Monthly Archives: March 2013

Old Men With Guns

bitcoin(This post is definitely TLDR but I had to get this off my chest.. apologies. You only need to read the last couple paragraphs..)

Bitcoin has had a busy news week. It has seen a 3x value spurt in the last 30 days probably caused by attention from Cypriots, Spaniards, Expensify and the US Treasury.

I also had a longish conversation a few days ago with my financier friend Christian about Bitcoin that got me thinking. I’ve been curious about virtual currencies for a long time, and couple years ago Christian and I bought some Bitcoin jointly and practiced spending it on each other just to test out the usability of the stuff.

My main challenge in understanding Bitcoin is that the public conversation contains so many nuts — especially dreamy opensource types, shouty Libertarians, purist crypto geeks, and huckster speculators.  Even as Bitcoin hits the Krug-o-verse and the rest of the mainstream I’m not sure it’s well understood, although I do applaud guys like Josh Davis who have IMVHO done a pretty good job of clarifying some of the mechanics and digging into some of Bitcoin’s mysteries.

To sort through all the noise I’ve used a couple questions to help drive my thinking and that have landed me somewhere near a working opinion on Bitcoin. Here’s what I’ve got:

Question 1 — Does Bitcoin have intrinsic value?

This question is at the bottom of a lot of the currency debates, and I think my answer here would be the same as my answer to the gold-themed version of this question, which is: of course not Ms. Rand, nothing has absolute intrinsic value to all humans, but gold has some key properties that historically have allowed it be a great way for people to keep track of value (or commoditize debt!). It’s these properties of gold, which include prettiness and the right amount of scarcity, that have made gold historically valuable in a lot of cultures.

What properties would Bitcoin have to nail in order to be a viable digital commodity and player in global currency systems? My baseline list of prerequisites to adoption would be: security, reliability, speed, simplicity. Smarter people than me have done deep dives on all these features of Bitcoin, but I find Bitcoin lacking in the speed (hey, it adds 10 minutes to my Pizza delivery time!) and simplicity. While software tends to improve over time as a function of demand and resources, some of these limitations may require a service layer to mitigate. More on that later.

The whole question of “intrinsic” value seems a little sad to me fundamentally. It presupposes a world-view where ownable, graspable absolutes actually exist. When gold is held up as an “inflation-proof store of value” (this is from the Bitcoin wiki!) I go nuts. What kind of world does a person live in who can say such a thing? What am I missing? What happened to supply and demand? Every commodity changes value over time, nothing is absolute, not even gold. Or Bitcoin. But I totally get the very melancholy human longing for certainty and absolutes that you can put in your pocket.

Question 2 — Can you trust a “store of value” that is not attached to a trusted institution like a government or a bank?

Well, it has clearly become more popular in some places (esp. little island countries.. Cyrprus! or Iceland!) to distrust banks and governments, most people tacitly have deep faith in the idea of these large public concentrations of consensus. Its these pools of consensus that allow you to exchange small bits of paper for cars and cups of coffee without a second thought. Can Bitcoin operate outside these known institutions and create from scratch a new source of trust?

In theory, absolutely. And more specifically, Bitcoin is designed to be supertrusty in a couple important regards:

a) it uses the distributed nature of the internet to provide it with resilience and durability, features that the US Federal Reserve pioneered in the 1800s with their own junior internet of banks.

b) it uses strong crypto which seems really safe in 2013.

c) it builds on the parts of the open source movement that provide a kind of forced sharing and transparency as a feature of the system. Geeky types especially see this as a very trusty move.

d) it has a built-in currency limit — only 21 million BTC will ever exist, and it will be divisible only down to 8 decimal places. This is intended to mimic the right-sizing of gold’s scarcity curve as a commidity and to keep the currency from being quantitatively eased indefinitely, a practice that  some people — including the anonymous Bitcoin developer — see as an expression of banker greed.

Despite all of Bitcoin’s good intentions the question of whether you can trust it to hold value comes down to how it will get used, not so much what it was originally designed to do. Nassim Taleb last week was nicely evasive when asked about Bitcoin — “I’m waiting to understand it better, not with my brain, but with my experience.” Um, yeah, we’re all waiting on the experience part.

