His point about insurance companies being necessary and sufficient for health and safety is well put...
Friday, July 1, 2011
More Bitcoins Colloquy
P: I add this. It seems to me that a bitcoin is a newly-produced commodity or good.
***No more than accounting entries moving from paper to computer was a newly produced commodity or good.***
P: In the same way, those persons who discovered a rock and got gold out of it produced a new good or commodity by extracting the gold.
***Bad analogy...***
P: Marketability is a quality of a good that is subjectively assessed by those in the market. It seems that bitcoins possess it.
***True... necessary, but not sufficient to be money.***
P: People can recognize it and transport it at almost zero cost.
***False, 1. Bitcoins, being computer based thing, can easily be counterfeited, so it is hard to recognize.
Would you know one if you saw it? Gold is almost impossible to counterfeit, and with the insouciance gold dealers buy and sell gold coins and material, I suspect it is extremely rare. Second, it takes a trillion dollar infrastructure to make bitcoins possible, that system can go down leaving not a trace of bitcoins. Gold moves along and infrastructure that cannot go down all at once, and even so, like the Twin Towers on 9-11, every ounce of gold is still there, and recovered, after the annihilation.***
P: They can exchange it very easily.
***Again, necessary, but not sufficient.***
P: The supply process of the bitcoin is also apparently known, but what is not known (at least to me) is the entry of future close substitutes. I'm leery of that. But gold had the same problem. How did early users of gold know that vast supplies would not be discovered?
*** Categorical error. Gold (and silver and any other money) move from rock to medium of exchange, until the price drops to the point where it is converted to plate, jewelry and decoration, maintaining a fairly steady price of gold as money (following Spooner). A huge discovery would simply mean churchs got gilded, but gold as money would remain fairly steady, not fall in buying power (an ounce of gold bought a fine suit in Caesar's time, in 1500 and today.) Spain saw a huge unanticipated influx of gold from its colonies... Spain got gilded. When gold as money rises in buying power, plate, jewelry and decoration gets melted down into money, again keeping things steady.***
P: I'd also like to mention that money CAN be accounting entries, if the process that creates those entries keeps the supply limited. In fact, accounting entries have certain advantages over hand-to-hand forms.
***Money can't be an accounting entry if that is not the definition. Limited supply is necessary, but not sufficient. I think you are defining money as fiat currency here.***
P: Liability claims that are used as money need the assurance that the claims are "good" and will be or can be paid off in things of value.
***Too strict... the agreement is paid in money, gold... both parties know what they are doing. Gold recipient is quite aware of the nature of this money.***
P: That is why some may be looking for a "backing" to bitcoins. But bitcoins are not a liability claim at all. They are a manufactured thing, and so they are a good or an asset.
***But not money...***
P: Their value would be conceivably very low if they were not well designed. If I introduced bitsand, which was a digital entry for a grain of sand, it would be worthless. The value of the bitcoin is apparently being driven by certain uses that allow anonymity in transacting. That's my guess.
***This comment reminds me my nephew has done well buying and selling online property associated with online games. There are people making several hundred thousand dollars per year selling digital "objects" among online game participants. Kids pay real money to dress up digital dolls online, dolls they bought for real money. It is truly ephemeral. Perhaps bitcoins is simply another online game.***
Thursday, June 30, 2011
Bitcoins
One thing I love about Austrian economics is devotees cannot agree on a definition of money, interest, profit, the foundation of rights and so on. But I see that as a strength not a weakness. Keynesians and Marxists have their disputes, but neither side is ever right (Marxists do get their facts straight, something Keynesianism inherently cannot do, since Keynesianism is irrational, and must proceed from false premises to work). At least in Austrian school, one side has often got it right.
I got into a Colloquy with a devotee of Austrian economics over bitcoins as free market money, which we join in progress...
P: And since you are thoughtful on this subject, let me point out to you that cowry shells were not universally accepted either, but they still were money in a broad swath of earth.*** Internal contradiction - not universal/broad swath.... But I think you mean similar bagatelle items shells here, agates there, totems over there... but not universal.***
P: And why is universal acceptability a necessary criterion?
