Tag Archives: science

If anything, Bitcoin is inflationary

Bitcoin fails as a form of “money” according to how economists look at money. This has lead many economists to conclude that Bitcoin will fail. What it really means is that economists need to change how they look at money.

The Internet is the history of disruptive innovation. The telephony system had evolved slowly for over a 100 years, then the Internet came along and changed everything. The old engineers, steeped in telcom lore, unwilling to challenge old assumptions, claimed that the Internet would never work. And, according to their principles, it doesn’t. For example, when I use Facetime with my brother who lives in Japan, there is a lot of “latency” or “lag” between when I say something and I see my brother react. That’s what the old telcom engineers warned us about: the “packet switching” nature of the Internet would cause unpleasant lag in telephone calls.

But did I mention my free video call, in high definition, from my iPhone in the United States, to his iPad in Japan? That this works at all, and so cheaply, is inconceivable according to old telcom principles. No matter how right the old telcom engineers were, they were still obsolete. Nobody cares about their old principles; the Internet is a whole new set of principles of free, world-wide, high-speed connectivity.

Old economists have the same problem as old telcom engineers. What economists say about Bitcoin is correct, after a fashion, but it’s obsolete.

For example, a major critique of Bitcoin is that there is a fixed supply (21 million coins), and thus can’t expand to accommodate demand. This causes the value of Bitcoin to rise (“deflation”). This in turn encourages hoarding (why spend the coin when it’ll buy twice as much tomorrow?). And this in turn causes the value to rise even further. This means nobody will be able to buy anything using Bitcoin because everyone else will be hoarding them.

That’s true for normal currencies, but not true for Bitcoin. The idea that hoarding money makes it unavailable only applies to physical money, because you can’t move it around and subdivide it. This doesn’t apply to electronic currency, because somewhere in the world you can always find somebody willing to part with a billionth of a coin so that you can use it to purchase something. Hoarding has no effect on the “supply” (sic) of money available for transactions.

Well, another reason hoarding is bad is because it causes volatility. As people hoard Bitcoin, a bubble forms, a sort of ponzi scheme driving up the value until the music stops, after which the price collapses. Such volatility makes it too impractical to use as money.

Again, volatility matters more for physical currency than electronic currency. Volatility is only a risk for the duration that you hold onto the currency. This matters, for example, if you need to save money to pay rent at the end of the month. But, in a fully liquid electronic system, such timing goes away. Instead of a monthly, weekly, or even daily wage, you could get paid once per second. The incoming pennies every second can then automatically be spent every second on rent, food, gasoline, and so on. Even in situations like Zimbabwe’s trillion-percent inflation, earning/spending electronic money on a 1-second timeframe means volatility doesn’t much matter.

Bitcoin’s timeframe is around 10-minutes for transaction, so volatility matters somewhat more. But here’s the thing: the amount payment processors charge for Bitcoin is less than what they charge for credit cards like American Express or Visa. The total risk associated with Bitcoin, including volatility, is still less than the total risk associated with other payment methods. And in any case, a recent study has shown that Bitcoin volatility has been steadily decreasing.

So we’ve proven that Bitcoin’s deflationary issues don’t matter, but here’s another thing: it’s not even deflationary.

The word “Bitcoin” can mean many things. It can refer to the coins (B⃦) themselves. It can refer to the “blockchain” (public ledger) that holds those coins. It can refer to the “bitcoind” software that most everyone uses to process the blockchain. It can refer to the “protocol” that the software implements. It can refer to the general algorithm that the protocol/software implements. It can refer to the general idea of “cryptocurrency without centralized control”.

If 21 million coins aren’t enough, somebody can simply fork the blockchain, starting a new one with another 21 million coins. Or, somebody can fork the software/protocol, creating a new currency with more than 21 million coins (and other useful properties, like shrinking the transaction window, or changing the proof-of-work algorithm). Or, somebody can come up with a wholly new cryptocurrancy vastly different than Bitcoin.

People have done all these things. There are a vast number of “Bitcoin” things running around.