I’ll go one farther than Taleb. My brain says that Bitcoin is too limited and inflexible and unmanaged to be the nation-less community-regulated world currency that it aspires to be and in that sense it will fail. Like Yahoo or Napster or MySpace, the rigid first-mover is on the right track but is often overtaken by a superior second-mover.

But does that mean Bitcoin will cease to exist? Probably not. I think its very likely that Bitcoin will be the basis for some fraction of digital value exchange for decades to come. In fact, I think that the more successful Bitcoin is in the short term the more it will fail in its intended mission.

If you’ve ever looked into the question of “how much money is there in the world” you pretty quickly run into a very weird multi-dimensional world that is the product of a few fancy tricks that banks quietly perform but which are hard to explain to children. Like fractional reserve banking for example. Bitcoin was designed in protest to these tricks and to work around them. But yeah, good luck with that. It’s not hard to imagine how adding the inevitable service layer to Bitcoin, in the name of making it fast and safe, will allow for the the next round of fancy tricks. So despite the purity of Bitcoin’s intentions, the old men with guns who run all the banks in the world will continue to run the world, as they should. But now with a position of Bitcoin in their portfolios.

The Smoking Gun: Time Waster

One of my long cherished beliefs is that I can tell a lot about someone just by looking at them. I’m probably not the only person in the world that thinks they have this superpower.

The Smoking Gun — the interwebs crime rag — has a pretty fun casual game that will test your abilities on that front. It’s a matching game that they call “Time Waster”. The gist of it: you match mug shots with a reported feature of that person, like the crime weapon, their self-reported occupation, the crime, or their tattoos.

I think this game is genius on a couple fronts:

1) the difference between your own perception of yourself and a quick test of that perception drives the game.

2) the game simplicity and speed of the feedback drives addiction. Reminds me a bit of the dynamics that surface in other addictive casual games, like Angry Birds.

3) the only real notification mechanism is clicking on the FB Like button — which I’m not going to do, but I thought hard about it <g>. But what a great way to drive FB Likes, eh?

I’ve played this game on and off for a couple years. I’m not sure what this has done for TSG traffic but it certainly has boosted my own awareness of the site and for very cheap I bet their getting a good bang for their buck.

Oh, and I have yet to get a SINGLE correct pick on the occupation matching games. Not one! Ouch.



Why Do You Follow Rules?

Instead of taking recreational drugs I read books like Finite And Infinite Games by James P. Carse. This kind of abstract word collection is very dry and beautiful, like an alien landscape, and without a doubt this is one of my top ten books from the last decade. I’ve been reading and re-reading it for a couple years now.

The picture here of James P. himself is a still shot from a dance movie version of this book. You think I’m kidding — I am not. Check it out here.

But first check out this quote — this is from Part One, Section 9, talking a little about the nature of finite games:

The rules must be published prior to play, and the players must agree to them before play begins.

A point of great consequence to all finite play follows from this: The agreement of the players to the applicable rules constitutes the ultimate validation of the those rules.

Rules are not valid because the Senate passed them, or because heroes once played by them, or because God pronounced them through Moses or Muhammad. They are valid only if and when players freely play by them.

There are not rules that require us to obey rules. If there were, there would have to be a rule for those rules, and so on.

See? You like that? It’s got enough of a beat that you can almost dance to it.

Rovio, Kickstarter and Lamborghini

The interwebs loves a good underdog triumph story. I simultaneously love these stories and am very suspicious about the easy moral lessons that shape them.

Yesterday I read through a couple founding stories — the Rovio story on Quora is hard not to like, and looking at the 50 other no-name game titles in the Rovio company history, it looks pretty truthy:

In 2003 some Finnish guys decided to convert their love for making games into a video games company. They made one game after another in the hope that one of them would catch on.

After 51 games and 6 years in, they were still at it. Their 52nd game was a slingshot puzzle game about some birds. Yes, the company is called Rovio, makers of Angry Birds.

Today, they have over a billion users, 500 employees and partnerships with some of the world’s most recognizable names like Star Wars, NASA and the Chinese government.

The moral, of course, is that love + persistence = eventual success. What’s not to like? Except the six years of living marginally and the “almost going out of business” part.

What I would like to know is: what were those six years like? Did the founders live in zenlike acceptance, knowing that there are thousands of other companies out there that make 51 versions of their product and fail? Or was it thrashing and frustration and divorces so that now success is anti-climatic? I’m sure there’s a much more interesting truth under this polished rock.

