fisherman and began speaking with him in Japanese.  After about 5 minutes of conversation, the fisherman reached into his pocket and gave us two paper badges to put around our necks.  I found out later from Ari that she had told the fisherman that I was a very important visitor from Silicon Valley, who had come to Japan to observe the tuna auction.  The fisherman told her that you weren't allowed in the building without a badge, so she simply asked if he could give us some badges.  She told me that she had addressed him with the traditional rural Japanese honorific for "father," appealing to the ingrained parental instincts of any older Japanese man when addressed by a younger woman or girl.

Now armed with official badges, we got to wander the entire fish market while waiting for the auctions to start. (Ari purchased both a fresh giant scallop and a 1-pound block of fatty tuna, which I then stuffed into my jacket pockets)  It was astounding to see the variety of fish, from fugu to live octopi (I felt bad for them).  I watched blocks of tuna being trimmed to perfection, then being misted to glistening perfection via spray bottle like a Hollywood star being prepared for a close-up.  I watched eels being slaughtered, with their heads jammed on a metal pin on a cutting board so that they could be properly filleted.

Once the auction started, the sounds of ringing bells and constant sing-song auction chanting filled the air, and fishermen hurried about with hooks, loading 400-pound tuna onto wooden carts to be carried off to market stalls, high-end restaurants, or to be whisked to the US on cargo jets.  At one point, a security noticed us (which was hard not to, since Tsukiji is essentially 100% Japanese men, with no women or non-Japanese to be seen anywhere) and told us (Ari told me later) that we had to leave.  So we left the room, circled around to the other side of the auction, and re-entered.

All told, we watched the three different tuna auctions, then found the actual tourist-accessible part of the market and had a breakfast of fine sushi at 6 AM.  The fish was very fresh and very delicious.

The moral of this story is that even in Japan, the most orderly and rule-following nation I've ever seen (more on this later), an entrepreneur who won't take no for an answer can still work wonders.

Japan: Land of Detail

Japan is the cleanest, most orderly place I've ever visited, and I've visited Singapore:

  • I still haven't seen a single piece of litter on the ground.  This fact is even more astonishing because there literally are no garbage cans anywhere.  Ari told me that the lack of garbage cans reminds people that they are responsible for their own trash.  If this were America, there would be litter everywhere, as people said, "Fuck it," and chucked their trash whenever no one was looking.  In Japan, it simply means that people will carry their trash until they get home to throw it out.
  • The busy parts of Japan are as crowded as Manhattan, but the experience is totally different.  Everything is clean and polished.  The crowds of people move purposefully, obey all the traffic signs, and make barely any noise.  I eventually realized that the thing that seemed to be missing the most was the constant sound of honking and cussing that characterizes Manhattan.
Even the most minor thing is crafted with incredible care.
  • The first thing Ari and I did after getting through customs was to visit a Japanese convenience store for snacks.  I selected a tuna roll, which cost about $1.  When I opened the packaging, I was surprised to find that the rice and seaweed were carefully separated by a layer of plastic; when you want to eat a roll, you open the package, and roll the rice into the perfectly sized and aligned sheet of seaweed.  The result is a satisfying crunch when you eat the roll that would be impossible if it were presented, as it would be in the US, completely assembled, which would lead to soggy seaweed.
  • As I've already posted on Facebook, the instant coffee in my hotel room is a marvel of craft.  Rather than a cumbersome paper pouch or a sealed K-Cup, poured into a styrofoam cup, the coffee package folds out with origami-like precision to precisely fit the delicate, fine bone china cups provided in my hotel room.  It makes instant coffee somehow elegant and refined!
  • At my various meetings, my hosts presented me with coffee and tea.  Instead of the American system of a heatproof disposable cup with a cardboard sleeve to prevent burns, the Japanese way is to have disposable cups that fit into a plastic adapter that holds the cup, protects the drinker's hand, and offers a handle so that you can grasp the cup with a few of your fingers and drink your tea in a civilized and genteel manner rather than barbarically holding a cardboard cup with your whole hand.
  • After my talk, I was presented with a present--a special fruit package, which, when opened, proved to hold the most beautiful grapes I had ever seen, and a whole cantaloupe.  The grapes were all clustered perfectly on a single stem, were large and perfectly ripe, and were somehow perfectly clean and dry and ready to eat.  It wouldn't surprise me if they were hand washed and dried with tweezers.  They were delicious.  Later, I found out that the fruit package probably cost $100-200.
Here are few of the final quirks and observations that either amused, impressed, or horrified me.
  • Years of reading Cracked.com gave me the impression that all of Tokyo looked like a cleaner Blade Runner, with brightly colored lights illuminating a neon wonderland where all the women dressed as schoolgirls while Hello Kitty ruled from on high like a fierce overlord.  For the most part, Tokyo looks like a much cleaner, much more elegant, much more Japanese Manhattan.  Though we did visit Shibuya one night, and it did look like a neon wonderland that rivaled Times Square for garishness.  That was the night we went to a trendy "meat sushi" restaurant with pictures of horses on the menu.  I did not partake.
  • At one point, I visited a very traditional bank.  The lobby was titanic in scale, and had an army of uniformed receptionists who all looked and dressed identically.  When I went up to my appointment on a higher floor, I encountered a secondary lobby with its own army of uniformed receptionists, who would stand and bow any time any employees walked past.  I still haven't figured out when I'm supposed to bow, so I just bow anytime everyone else does and hope for the best.
  • People keep taking me to eat non-Japanese food.  I've already had Chinese food twice!  The food is excellently prepared and delicious, but I feel like I'm visiting Japan to enjoy Japanese culture, not Chinese or American culture.  That being said, not everything translates precisely; I saw New England Clam Chowder being advertised in a supermarket, complete with its traditional topping of mounds of cheddar cheese.  An Irish pub advertised its traditional beef salad.
  • Tokyo may be considered an expensive city, but restaurants are much cheaper than in the US, and tipping is not allowed.  We had a dinner in a high-end tempura restaurant at the top of a luxury office tower, complete with plenty of sake, and the total bill was about $50 per person.  I had a quick-service sashimi dinner for about $10.  On the other hand, nuts are expensive as hell (I guess they're all imported), and there is no peanut butter!
  • I feel like a hulking giant in Tokyo.  Everything, including the food, is designed for people who are much smaller.  I can only imagine what it is like for someone like Ben Casnocha, who makes me look tiny in comparison.  I found the taxis cramped, and my large American gluteus maximus spilled out of some of the chairs.  Once, I noticed that an elevator was rated for 1,000 kg/15 people.  In America, it would be 2,000 pounds/10 people, and even that might not be enough of a safety margin.
  • In the business districts, the vast majority of men wear suits and ties.  Dressed in my most formal attire, including Brooks Brothers blazer, I look like I'm wearing business casual.
  • I feel completely safe from crime wherever I go.  The contrast with San Francisco is devastating.  In comparison to Tokyo, we live in a third-world country.
  • The major auto manufacturers have many more models in Japan than in the US.  I don't even recognize most of them.  One person told me she had a Honda that was very short but very wide, and had three seats in the front, and three seats in the back.
  • Spoken Japanese is incredibly fast and very melodic and animated.  We think of the Japanese as reserved because their English is slow and formal, but their Japanese conversations make most English conversations pale in comparison.  Of course, I don't speak any Japanese, so in a number of meetings, I resorted to nodding my head when everyone else did, and trying to look sage and wise each time my name was mentioned.