***Money is a medium of exchange. If I cannot use it as a medium of exchange, it is not money, it is something else.***
P: Who hands down these edicts anyway?
***The market, the same people who said Euripides was a great playwrite....***
P: And who says that money MUST emerge from a commodity? (von Mises I know, but what makes that pronouncement authoritative?)
*** Von Mises is always just restating the obvious... when time and again "money" (medium of exchange) emerges, it is from a commodity.
This leads to "the store of value controversy" as part of the definition of money. All commodities are a store of value, and when one emerges as money, it does not lose its inherent quality as a store of value. Some austrians get worked up over money defined as medium of exchange AND a store of value since it offends against the principle of subjective valuation. But it is one item acting in two faculties, so the confusion is understandable.***
P: And is it really barter when you use another object (like bitcoins) to mediate an exchange?
***It is barter because bitcoins explains itself as barter, without saying the word. You and I can agree that I'll send you my book for 2 bitcoins (which you either mined or earned) and now I have 2 bitcoins to use to buy that 8 meg flash drive from Fast Eddie. Bitcoins role is to make an accounting entry on who owes who what, in this barter arrangement. Alternatively, this could be called fiat money, but fiat and money together is an oxymoron.
An accounting entry is rather tenuous item to describe as an object.***
P: If so, then all money transactions are actually barter.
***I disagree, since in barter, like bitcoins, there is no medium of exchange. In bitcoins, the exchange is in-direct, whereas in barter the exchange is direct (My pig for your goat). Bitcoins may solve the problem of double coincidence, but it meets none of the other criteria the market has set for money.
With money, all of the criteria set by the market are in place (plus one only recently observed: money is antibiotic... newly discovered metals that are antibiotic end up being made into coins (platinum, rhodium, palladium), metals not antibiotic do not end up thus... it is a curious phenomena.
Goat for pig, barter; goat for 1/4 ounce of gold, medium of exchange transaction; goat for bitcoin... i'd say barter with accounting system, but if someone wants to argue it is a fiat currency transaction, ok...whatever, but it ain't a money action, there is no medium of exchange, no object.
If one argues bitcoins is just a private mockery of our fiat system, I have no problem with that. But it is not money.***
P: Barter has to be disparate goods exchanged for other disparate goods, or else it loses all meaning.
***d'Accord. Since bitcoins are usuable only within the tiny milieu of the bitcoin nation, the universe of goods and services are rather limited.***
P: And even if we accept the notion of emerging from a "commodity", how you demonstrate that the emergence of bitcoins in the process being used is not a commodity?
*** a commodity is universally accepted: rice is a commodity, sushi is not. Bitcoins are far too rare, intangible, and are near universally unacceptable for barter, (nothwithstanding that I think their miniscule use is as barter).***
P: It's easier to say that it IS a commodity.
***I disagree, walk into a market with 100 pounds of rice, and 10 bitcoins, see which gets you a deal...***
P: And so, I deeply appreciate what you've suggested, because it has elicited from me all of these counter-thoughts, which I hope you find stimulating and perhaps persuasive.
***I've read you for years and I would not have challenged you if I did not think you were more than my match... I come from a family of academics, and I am the black sheep who went into commerce. You've forgotten more on these topics than I've ever learned... but as to money, I've been fixated on the topic for 40 years, and as an importer have been able to discuss it worldwide (have you read spooner on how the precise correct amount of coin is kept in circulation? http://lysanderspooner.org/node/49).***
Wednesday, June 29, 2011
Alibaba Fatigue
"Trade Leads" have long been a desultory source of business, and so when Alibaba came along, I doubted it would be of much use. One of my students availed himself of Alibaba, and wasted some time, and is now back on track.
Since one can buy ones way on alibaba, it also attracts plenty of scamsters and wannabees. there very well may be first rate vendors listed there, but the vast majority of the traffic they receive from alibaba sources must be risible, therefore a fatigue sets in regarding alibaba generated inquiries, such as yours.