For example, “Bitcoin mining” can now only be done by those who invested a lot of money in custom silicon chips (“ASICs”). It takes two years to create a new chip, so only enthusiasts who invested two years ago can profitably mine Bitcoins today. However, many forked Bitcoin variants use different mining incompatible with these chips. You can still mine these “alt-coins” (as they are called) using a desktop computer with a graphics card. I do this. I mine whichever alt-coin is more profitable at the moment, and then exchange them for true “Bitcoins” at the end of the day. Thus, I’m earning about 0.02 Bitcoin per day (about $10) through mining — but without directly mining Bitcoin. This demonstrates that more “coins” are being created than just the 21 million limit on Bitcoins.

Some of these alt-coins, namely Litecoin and Dogecoin, can be used to buy things online. For a payment processor, or online trading site, handling multiple types of coins is as easy as handling one. If Bitcoin is volatile and has a high risk premium, a buyer could easily switch to Litecoin, which might have a lower premium. If more people would use Litecoin, then that means fewer people would use Bitcoin, and that the value of Bitcoin would drop.

QED: Bitcoins are inflationary in the long run.

So it’s not about Bitcoin, but the entire ecosystem of alt-coins that needs to be evaluated for inflationary or deflationary tendencies. On the whole, the system is inherently inflationary (anybody can fork the system at any time), but it depends upon the willingness of payment processors and customers to use new kinds of coins.

We might find that it’s self-regulating as alt-coins are accepted or dropped from the system. New alt-coins might be created when the price of existing coins rises. Lesser alt-coins might stop being accepted when their price decreases. We might find a decade from now that the Bitcoin-ecosystem turns out to be more stable than national currencies.

What we see here is that old timers (the economists) are right on every principle, that a physical currency limited to 21 million coins would be inflationary, volatile, and unusable as money in the economy. But, they are ignoring how online currency changes those rules, and that Bitcoin isn’t a single currency, but an entire ecosystem. For economists to be right, they have to hold onto their immutable principles for old currencies and ignore all the innovation happening online.

Nobel Prize winning economist Paul Krugman opined back in 1998 that “by 2005 or so, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s”. After being mocked for that, he gave this rebuttal:

“I don’t claim any special expertise in technology… The issues about Bitcoin, however, are not technological! Everyone agrees that it’s technically very sweet. But does it work as money? That’s a very different kind of question.” — Paul Krugman, from Business Insider

But he’s wrong. That Bitcoin is technology has everything to do with whether Bitcoin works as money. It’s like old time telcom engineers who claimed that while they didn’t understand computer networking, they didn’t have to, because it was long distance transmission of data that mattered, regardless whether it was computer data or voice data.

Consider my claim that the Bitcoin-ecosystem is inherently inflationary. Let’s take that to the logical extreme and assume that anybody who has Bitcoin gets rid of them as fast as they can, as they would any inflationary currency. They only acquire Bitcoin if they can immediately spend them. If that’s the case, and assuming that Bitcoin accounts for 10% of the U.S. underground economy, then the value of Bitcoin comes out to one penny, or 1¢, or $0.01. It’s simple math, taking the $2 trillion underground economy (IRS estimate) and taking into account the 10 minute transaction window enforced by the Bitcoin protocol.

I arrive at this 1¢ value by technology, now explain it with economics. I’m pretty sure squaring the two will discover something new about the properties of money, all monies, that economists hadn’t considered before, at least, been able to convincingly prove. I predict that in 20 years (these things take time), some economists are going to win Nobel Prizes for their theories on cryptocurrencies.

The technology of decentralized cryptocurrency is here to stay. It’ll be used by those dissatisfied with existing currencies (namely, the underground economy unhappy with the surveillance mandate placed on existing money). Instead of poo-pooing this technology claiming it won’t work, the successful economist is going to be one that analyzes it, gathers data, and explains why it does work.

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Busy Season Survival Tips for Accountants

Accountants: Join the survey, get more answers

By Rick Telberg
CPA Trendlines

Accountants joining the annual CPA Trendlines Busy Season Barometer Poll are recommending regular rest and recreation among their leading survival strategies.

