"When I was young I thought that money was the most important thing in life; now that I am old I know that it is." -Oscar Wilde
Pop quiz:
What does the late Charlie Munger compare to a combination of artificial gold, turds, and rat poison?
Bitcoin.
Here’s Munger comparing Bitcoin to artificial gold:
And here’s Munger comparing Bitcoin to turds:
I’m not sure if this makes comparing Bitcoin to rat poison a compliment by comparison? Either way, he’s set the bar very low.
I don’t own any crypto-currency, nor do I plan to: I don’t like the idea of owning something I do not understand. At best, buying crypto is like buying individual securities (i.e. stocks), and, in general, normal people like me should not trade individual stocks because there is always someone on the other end of the transaction who knows (a lot) more than I do. Plus, when I hear a word with the prefix “crypto,” I think “fake.”1
However, crypto isn’t going anywhere.
While I have no idea where it will go, even if Munger is right, we need to know more about it and what crypto’s growth might mean because some trends crypto represents mirror how Jewish organizations are changing.
Blockchain
How many single-dollar bills are circulating?
I have no clue.
And neither do you.
In fairness, we don’t know because it’s not our job.
If I want to learn more, I can contact the United States Treasury, specifically the U.S. Currency Education Program (yes, this is a real project of the United States Treasury.) I pay taxes to ensure that there is a treasury to know approximately how much money is in circulation.
However, were I more anti-authoritarian, I may not love that one governmental entity is responsible for tracking how much money is circulating.2 Instead, I decide to use my social network to keep track of monetary transactions:
I will create a digital spreadsheet where a list of transactions is recorded.
Each new person who wants to join my network must also keep that complete list of transactions.
Taking this approach, we each form a link, or “block,” in our network with a record of all the correct transactions. Should anyone want to change the network, they would need to change every single ledger held by everyone (which becomes less likely each time a new person joins.)
Since this is incredibly difficult, our network forms a highly durable, semi-decentralized chain, hence the word “blockchain.”
If you’d like a video summary of blockchain, I recommend this lecture from Gary Gensler’s Massachusetts Institute of Technology course. He makes a complicated topic highly understandable:
I watched this entire course on a plane ride to Israel.
Today, Gensler is the head of the Security and Exchange Commission (SEC) and is not a fan of cryptocurrency, to put it mildly. But his explanation is incredibly clear (and mildly entertaining.)
Pointedly, bitcoin and cryptocurrency did not “invent” blockchain; blockchain technology long predates how we see it used today:
However, there would be no Bitcoin or cryptocurrency without blockchain.
When Satoshi Nakamato3 proposed a peer-to-peer electronic cash system, blockchain technology enabled transactions to be verified and participants in the system to trust one another. Instead of relying on the government to validate the money supply, people validate everyone’s money supply through computer science.
If you are looking for a Jewish organizational analogy to a blockchain, here’s the closest one I could find:
Kashrut certification.
Really.
In the United States, kashrut fraud was rampant from colonial times until the early twentieth century, as Timothy Lytton describes in Kosher: Private Regulation in the Age of Industrial Food, and solutions to the problem in places like New York City were “thwarted by factionalism, rabbinic rivalry, consumer apathy, corruption, and the sheer size of the problem.”4 When the government tried to intervene in the form of the New York State Assembly’s 1915 “Kosher Law,” law enforcement was able to curb some fraud, but the problem remained unfixed due to (you guessed it) “rabbinic infighting and lack of resources.”5
However, Lytton points out that a successful and largely reliable kashrut industry grew and developed acceptance because a “core of active and vigilant consumers produces, monitors, and disseminates information.”6 While some companies profit from the food itself and the food certification, none of this would be possible if that food is “not considered reliable among consumers.”7 Ultimately, people trust the kashrut of different certifications because other people who care about kashrut trust those certifications.
Of course, this decentralized system can lead to rumors that are unhealthy for other reasons (said anyone who believes Hebrew National is kosher or thinks that “glatt kosher” is a scam to upsell more expensive products.8) But like in a blockchain, no person holds all the authority over what we define as “kosher.” And that’s probably for the best.
I’m just not sure I’d say the same thing about my money.
Read Write Own
Back to crypto.
One thing I appreciate about cryptocurrency is that it provides endless stories that are too crazy to believe, like “Bitcoin Beach” in El Salvador, the white supremacist enclave in South Africa that uses a cryptocurrency called Orania, or the Caribbean island of Bequia.
Oh, and Dogecoin.
