Monday, November 28, 2016

Another Digital Manifest

It's been Future Convention day in Frankfurt and here is the tweet I wrote while reflecting on what I saw today:

Don't get me wrong, it was a great day with a hundred ideas, concepts and biz-models to learn about and interesting talks in the business line to attend.

Nevertheless following the discussion panel in the evening I felt there could have been more:
  • More insight into how digitization is about to revolutionize or transform how society works. 
  • And more controversial ideas on how to get a grip on what is happening and shaping the rules of play to create value. 
We are talking value not in a strictly monetary sense but understand it as the well being for us humans engaged in our globalizing social collective.
This is why I found myself capturing my basic impressions on the state of digitization below. Feel free to comment, agree, disagree and share ideas and resources on digitization that you feel excited or concerned about:   


The Digital Manifest

1) The dynamics of acceleration by setting up and using networks and digitizing the way we communicate and work is a feature of the collective. 

2) Individuals can't or at least won't be able to cope with the speed of technical progress in terms of learning. But we like to believe that they can a lot.

3) Without moderating boundary conditions a thriving collective does not in itself establish or care for the well being of individuals.

4) We don't have a clue or at least are far from establishing consensus on which set of rules to impose would be wise.

5)  The current dynamics of digitization is a global phenomenon. But we are lost maybe stuck in the trouble to define, implement and establish a set of rules we deem useful.

6) As long as we fail to come up with such rules, we will see cultural achievements, moral values and social peace erode increasingly faster day by day.

7) This development is a chance to change human society into something more human. The chance exists because morals and responsibilty are always based on human, empathetic interaction between individuals fostered globally by digital networks.

Final Remark: There is another digital manifest you can find at Spektrum der Wissenschaft. It is labeled "Digital Democracy not dictatorship of data" and worthwhile to read (german).

Wednesday, September 14, 2016

Kategorienfehler oder Vermeidung von Verantwortung

Notizen und Gedanken zum Artikel "Kennzahlen forcieren eine Entmenschlichung der Wirtschaft" von Conny Dethloff aus der Reise des Verstehens:

Zuweilen ist es interessant Zusammenhänge des Wirtschaftens aus einer anderen Perspektive als der des Geldes zu betrachten. Die Frage wie findet sich der Mensch als Mensch in wirtschaftlichen Zusammenhängen wieder, ist ein mit moralisch, emotionalen Konflikten besetztes Thema und eine nähere Betrachtung oft erhellend.

Ausgangspunkt ist die interessante Denksportaufgabe folgend aus der Behauptung, die Modellierung von Zusammenhängen durch Zahlen und physikalische Einheiten würde bei der Betrachtung von Verhältnissen verschiedener Einheiten einen grundlegenden Kategorienfehler begehen. Da Multiplikation und Division auf Addition und Subtraktion beruhen, müsste man eigentlich auch verschiedene Masseinheiten addieren und subtrahieren können. Aber was soll das Ergebnis hiervon sein?

Was passiert hier?

Hmm?!? Hier haben wir also den Versuch eines Wiederspruchsbeweises, um übliche Denkmuster aufzubrechen. Ich halte ihn für einen interessanten Denkanstoß, obwohl konzeptionell falsch und unschlüssig. Letztlich lenkt das vom Kern der Beobachtung der Entmenschlichung eher ab, als ihn zu erklären oder zu stützen. Das ist schade und daher folgt der Versuch einer Klärung:

Widerspruch zum Widerspruch

Der Widerspruch entsteht nur dadurch, dass eine Randbedingung der Modellierung von Zusammenhängen über physikalische Einheiten nicht betrachtet wird. Diese Methodik der Modellierung formuliert als eine Regel der Modellbildung, dass bei der Erstellung von Verhältnissen die Einheiten mitgeführt und zuweilen auch mit eigenständigen Namen versehen werden. Das ist hilfreich, weil man gemerkt hat, dass diese Modellierung mit empirischen Phänomenen passt und sinnvolle Aussagen liefert. Es handelt sich um sinnvolle Modellbildung, nicht um unmittelbare Realität. Modelle haben Grenzen und eine der Grenzen ist, dass verschiedene Einheiten nicht durch Addition und Subtraktion verrechnet werden. Es ist eine Grenze, weil im Rahmen der Modellbildung dieser Vorgang keine sinnvolle Bindung des Ergebnisses mit der Realität erreicht. Man kann auch vorsichtiger formulieren, es ist bisher niemandem etwas eingefallen, weshalb das sinnvoll sein soll, also wird es nicht gemacht. Das heranziehen eines Widerspruch von außerhalb des Gültigkeitsbereichs des Modells bzw. durch die Nutzung eines Vorgangs, der in der gewählten Modellbildung als nicht sinnvoll angesehen wird, um das Modell zu diskreditieren und seine Sinnhaftigkeit grundsätzlich zu bezweifeln und daher grundlegende Kategorienfehler zu behaupten, ist daher eine Scheinargumentation.

Sinnvoller und nicht statthafter Umgang mit Modellen

Womit nicht gesagt sein soll, dass die Art der Modellbildung keinen Einfluss darauf hätte, wie wir mit der Welt umgehen. Im Gegenteil. Die Behauptung von Kategorienfehlern erscheint mir aber wenig konstruktiv. Ein besseres Verständnis der Grenzen und Effekte der verwendeten Modellbildung kann unmittelbarer helfen zu einer Modellbildung der Wirklichkeit zu kommen, in der Menschlichkeit besser zum tragen kommt. Vorab wäre natürlich zu klären, ob das überhaupt ein gemeinsames Ziel ist. Die entsprechende Diskussion ist ebenfalls wesentlich unmittelbarer und effektvoller, als eine vergleichsweise abstrakte und wackelige Argumention verbundener aber nicht in einem schlüssigen Konzept integrierter Methodiken. Vorausgesetzt es geht um einen Effekt, der über eine äußerst interessante Denkübung hinaus geht.

Entmenschlichung und Verantwortung
Die Grundaussage, dass Kennzahlen ungeeignet sind Lebendigkeit zu fassen und inherent eine Entmenschlichung der Wirtschaft befördern braucht die obige Fundierung nicht. Die Art der Modellbildung der Wirtschaftstheorie beinhaltet massive Vereinfachungen insb. den quasi vollständigen Bereich menschlichen Erleben mit all seinen Widersprüchen und Selbstbezüglichkeiten, die Komplexität menschlichen Handelns und zwischenmenschlicher Beziehungen usw. Es ist eben ein Modell nicht die Wirklichkeit. Wenn wir uns in ein Modell einsperren lassen, das uns nicht berücksichtigt, nenne ich das Passivität getrieben aus dem Wunsch Verantwortung zu vermeiden. Häufiger verwendet, weil genau dieser Umstand gleichzeitig beschönigt und befördert wird, ist der Begriff "Sachzwang".

Saturday, June 18, 2016

On Blockchain Layers, Risk and Learning

Here is some thoughts on Bitcoin, Blockchain, Ethereum and TheDAO, risks involved and the driving power of money.

The Fintech Bubble by Joi Ito calls for "as many of us as possible [to] focus on the infrastructure and the opportunities at the lowest layers of this stack we are trying to build." The article points out that it might be a bad idea to build castles on top of slippery ground that needs to be properly secured before putting too much pressure on it. This is a good thing to keep in mind, but learning fast is the positive side to having a lot of interesting and ambitious activity in the application layer. If everybody involved keeps a close eye on how much risk he or she can personally take, I think that learning fast even if it involves failing is a good thing to do. Chances are that being quick is necessary to "completely reinvent the nature of money and accounting". If regulation and big names in the money business should really catch up they will try to defend their assets. This has a lot of potential to get in the way of strengthening and exploring the blockchain.
Why do we need learning?