Some know how to balance things just right, like Vic Butcher who says to “Exercise every morning and go out for pizza and drinks every Thursday night.” We can’t object to pizza and drinks, although Alan Gray would have us “eat and drink less.”

Tyrone Midbope, however, survives by being realistic and being real. “Take care of the client and do not promise anything you cannot deliver,” he says. “Be honest and personable.” We can see where that might sometimes be difficult.

Kim Thomason starts off “each morning with 30 minutes of just personal time – whether it is having coffee and watching local news or hitting the stationary bike for 30 minutes of exercise, because once you check your email account, it is full speed ahead for the day.”

Charles Postal breaks down “the season into filing components. First is 1099’s and W-2s, then corporations and partnerships, followed by 1040’s and ending with extension requests.”

Of course, when all else fails, there’s always Melissa Goodman’s solution: “Pray!” That seems a better idea than one accountant’s goal: “Don’t kill anyone.”

Here are few more suggestions…

  • Remembering that 3 day weekends will start after it is over!
  • Stick to a routine and make sure to stay healthy.
  • Periodic and consequent exercise; manage client expectations
  • Work hard, don’t get side tracked.
  • Kickboxing
  • Try to get enough sleep by going to bed as early as I can.
  • Maintain focus and keep breathing and find something funny that will make you laugh.
  • Good help!
  • Make January productive on Year-end reporting and 1099’s and have organizers mailed out by the 1st week of January.
  • Relax
  • Organization
  • Block out times where I permit no interuptions
  • Backing off occasionally and taking a break – maybe an afternoon or evening , maybe a day. Almost always taking one day a week totally from work.
  • To start off each morning with 30 minutes of just personal time – whether it is having coffee and watching local News or hitting the stationary bike for 30 minutes of exercise. Because once you check your email account, it is full speed ahead for the day.
  • Not giving up on some of my personal favorite things – like my twice a week yoga classes or my my must see tv shows
  • Take time to enjoy life, read for entertainment, go for a walk.
  • Don’t procrastinate. Get things done right away.
  • Do as much as you can each day and do not let people give you any problems
  • Start early.
  • Allow / schedule some down time.
  • Try to work smarter, not harder!
  • Early in, early out!
  • Implementing and using available technologies to increase efficiency. And iced lattes… lots and lots of iced lattes.
  • I need to plan better.
  • Eat and Sleep
  • Walk 10,000 steps each day
  • Coffee… a lot of coffee!
  • Make no social commitments, deflect bad clients
  • Take it one day at a time
  • Eating regularly, getting to the gym at least 3 times per week to ride the stationery bike for 40 minutes each time, occasionally getting together with friends or family on Friday and Saturday nights
  • Stress less
  • Endurance and balance of work from my personal life. I also take mini breaks to relieve the stress. Make skip a weekend.
  • Deep breaths. I don’t really have a survival strategy. I just take it one day at a time and get done what I can within my available work day.
  • Eat and drink less
  • Try to establish a routine (weekly schedule of hours) and stick to it.
  • Be willing and expect the worst! Be willing to work around the clock if it takes it.
  • Plan your work and work your plan!! Then Rest, Rest, Rest (8 Hours Sleep).
  • Drink plenty of Water. Dehydration is the most common cause of daytime fatigue. Smile and Laugh a Lot!!! Best Stress Relief.
  • Hire part time students prior to tax season to familiarize them with our tax prep system.
  • Start early and work as if the deadline were tomorrow!
  • Weekly yoga
  • Exercise before coming to work. I concentrate on muscles that get cramped throughout the day.
  • Take the time to always be organized.
  • Hoping that software is updated soon.
  • Pace yourself
  • Walk away from work and then come back to it
  • Get plenty of sleep
  • Scheduling time off – Power days!
  • You, the CPA need to dictate the tax engagement and not let the client run rush shod over you.
  • Keep in touch with Staff progress and on top of client information.
  • Focus
  • Encouraging clients to get work in early, even if partial, so the last two weeks are less terrible.
  • Recruited several experienced but seasonal staff
  • More mental breaks. More physical activity. Enjoy the process
  • Don’t let work sit unattended
  • No appointments on Sunday
  • Tackle the difficult tasks first.
  • Start early and stay steady with your hours.
  • Taking long deep breaths.
  • Be okay with saying “no” to a client or a potential client.
  • Eat healthy and walk around many times during day
  • Exercise
  • Make sure to get enough sleep
  • Exercise and eat healthy foods