For China, HKTDC.com still reigns supreme. Inquiries through that source are of higher quality to both sides, so less fatigue. HKTDC does allow, indeed provide, email contact.
And all of this suggests somethign in my book true to this day: the paper letter mailed through the postal service will distinguish you. Emails are easy to delete and ignore. A piece of paper, in an envelope, with a stamp, warrants a file folder and a manager reviewing it.
Back to the future!
C Inquires As To Sales Reps
C:...a question about sales rep timing if I can. I have some working samples of my designs laser-cut from plexiglass. They illustrate my first concept pretty well. Is it too early to approach one of the sales reps that my stores have given me? I ask because some stores (and you mention something like this in your first book) say that I'll need to offer 5-6 different items for them to display together on a shelf. I have enough ideas and permutations of this first design to do that - but don't want to go too far down the path of developing them before talking to a sales rep, just in case there's info I should have beforehand to do it properly. On the other hand, I want to make a good first impression and obviously I don't have all my ducks in a row yet with the factories. What do you think?
***It is the great balancing act... enough retail feedback to warrant going forward with sampling, not so much feedback that you fatigue their patience...
This is partially why the approach to the retailer with you as a customer is advantageous: it is true enough, and retailers have far more patience for inquiring customers than inquiring vendors.
The point where a half dozen say “it is a good idea and does not exist” is the ideal. At some point in the process you decide you have had enough to go to sampling...
take the samples back to the retailers... see if they are willing to place an order... if so, that is the time to approach the reps, when you can name retailers ready to place orders.
Let’s say the retailer declines to place and order (better you hear this than the rep...) at that point, you will learn how come the retailer will not... wrong shape color speed flavor material size, whatever.
“If I fix that problem, may I return?”
“Of course...”
then it is back to the drawing board, until those retailers are ready to order...
Ultimately, it is always the retailer...***
TSA PornoScanners Are Completely Safe
I've refused every offer, on my doctors and dentists advice, to enter the TSA pornoscanners. Once I was patted-down for refusing, and the TSA agent threatened far worse when I stated he had the power to search me, but not the right. If and when a searcher every touches my peepee, I will call the police and swear out a criminal complaint on the spot. After that, it will be a law enforcement issue.
While being processed at SeaTac last Thursday, the continuous TSA announcement assured us the porno-trons are completely safe. There is plenty to dispute that. And now comes evidence that the TSA knows they are not safe, just like when the cigarette makers knew their product causes cancer.
The airlines should be responsible for airline safety, not the government.
Tuesday, June 28, 2011
Confusingly Similar
I went a-shopping at Costco yesterday and bought a 2 pounds of organic butter, Kirkland brand but a label that so closely mimicked Organic Valley butter that I thought it was. Well, it is... Costco cuts a deal with Organic Valley to slap the Kirkland label on Organic Valley production run. The ink, style, layout, graphics are all the same, except where the package says "organic valley" the Costco package says "Kirkland."
Now in trademark law an actionable offense is to have a label that is confusingly similar, since the law views this as a wicked practice. Costco and Organic Valley view this in practice as a good thing, so they agree to do it. Of course, when two entities agree on a practice, it is usually legal. But my point is, as a practice, by developing a confusingly similar label, both companies benefit. That is not supposed to happen, but it does.
I was fooled by the packaging, but not distressed, since I wanted Organic Valley, and I got Organic Valley. if this were not true, Costco would suffer by my resentment. With or without trademark law, this would be true.
Without trademark law, any time one was fooled by a label, and did not get what was expected, the distribution chain that proffered the offending item would suffer. This is necessary, and it is sufficient. We do not need trade mark law.
Tim Checks In From the Trenches
Hi John,
How’s it going?
I think we last had oysters at the Brooklyn in Seattle about 15 years ago.
I have been working on my own company the last few years, still using your advice.
We are very small with all the normal small business struggles, but would not want to be doing anything else.
I look at your blog all the time.