As we have no final idea how the layers in block chain tech should be organized to optimize for robustness, adaptability and ease of understanding/using the technology, it won't work out to get things right without experiments in applications. There will be fails, major ones likely, before the platform or landscape of platforms has settled. Comparing early blockchain to early internet is a fruitful point of view but you need to keep in mind that the link to money is much more direct for the blockchain and the link to user applications is less direct for blockchain tech. This makes for a very much different risk profile. Blockchain, Coins, Platforms for distributed consensus dig into the major conflict between centralized and decentralized infrastructure and are dealing with assets that convert to fiat currencies instantly. Hope and greed at scale will always have a seat at this table and everyone involved needs to find his very personal balance for investing time and money.

Is risk realized a bad thing?

No it is not. There is no doubt, whenever some risk materializes. it hurts. Someone will be in pain and needs to ask: Could I have known this to avoid the trouble I got myself into. This is learning and it is never more direct as in moments of great clearity when you lost a sum of money recently. If you take risk you better know that you can handle it. That said we should remember that money is not lost but changes hands. Blown investments are one of the more efficient mechanisms to transfer money from the relatively wealthy to those who invested time and devotion. This is why we should continue to aggressively evaluate the problem landscape for fast learning while embracing and controlling risk at the personal and corporate level.

Saturday, May 14, 2016

There Is No Scarcity With Digital Artefacts

Money features scarcity!

Scarcity is at the core of the value of money. If money would not be scarce for nearly all of us, it would not work well as a utility to measure the value of goods and services. The Tool for matching supply and demand by some kind of market mechanism would break down.

Having to cope with scarcity everyone of us is trying to keep some kind of balance between getting or aggregation money and spending it to consume goods and services at a certain price point. How you try to establish this balance is a very personal choice and involves tradeoffs between immediate satisfaction and securing future options or even trying to build long term perspectives by taking investment risks. Living for the moment is a battles planning vs saving vs investing into the future. Most of what we do as participants on various markets is focused and based on scarcity. If something is not scarce, we tend not to recognize it's value. Consumption will then neither provide the boost to our self-esteem nor the desired social impact. Whatever is not scarce will become a commodity of minor importance.

Enter the stage: digital goods!

There is no natural scarcity in digital goods. Cost of duplication is marginal and closes in on zero. A first in human history this enables production and delivery of global products. This opportunity carries the cost of a major shift for successfully applicable business models.

With our current market paradigm classic business models based on scarcity can no longer compete with delivery models that scale to the global audience at no direct cost whatsoever for a single artefact. Neither selling nor consuming digital goods based on distribution and monetizition concepts from the physical world work too well. Trying to save old-style business suffers from a major problem due to the lack of control of how, by whom and to whom the digital product will be transfered or shared. The digital product is not not scarce. To keep in control or reestablish control established industries on the brink of digital disruption muster a lot of effort that goes into artificially recreating scarcity.

That's what they call DRM Digital Rights Management. Calling it Digital Scarcity Management might be more to the point. Does it work? No. Artificial scarcity cuts down on likes, shares and mentions. A major drawback when competing for the global audience. 

For a digital business model to be successful you need to rethink what is scarce. It's not the digital artefact. It's users, their time and attention that are scarce.

You need to accept that abundance of digital artefacts themselves is inevitable. Otherwise your business won't be up to it's coopetition. 


Thanks for reading, feel free to share your comments. I'll follow up with thoughts on:

 -> Sharing and Marketing
 -> Attention and Participation
 -> Users and Software Maintainance

Wednesday, August 20, 2014

What exactly is an economy?

"There can't be such a thing as an economy based on the poems and paintings"

Is a phrase I caught in the video Humans Need Not Apply as I followed up the following tweet by Elon Musk. To spoil my punchline from the start: I think we very much need to establish an economy based on poems and paintings. I also think it can be done.