Posted by:Rick Telberg

Square Cuts More Custom Pricing Deals For Merchants And Ramps Up Sales Hiring

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This past week brought the news of a fairly significant development for Square — the rollout of Square Stands in bars, Whole Foods restaurants, and other venues. This comes a year-and-a-half after the huge deal the payments company inked with the coffee and beverage giant Starbucks.

The lengthy wait between these big deals was a signal to some in the payments world that perhaps Square wasn’t ready to attract large retailers to drop legacy systems and processing deals.

But then the Whole Foods deal was announced. While the partnership isn’t for the grocery checkout side of the business, it’s still a lucrative deal. And we’re hearing that Square is aggressively working to do more custom pricing for merchants, especially chains and big names, in order to bring in bigger names and retailers.

Square is also now crafting a big sales team; the company is staffing up on sales people, we hear, which is something CFO and operations head Sarah Friar had said in the past that the company was trying to hold off on.

Custom Pricing

Square’s pricing is 2.75 percent for swiped transactions, Square Wallet payments, and Square Market transactions, and 3.5 percent + 15 cents for manually entered transactions. The company cut a deal for custom pricing for Starbucks and we’re also assuming for Whole Foods, but previously this was done on an exclusive basis.

Now, any larger chain merchant can apply for custom pricing via Square’s site. For example, Square tells TechCrunch that the Butterfly Studio Salon in New York City is processing millions in payments per year, and has negotiated a custom rate of 2 percent for each swipe using Square. The custom pricing allows merchants who are growing to stay with Square instead of moving to a POS system with better rates.

As Adlin Palencia, manager of the Butterfly Studio Salon explains, “I switched to Square because it was simple and had a flat rate for all cards, including American Express, which is how many of my customers like to pay. As the business has grown, I’ve been able to stick with Square because my custom rate saves me more than $2,000 a month, which is money I can invest back into my business.”

Palencia considered switching from Square to another POS system as her business grew, but she stayed with Square because of the custom pricing deal she got.

Square commented on the change: “As our sellers continue to grow, we want to ensure we are growing with them. Custom rates, like many of our other new offerings, make Square a great fit for larger sellers.”

The fact that they are open to negotiating with mid-size to large merchants, as well as large ones like Starbucks, is telling. It’s likely that Square was “encouraged” to start negotiating with some merchants on fee structure after eliminating the flat, monthly fee structure last fall.

The question I have is whether Square is making any money off of the deals where the company goes down to 2 percent per transaction (or less in more high-volume deals like Starbucks). We’re also not sure what the exact criteria is for merchants to be eligible for custom pricing. And in terms of sales, it’s still not clear what Square’s actual revenue looks like beyond what the company is processing per year.


Square has notoriously done little marketing beyond simple advertising. At one point the company did a TV commercial, but for the most part, Square has prided itself on word-of-mouth marketing to target small to medium-sized businesses. As Friar infamously said at a Goldman Sachs Technology and Internet Conference, she doesn’t want to be involved with hiring sales people. But that tune has changed, and Square has been quietly building an army of sales teams focused on bringing small to mid-sized retailers onto the platform.

It’s unclear how big the sales team will be, but according to this LinkedIn job posting for a sales recruiter, “Square is beginning to build a world-class Sales team for the SMB and Mid Market marketplace.”

The company has attracted the attention of large brands as well more recently, with the Whole Foods partnership, as well as small promotional deals with Godiva and Uniqlo. But it seems like with these deals, these larger retailers are dipping their feet into the pool, and not diving in. Whole Foods has not enlisted Square stands to replace its cash registers on the grocery line, and it’s unclear yet if the promotional partnerships will amount to a bigger deal. Burberry has been using Square to take payments at a few of its stores, but it’s not a widespread implementation.