I hope everything is well
Tim
tim,
Yes, all is well, and I remember you got the free ticket out of evergreen air, outdoing my expertise...
glad to hear from you! Cool item, are you working on "what is next" for your line...?
Can I blog your note and its reference to your product?
John
Hi John,
I’d forgotten about that. I think I met my wife on that trip. They should have charged me for that ticket….
We are working on the 2012 products, some ScreenDeck related, some still in thought phase. Some people worry about the meaning of life but I worry about #1, cashflow, and #2, new product ideas….
Sure you can blog this.
Thanks
Tim
Tim
Thou Shalt Not Kill
I was listening to a preacher man on the car radio explain that the commandment is "thou shalt not murder" since God gave Moses so many instances where he expected the Jews to kill offenders, such as when a son strikes a father. The preacher man went on to say when the state fails to execute a criminal, it is an injustice. When the state executes a criminal, it is justice in action. Quite a leap, from the laws of a nation communing directly with God Almighty, the Creator, to a nation run by hacks who know how to throw an election. The preacher man forgets 1 Samuel 8, when God specifically rejects the state as a form of government, but relents in the face of Jewish obstinacy.
The preacher man noted God commanded the Jews to occupy Canaan and wipe out the Canaanites, along with their fellow travellers, and women and children. Modern atheists offer this as an example of ethnic cleansing and and a false god. The preacher man suggested this showed God wanted nations to destroy other nations. A couple of problems with either of these interpretations:
1. The people to be wiped out had been progressively more abominable over a 400 year period. This suggests a patience mankind cannot match. The Canaanites were heavy into child sacrifice, a particularly wicked practice, in which one is assured a better future by killing a child today. They had been marked for extinction by the God that created them. In the eternal conflict between grace and free will, the Canaanites picked evil. We have yet to attack a country over "child-sacrifice."
2. It was a one time event, ordered by God. This is different from Obama ordering USA to attack Libya or Bush Ordering USA to attack Iraq, and the USA serial assault on any country with oil and ideas of independence. Given that USA is the #1 country in the world for child sacrifice, it really is provoking to claim USA needs to attack countries where child sacrifice is outlawed.
3. Explicit in the order is the rationale if these abominable people are not wiped out, they will reanimate and destroy Israel. The Jews did a poor job of following God's command. The bible notes vast swathes of condemned survived. The subsequent several hundred years' history of Israel is a continuous battle with remnants of these people who escaped destruction. I experience some extremist Jews and Christians expressing that all Moslems should be wiped out, not doubt a residue from these Bible passages. A couple of problems here, the Arabs are not Canaanites, and Israel today is a secular socialist modern state, not the nation following God, or even the Kingdom God permitted (let alone the Kingdom Jesus sought to establish.)
Of course, Jesus, as King, proclaimed the law fulfilled in Himself, and affirmed God is Love and demonstrated that shalt not kill. Jesus used physical force to disrupt evil, as when he drove the money changers out of the temple, but he did not execute these people, nor did he kill those who came to arrest him falsely.
All nations claim to have God, or a god, on their side in war. Clearly God has not been on anyone's side since he ordered the Jews to wipe out the Canaanites. Given what a hash the Jews made of that work, do you blame Him?
Whereas God is capable of justice, we are not. At best we arrive at a truce, until next time. What we are capable of is mercy, which is a great substitute when justice cannot be achieved.
In practice, of the three great religions, only Islam permits the victim to show the criminal mercy. Note the Pope could forgive the man who attempted his murder, but the Pope could not get him released from prison. The lowliest Moslem can forgive his trespasser and have him freed from capital punishment and prison.
We pretend USA legal system reflects our Christian sensibilities, when that is really an absurd notion. We claim we are safe and have justice because of our system. We ignore the fact that the bigger the criminal, the more they are backed by the state. Whitey Bulger was finally arrested, he who owes his career to FBI assistance.
Our system has failed, and it is time to devise a system that works. A radical idea would be to examine the legal system suggested by God. It's never been tried before.
Monday, June 27, 2011
Here Come the Taxes On Small Business!