Let's Start At The Beginning

The video above is well worth your time because it illustrates the next step in the automation revolution and how disruptive it will be to our current way of earning money to sustain and improve our participation and rank in society.

Modern western societies tend to be organized around some kind of market that includes human work force. Value is based on scarcity of the type of work needed to produce stuff. The rise of productivity reduces the necessity to assign work on producing food and provides the luxury of producing stuff that is less and less essential to primitive needs moving our demand profile up the Markov Pyramid day by day.

Coming from a long history of hunters, gatherers, merchants, workers and capitalists we can't avoid to structure our view of the world along the lines of scarcity for something. This is true despite of abundance of food and goods due to increased productivity and despite of minimized margin costs for the duplication of digital goods.

Let's Look At The Current State Of Economy

What we end up with is a set of rules that fails to distribute wealth derived from the abundance we achieved. Instead there is a happy few who end up living in the process of getting rich beyond measure. There is the decreasing part of the population doing the rat race to succeed in life. And there is those that have been dropped from or never were in the position of participating in the game of money and career.

This won't work as Nick Hanauer states in his Pitchfork Talk at TED. 

Let's Step Back And Rethink

As this is a bog and not politics it should be easy to start organizing things from scratch. Put aside greed generated by fear generated by thinking in terms of scarcity. Have a look at people you meet. They are interested, they want to participate and share. They want to earn positive feedback by involving them with others. From their day of birth they explore and try to make sense of why they are here and how to contribute so that in the end they may look back and see that it was a good life they lived. Not easy, not without risk, not without hardship but with curiosity, engagement, purpose and warmth.

Most of the time people are nice, motivated and trying to do the right thing.

Let's Organize Abundance

So how about building on all those people motivated to participate and move things along. Economy is a set of rules we come up with to organize ourselves. To organize us in a way that improves the fitness of our population given a set of circumstances. The circumstances have changed dramatically so we have to rethink the rules we established. The new set of rules needs to take into account that there is a link between individual welfare and the success of a population that is essential and absolutely non trivial. Personal welfare for all should align with being successful as a population inhabiting a planet with limited resources.

A lot of thought needs to go into that so increasing participation is a good idea.

Let's Define And Implement The Right Set Of Rules

The right set of rules needs to focus on what makes us human. Deriving a set of rules while having this in mind will enable us to have an economy that implements what is good for people and not the other way around.

Sharing poems and paintings seems like a good point to start. These are products that are very personal and human. Which is what we all crave for.

The rise of global social interaction is proof that an economy of abundance is possible.

Let's Reframe Our Point Of View

Human work won't be needed to keep up the economy of scarcity. We won't be able to compete with smart machines. But being and living as a human being is not restricted to working for the economy. We are free to come up with rules for an economy to try and help everyone of us to pursue his or her human potential. This is true even for an economy based on the use of smart machines.

Monday, May 26, 2014

Experiments on Money

Here is a tweet I responded to earlier this evening:
The article "The Correct Strategy of Bitcoin Entrepreneurship" by Daniel Krawisz caught my attention and here is my comment:
I failed to realize the ambiguity of my response until I read this:

Twitter is just too short sometimes, so here goes some more text to clearify what i meant.

I sure like the catchphrase "speculative philanthropist". It rings a bell of what I feel might be a good set of intentions to go about investing, entrepreneuring or otherwise dedicating your money and time.

Meaning, positive impact, personal fullfillment won't be achieved by money for it's own sake. This is no different if looking at bitcoin than for fiatmoney. Everyone needs to think about what to do with money. How to handle money issues in order to live up to ones own expectations and responsibility is a critical question. It is also a question many of us do neither ask nor answer while we are struggling to get a grip on our personal money issues.

Taking into account that the crucial money question is answered all too seldom, I object Mr. Krawisz's notion on all those "bad" alternate cryptocurrencies.
Why should we feel bad about investing time into alternative cryptocoin variants apart from bitcoin at this point in time? Is it really necessary to focus energy and sort things out before getting in too deep?