Another area where Square is beefing up in the hope of attracting larger retailers is in customer support. Square is adding phone support, which the company previously didn’t have available to merchants. The lack of phone support had been a pain point for many merchants, who want access to a live person to get problems fixed in real-time. If Square is pitching large retailers on switching from legacy systems, then phone support is a must.

While Square still has consumer-facing apps (Square Wallet, and most recently peer-to-peer payments app Square Cash), these changes are squarely focused on the merchant services side of the business. And all of these moves aim to collectively accomplish the goal of attracting more large merchants to the platform. As the company matures, and is potentially looking at a public offering, Wall Street will be looking not only at the number of small merchants and revenue, but also how many mid-size to large merchants are willing to forgo legacy POS systems in favor of Square.


Hooray for Failure!

It’s Nature’s way of telling you you’re not being creative enough

I’m not a scientist at the bench anymore. My wife told me I had to stop playing and get a real job (a.k.a. graduate). However, I have very fond memories of my days studying chemotaxis. Bacteria, despite all modes of intimidation, do not follow our commands. They dance to the beat of a different drum, internal programming. Following the scientific method is easy but hard. You can make observations all you want (in my case 6 and half years and over 40 hours of video), but describing why things within the cell are happening or how they happen is a process. Finding explanations for what you observe and designing experiments to test them teaches humility because inevitably the cells will prove you wrong.

There is not much bravado in science. Failure is much more common than success and I would not have it any other way. I learned ten times more from failure than success. My dissertation project was split into two main goals dealing with two different proteins within a single bacterium, let’s call them protein1 (due to embargo and not published yet) and Tlp1 (since one paper is already published). It took 4 years of mostly failure with protein1 to open my eyes and look outside the box. Breakthrough! Tlp1 was more straight forward, at least I thought at first. I still failed to explain my observations for a few years. Once I started visualizing the inside of the cell, with all its organized chaos, I started to be more creative in my hypotheses. Ultimately, we discovered a sort of paradox to everything found in the literature about the bacterial second messenger cyclic-di-GMP (c-di-GMP). The publication is one of my proudest accomplishments.

Graduate school taught me a lot. I learned that if you love what you do, it is not work. Most of all, I learned that failure is a good thing because it takes us outside the box which is usually where the correct answers are.

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Professor, science and creativity advocate. Curious learner for all things small, especially kids and bacteria. http://about.me/mattrussell_PhD

We Need Our Brightest People Working on Our Biggest Problems

A few weeks ago, I got to visit Microsoft’s annual conference of faculty members involved in computer science research at universities around the world. I hadn’t been able to attend the conference since I went full-time at the Gates Foundation, so I took the opportunity to talk about how the researchers’ work might overlap with some of the foundation’s efforts.

A lot of the faculty members wanted to know how they could help and how we can all bring more bright people into the fight against disease and poverty. So I thought I would share a few ideas about how we can help researchers from different fields have an impact on the world’s poorest people.

1. Find ways to apply technology so it helps the world’s poorest people solve problems.

For the poorest 2 billion people, progress in the most important areas — which I argue are health and agriculture — will depend on advances in technology, from computer science to genetics, materials science, and energy.

For example, in health, computer-based disease modeling is a big area. I’m optimistic that we’re going to eradicate polio in the near term, and perhaps malaria and measles in the mid to long term. To eradicate a disease, we need to understand how it’s affected by things like weather or the movement of insect populations (malaria is spread by mosquitoes). A technique called stochastic modeling — which involves running a lot of computer simulations where you randomize different variables and study the outcome — is helping us understand the impact of the various factors so we can get the right mix of tools to fight different diseases.

There are many examples from other fields. Geneticists can help develop crops that are more nutritious, disease-resistant, and drought-tolerant. Someone who’s interested in finance can help drive innovations such as digital currency that reduce transaction costs so that poor people can borrow at five percent a year instead of 15 percent. People with a passion for education can develop software that models what the student knows, interacts with and encourages her, and helps the teacher see what she’s been doing.