Yesterday I read this week’s Fast Company story on the formation-in-process of Kickstarter. Again, what’s not to like — three guys pursuing their “idea” and following their principles. Sure, right now they look like a success, but with their relatively unpopular manhandling of their own marketplace the open question is: will they survive? I liked that the original founder, Perry Chen, is obsessed with long-running companies — which is cool — but there’s something about the arbitrariness of his business culture, and lack of transparency, that doesn’t sit so well with me. I’m not sure my feelings are any marker of long term success — I think the persistence and luck formula (see Rovio above!) is where its at, and I think in some form Kickstarter will be around in 10 years. Maybe like Yahoo! — a quirky category starter that was too pure to evolve.

A third founder story from yesterday: Lamborghini. Nothing pumps a story like the petty competitions that drive founders — like the Dassler brothers — and the Ferrari vs. Lamborghini friction seems pretty obvious. But if you read through the Quora summary, and then read the source interview, you can see pretty quickly why I find these “founding legends” so problematic. You notice in the Quora re-telling that Lamboghini went to Ferrari to complain that the clutch assembly was the same as in one of his tractors. Hello? Ignoring the technical unlikeliness of that detail, it turns out to not be based in any reference in the actual source material. Blech! But it makes a better story, along with the clever hidden name-reveal technique.

Postmortem: Yahoo SportsIQ

sportsiq1I love Marissa because IMVHO she keeps making some great calls. Work from home ban? Check! Poaching from Google, dropping Ross? Check! Strategy direction — mobile and personalization? Check! Dropping Yahoo’s first daily casual prediction game? Check!

I was pretty excited when Yahoo SportsIQ debuted a few months ago. I’m a fan of Yahoo sports games (81 trophies over 13 years, and counting..) and was happy to see that the apparent success of ESPN’s Streak For The Cash seemed to be making the Yahoo Sports folks jealous.

For those of you who didn’t play SportsIQ here’s the bones:

  • Every day Yahoo publishes 10-15 sports matchups
  • You predict the outcome of any or all of available daily matchups
  • For every correct pick your “Sports IQ” goes up, for every bad pick your IQ goes down
  • You start at 100 “IQ points”
  • You can play time-bounded “challenges” against Yahoo or Facebook friends
  • Prizes — apparently there were some prizes and cash involved, but that was a bit murky to me..

This sounds like fun, and not too far off of ESPN SFTC — which I play faithfully.. and B3TZ Sports of course! So why didn’t it work?

Well it did kinda work, but it was a new game format and still needed a bunch of play testing. Out of dozens of things I thought needed improving, here are my top three:

  1. Scale? — the game was skewed toward keeping you above 100. Most of the matchups were offered straight up without a line, plus they showed the % selected so most people were “winning” — and that is good. Losers leave. The problem is that after you get to an IQ of 200, what’s left to attain? Where’s the struggle? There were no mini-games, or category races even. The daily match-ups provided a great basic ingredient for game play, but they didn’t do much with it. It was like eating a bowl of flour. Blech.
  2. Where are my friends? — they promised me that I could play with my friends, but the set up was SOOO cumbersome and the payoff so weak that I only did two challenges and gave up. The user interface didn’t surface my challenges so I promptly forgot about both of the challenges I made with friends. There was no facebook integration — no notifications, no “you’re playing” message, nothing. Playing head-to-head would have been huge for me, and all the pieces were there — they just didn’t get communicated.
  3. Prizes? — I think there was some giant lump of cash that went to some dude who has an IQ of 681 or something, but I never got my rank above 6053 so I didn’t bother even thinking about prizes. Does anyone think that a “big payoff” for one person is going to provide anything but starter motivation? Start handing out badges even to minigame winners or weekly winners or top 100 for the day winners. Build a prize cabinet of crap you can win if achieve little milestones — you don’t even have to introduce your own currency although you might think about it..

The bottom line is that this game was a new adventure for Yahoo at a time of The Great Focusing. Given the Yahoo team’s track-record with fantasy sports games they could have easily plowed through and made this game awesome — with the right brains and resources and some time. But without long term commitment to making this game great, poof! Gone.

Making a casual prediction game like this is not for the faint of heart, but as the ESPN Streak game proves, it can be done successfully if that’s what you’re focused on. Clearly Yahoo has other priorities.