I believe the opposite is true: We need as many people to bring their various maybe weird ideas to life as new currencies. There is centuries of stagnation on how the money systems work to break. Experiments need to be done, we will learn a lot dropping mindblocks as we go. 

Bitcoin, Altcoins and the blockchain are recent concepts and technology with quite some power to disrupt. No one really knows how this story will proceed. Keeping an open mind and experimenting a lot is how to learn.

Learning is key to do good stuff based on cryptocurrencies. How money works is at the core of modern societies and hasn't changed a lot. You get money if you have money. The systems tends to concentrate wealth and works in favour of those who are fine off already.

But money is not reason. If money becomes reason bad things follow. No need to duplicate this bug with cryptocurrencies. Let's try something else. Let's design a money system that supports participation and engagement not hording.

This is why i think requesting the community to stop altcoin experiments and put their attention on Bitcoin only is a bad thing to do. Feeling the need to restrict engagement derives from a worldview of scarcity not appropriate in the digital age.

We are at the verge of giving economy a new set of rules. They will be encoded as algorithms and safeguarded by blockchain trust. Let's try to find a set of rules that works for the people not the other way around. 

Keep up the #altcoin experiments!

Tuesday, February 25, 2014

Hope and Fear, Greed, Responsibility and Bitcoin

People are strange, businesses are lead by people and stability emerges gradually.

This is what crosses my mind reading about the latest Mt. Gox Bitcoin incident at Coindesk and triggered putting down my thoughts on "What is Bitcoin?" below.

Disclaimer: I own bitcoin but have no money at Mt. Gox. Invest your time and money at your own risk.

Interesting to see how other bitcoin related businesses and people, blogs, journalists and all jump to tweeting and commenting on the subject. I am still trying to make sense of what happened at Mt. Gox and how it connects with Transaction Malleability. Whatever details will surface, if Mt. Gox managed to loose your coins and money you need to remember the risk you took was your personal responsibility.

Don't take me wrong, risk is tough and realized risk hurts. Managing risk and coping with whatever risks manifest in your life is at the very core of investing, starting and running businesses and of life itself.
Hope makes us go for a chance, fear helps to keep us away from risks too big and greed kicks in, when things play out smoothly or even better than expected.
But success is dangerous ground. If you allow greed to change how much risk you are willing to take, the blow you take will be harder than you like and expect, when success gives in to trouble. Success and failiure, every life has it both. Everyone successful in the long run knows and plans for this.

So what about bitcoin, money and the money industry?

1) Everybody investing in bitcoin knows that this is quite risky from whatever perspective you choose to look at it:

  • Fragile Usecase: Bitcoin based consumption of goods is a tiny fraction of the transactions generated. Trading bitcoin vs various fiat-currencies ($, €, ...) is what happens most.
  • Volatile Pricing: Bitcoin price went from a single cent to a thousand dollars in a snap but not without massive drawbacks along the way. 
  • Young Technology: The technical bitcoin ecosystem is young, so is the business and service ecosystem building on top of that.
  • Attractive Target: Bitcoin is a worthy target for digital theft, IT-Security is bad on average, so storing bitcoin safely is not easy.  
  • Political Impact: Bitcoin money might be very disruptive to the system of fiat-currencies which has a lot of quite potent stakeholders.
2) Everybody investing at all should know that investing is inherently risky:
  • Leaving your money alone decreases your money's worth.
  • When first taking money to your bank you signed a contract that is about risk.
  • When buying an asset you try to make an informed decision balancing chance, that is risk and potential in your favor.
  • Buying and selling assets doesn't always leave you with more money.
  • The value of your assets keep changing every day.
  • There is a lot of folks telling you how to invest and most of them earn their money from feeding you this information as opposed to following their own advice. 
3) Fiat-money is established and regulated:
  • Digging down in the history of money is interesting and boils down to the basic fact that money is about the convenience of trading goods and risks. 
  • Money needs services and infrastructure to be practically useful.
  • Those providing established money related services tend to be powerful players in their time.
  • Seems like power needs regulation to keep a society stable. 
  • Regulation is never perfect and always biased. Beneficiaries of the bias are essential to keeping the regulation up and running.
  • Most people have small money and little knowledge about it. They end up using established services of big money companies to manage their money. 
  • Small money tends not to be smart money and the small money people tend not to be among those who benefit the most. Stability and a reasonable standard of living is what they get out of the system.
  • The harsh downside of the established system is all those people struggling to get mere minimal access to the system, devoting their lifetime to sawing clothes is some factory in Bangladesh or whatever.
What is Bitcoin?