So there’s a lot of opportunity. But these advances won’t happen unless bright young people enter these fields. That brings me to the second priority:

2. Attract more of the world’s brightest people into technical fields.

We need a constant stream of new people coming into these fields with fresh energy and ideas. And it needs to draw from a broad range of people — meaning different ethnicities, income levels, and countries. After all, no nation has a monopoly on talent or on the best way of looking at a problem.

I wish rich countries did more to draw their brightest people into the sciences. We also need researchers from developing countries, though that’s hard because few of them have great universities where people can get top training. We need to look at ways to strengthen those schools through partnerships. We can also expand opportunities for young people to study in other countries and then return home to start their careers. And we definitely need to encourage more women to enter technical fields.

As we bring more bright young people into the sciences, there’s a third step to making sure it has an impact for the poorest two billion:

3. Show experts how they can help solve these problems.

As I said earlier, several of the researchers I talked to at Microsoft asked how they could help. Unfortunately, historically the world hasn’t done a very good job of connecting people with expertise to the biggest problems.

For example, a big challenge with vaccines is that they spoil if you don’t keep them cold. This problem has kept a lot of kids from being vaccinated, and it has cost a lot of lives. There are experts in the science of insulation, but no one had explained this problem to them. As soon as we did, they started thinking about how they could help. They got to work on a kind of super Thermos — a way to keep the vaccines cold without using any energy. It’s in development now.

Scientists aren’t the only ones who can help solve problems in the poor world. Savvy people in businesses, non-profits, and governments can find ways to deliver solutions at scale.

Of course there has to be a financial incentive to draw people in. Governments and philanthropy can establish grants and prizes. They can also set up funds to guarantee that there will be a market to pay for advances if they’re developed. The Gates Foundation has a program called Grand Challenges in Global Health, which is designed to help experts from various fields see how they can help save lives in the poorest countries. That’s just one example, though, and the world could use a lot more.

It was great to connect with all the researchers at the Microsoft conference. I hope some of them use their talent to help solve some of these challenges. I’m convinced that getting our brightest minds focused on our biggest problems will save lives and make the world a more equitable place.

Republican Leaders Don’t Have The Votes For Their Own Hostage Plan

Source Huffington Post!

Speaker of the House John Boehner and House Majority Leader Eric Cantor


WASHINGTON — House Republican leaders rolled out their latest gambit to use the nation’s debt limit to extract concessions from Democrats, but they may have spoken too soon.

Numerous members of the GOP conference emerged from their weekly closed-door meeting Thursday expressing confidence in a bill that would seek numerous cuts and legislative changes in return for raising the country’s $16.7 trillion borrowing cap. They said a vote could be scheduled swiftly, with an Oct. 17 deadline looming.

But reports surfaced later in the day, as members thought the plan over, that there might not be enough votes in the fractious Republican caucus to pass it.

Leadership sources told HuffPost that such reports were “premature,” but acknowledged they were “still talking to members, still listening to concerns.”

“I’d guess we need more votes,” one said.

Nairobi Mall Shooting: Gunmen Throw Grenades, Open Fire At Upscale Shopping Center

English: Flag of Nairobi (Kenya) Español: Band...
English: Flag of Nairobi (Kenya) Español: Bandera de Nairobi (Kenia) (Photo credit: Wikipedia)


Source Huffington Post!



NAIROBI, KenyaTerrified shoppers huddled in back hallways and prayed they would not be found by the Islamic extremist gunmen lobbing grenades and firing assault rifles inside Nairobi’s top mall Saturday. When the way appeared clear, crying mothers clutching small children and blood-splattered men sprinted out of the four-story mall.

At least 39 people were killed and more than 150 wounded in the assault, Kenya‘s president announced on national TV, while disclosing that his close family members were among the dead.

Foreigners were among the casualties. France‘s president said that two French women were killed. Two Canadians were killed, including a diplomat, said the Candadian prime minister. Four American citizens were reported injured but not killed in the attack, the State Department said Saturday.