IN the government policy-generated boom/bust cycle, the damage is done during the boom part. The false economy allows people to get away with projects big and small that would not be warranted otherwise, and at the same time good projects go starving for funding. From remodel jobs if doubtful necessity and dubious aesthetics, to superstadiums at taxpayer's expense, to criminal wars and the security states, all those features of the boom times must now be paid for with the bust.
As I said, if you have a paycheck, pension or property you are sunk. One way or another, it will not do. Having all three will not help, it will just mean you are being hit from three sides.
The USPS has stopped making pension payments, so they can waste more money internally. the have assured people currently collecting pension money from the post office that their payments are not in jeopardy. Of course. In a Ponzi scheme, the people first are getting paid while later people are getting ripped off. Every week postal employees make a contribution to pay for retired workers, but nothing is being set aside for the current workers. Madoff went to jail for this.
We could have avoided this by letting the market bust the bad banks, clearing the decks, and then letting the chips fall where they may. Instead, American elected Obama who tripled down on the disastrous Geo Bush policies. McCain would have done the same thing.
One reason nothing will change is every individual is developing an idea in his own head that he will be an exception: I am an exceptional worker, I have this connection, if we just get the right person in office.
Maybe each will be an exception. Probably not.
The people who benefit from the system will not change it, desire no change, but in fact need one disaster after another to stay in power.
Fighting is pointless, and fleeing will just get you where it is worse. The only safe haven, relatively speaking, is self-employment. As I said, taxes will be raised to 95% of income, but if you think this is a problem for the self-employed, you still do not get it. It is never about the money, it is about the lifestyle. As a practical matter, when every penny you direct to be spent in your business is also your lifestyle, then those pretax dollars go very far indeed, especially when the economy is in the dumps, due to parasitical govt policy.
At a congressional hearing, Timmy Geithner says taxes must go up on the self-employed, or the size of government might have to be reduced. Since the size of government cannot ever be reduced, the taxes will go up.
The bust is not over, so the price will go much higher. It has already been decided who will pay for bad govt policy, for our decision to be a fascist empire (big govt and big biz as one). The answer is you will pay. In the next 50 -75 years the powers that be will make a huge mistake, and most people will escape to anarchy. The best vehicle for this storm is self-employment.
Sunday, June 26, 2011
Groupon: Read Ogilvy First
| Hi John! Just wanted to point your attention to Groupons, and wanted to know what you think of them (out of curiosity). I've always believed in your saying that business owners are fully responsible for the choices they make, and it seems like this coupon deal is being torn to shreds by the public and companies who used them, and blame Groupon for their bad choices. Which is really funny, might I add. Hope you're well! Amy Hey Amy, Thanks for the links. The first fellow defends the "groupon movement" on the whole, but fails to mention a critical bit of analysis that I have in my book, about discounting. People need to understand that price cutting is serious business: On the basis of 25% profit, a cut of 5% requires 18% more dollar volume and handling 25% more merchandise. 20% cut require 300% more dollar volume and 400% more merchandise. If the deal made sense, one might enhance it by getting discounts out of the suppliers to the stores and co-promotion dollars. Build the best deal possible on a sound foundation. The second link is an example where the comments are far better than the article. This comment was particularly good: Nilay Patel Alcohol. My theory - the single most successful factor in whether a Groupon will generate more revenue than the face value of the coupon is if alcohol is served at the venue. Something tells me that the pizza place made up for the promotion by serving beer. Have a system to serve the customers, and then convert them. If you cannot or do not, then like so many people, decline the means. The third link is heartbreaking, since it is easy to see her making a mistake at each decision point. The right decision at any one of those points would have caused her to decline the groupon offer. This social media group buying thing will shake out like online search did... the early innovators will die away, and someone late will come along with a rational valuable model. But anyone who will ever buy any advertising should first read Ogilvy on Advertising. I bought his book 30 years ago and saved a mountain by almost always saying no, because I can tell if the ad dollars will work. Learn From Ogilvy! |
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