And Gilfoyle’s Bitcoin notification.9
However, because cryptocurrency itself may be a scam ultimately to make the same rich people even richer and enable global crime, what the popularity of crypto represents is important to understand. To dive into this subject, read Chris Dixon’s Read Write Own: Building the Next Extra of the Internet.
Dixon is not an unbiased observer: He works at a venture capital company that invests huge sums of money in crypto. However, he’s also an excellent writer and makes a topic I barely understand moderately understandable.
Originally, Dixon argues that the internet of the 1990s was “permissionless and democratically governed” and “whatever you created, you owned.” However, starting in the mid-2000s with the rise of behemoths like Apple, Amazon, etc., “the internet got intermediated.”10 Today, the internet is largely controlled by a series of companies that act as gatekeepers for everyone else. Dixon writes:
“Today creators and startups need to ask for permission from centralized gatekeepers and incumbents to launch and grow new products. In business, permission seeking is not like asking your parents or teachers for permission, where you get a simple yes or no answer. Nor is it like traffic lights setting the rules of the road. In business, permission becomes a pretense for tyranny. Dominant tech businesses leverage the power of permission to thwart competition, desolate markets, and extract rents.”11
Dixon argues that “network design determines outwork,”12 and technologies like crypto change the network structure from a series of behemoths creating barriers to entry to a decentralized structure where anyone owns what they wish to create.
The Jewish world is no stranger to “walled gardens,” internal systems in which one cannot participate if they are outside the network. Some of these gardens are not new (like rabbinic placement systems), and others are more recent (like Birthright as the default college Israel experience.)
I’m neutral on whether or not these are good or bad, only that they exist.
To make up your own mind, read Dixon and see what you think.
Chris Dixon on Pivot
$3.4 Billion
Minimum amount of money that Andreesen/Horowitz, Chris Dixon’s venture capital firm, has invested in crypto-related technologies.
So yea…Dixon is not an unbiased observer.
What I Read This Week
Does Social Media Affect Mental Illness?: Platformer provides a great summary of the recent debate sparked by Jonathan Haidt. I lack the expertise to weigh in, but there is no scholarly consensus.
America’s Reality Distortion Machine: The folks from Axios produced an excellent article in their style of smart brevity13 about our assumptions around polarization in America. Read it.
Memories of Daniel Kahneman: The number of tributes written honoring the late Daniel Kahneman is truly inspiring.
Is Your Nonprofit “Grant Ready”?: Fish gotta swim.
Bill Murray’s Son is a Basketball Savant: No, it’s not a joke.
Yet another reason everyone should get a degree in philosophy:
I’ve always thought that the biggest strike against crypto-currency is the choice to use the prefix “crypto” to explain what it is. While the choice of the word “crypto” comes from the connection between crypto-currency and cryptography, ultimately, when I hear the word “crypto,” I think “fake” or “not real.”
Not what you want if your goal is for people to take you seriously…
Personally, I think the government is way more trustworthy in holding sensitive information than social media companies, but sadly, I’m in the minority on this one.
Satoshi Nakamoto, “Bitcoin: A Peer-to-Peer Electronic Cash System.”
Here’s a totally nerdy thought: If crypto-currency ends up dominating the world, and we still don’t know the identity of Nakamato, I wonder if scholars will examine this paper to identify different authors the way biblical scholars examine the Tanakh?
Ibid., 25.
I’m noticing a trend here. Seriously, I wonder how many major needs of the Jewish Community have not been met due to “rabbinic infighting and lack of resources.” The very thought makes me shudder…
Ibid., 133.
Ibid.
Yes, in both cases, I am that someone.
But in all seriousness, as someone who has bought items with kashrut certifications someone else tells me they “don’t trust,” I’m still waiting for anything that resembles evidence to justify that lack of trust.
When I would ask someone why they don’t eat Hebrew National or a specific hekhsher (say, Triangle K), the response I receive goes like this:
“Well, someone I know knows someone who knows someone who worked as a mashgiah in the companies this hekhsher certifies, and he doesn’t trust their kashrut based on what he saw.”
As far as evidence goes, this doesn’t pass the smell test. In halakha, we would call this עדות מפי השמועה, and it’s not a great form of evidence (to put it mildly.)
However, I think this is Lytton’s point (and why I’m wrong, as always.)
Yes, many of the reasons people do not eat Hebrew National are based on nothing more than hearsay, but it’s that same social control that makes the system of kashrut certification effective; not only are companies checking to ensure the reliability of kashrut, but consumers are, as well. Hebrew National is a negative externality of that system, but there are plenty of positive ones to balance it out.
Catchy…
Ibid., xvi.
Ibid., xx.