Bitcoin is yet another currency, a label to attach at numbers used to trade goods and risks. The currency is algorithmically designed, so that the amount available increases but scarcity remains intact. Provided that demand does not break down that is. The rules of the game are coded in software and fortified by cryptography. Who owns what is stored redundantly by the peers themselves. Bitcoin wallets are a decentralized net of peers keeping each others transactions. No need for Banks, that's it. 

It is quite common to think of bitcoin as digital gold. That is why the process of bitcoin creation is referred to as "mining".  The cryptography is there to ensure there won't be no alchemists somehow magically creating bitcoin (gold) from lead (electricity). Actually mining is alchemy transforming electricity to bitcoin but the cryptographic challenge keeps getting harder and harder.

The digital peer2peer nature of bitcoin make it a much better fit for the digital and mobile age than gold. But as with gold there is no man made central authority in charge of creating bitcoin as it is with the nation dominated fiat-money system.

As with every currency the value of bitcoin is derived from trust. Lacking the central authority backup and as opposed to gold being around for a very short time only, the trust basis of bitcoin is quite volatile. (I kind of miss out on why people keep being dumbfounded by this.)

What value does the Bitcoin-System create?

As a currency bitcoin is a measure for value not a value in itself. But the bitcoin infrastructure provides value by cutting down on transaction costs for currencies especially in a global digital economy.

Cutting down on transaction cost is profane but disruptive. It is disruptive to the established money system. In fact i think this to be so disruptive that I'll have to do another article to dig into this.

Finally: Is  the Mt. Gox incident a mortal wound for Bitcoin?

I doubt so very much. Reading what I read, I tend to believe that another early mover in the bitcoin ecosystem stumbled. Maybe they stumbled for the last time, maybe some investor grabs them by their hair pulling them from the mud.

Either way, digital money rigorously cutting down on transaction costs won't go away. But could not some other currency take over? Sure. If bitcoin demand drops in favor of some other digital currency that might happen. 
I tend to think this won't happen unless someone finds a major unfixable flaw in the bitcoin concept or the unknown-digital-currency-to-be offers a major benefit that i can not think of for now. Remember there are lots of alternative digital currencies around, but they all trade for bitcoin thus increasing the bitcoin ecosystem.

In a nutshell Mt. Gox seems to have lost track of what they have been doing on a really big scale. There is no excuse for that and courts will have to judge if this was careless, negligent or criminal. Bitcoin will move on and that is move on without being "put back 5 to 10 years". This pu-back-hypothesis from the crisis strategy draft of Mt. Gox tells a lot. It is a self-deceiving notion of Mt. Gox to believe they are an essential ingredient to the bitcoin-ecosystem. They are not. Investors won't move on the behalf of Mt. Gox to save the bitcoin-ecosystem. Why should they?

Investors balance risk and potential. So should you!

Best of luck!

Update: Nice dive into the Mt Gox Topic by @aantonop is at The main point is: when in  take and keep control of your keys, ensure that your trust is based on the blockchain.

Three hours into this live video and still running. This is the internet age. Tech-kids running major businesses and before anyone notices what the hell happens, they fail miserably. Will Karpeles join the session? Will MtGox rize again as Is @goxreloaded a hoax? Staying tuned.