Monthly Archives: August 2014

If you have the right to work…

What is hypocrisy? Hypocrisy is a chain smoker that proselytizes on the dangers of smoking. Hypocrisy is an outraged thief discovering he’s been robbed. Hypocrisy is the state taking away our rights and then warning us to be vigilant against those that would deny us our rights. Or perhaps that is irony – I’m never really sure on that one. This past week my family and I stopped into an Arby’s for a quick dinner. Hanging on the wall adjacent to the registers was the most patriotic looking DHS labor rights poster you will ever see (red, white and blue with an overt flag theme to top it off). It was one of those silly “workers rights” posters that the government forces employers to post in effort to ensure that employees everywhere are aware that without the helpful fist of the state they’d all be earning 5¢ an hour on 16 hour shifts. Over the years these posters have grown in size from a mere 8.5×11 sheet to blockbuster movie poster sizes. I don’t know if this particular Arbys posted it where the customer’s could read it because they wanted their clientele to know they are doing their patriotic duty to keep them ‘ferners from stealing our jobs or if they simply ran out of wall space in the back.

In any event, what caught my eye was the prominent byline, “IF YOU HAVE THE RIGHT TO WORK, Don’t let anyone take it away.” That most people absorb this without comprehending the underlying violation of their rights is a masterful stroke of state propaganda. It first takes root within our public school system and is then nourished over a lifetime of exposure to popular media state-apologist indoctrination. People now blindly accept that our rights come from government. Most have the Bill of Rights backwards; it did not establish our rights, it simply delineated what was already ours to begin with. This enumeration was done in order to keep at bay those who believe that all that is not permitted is outlawed (a view clearly contradicted by the 10th amendment).

So at the very first word, “IF,” we find evidence of an egregious violation of a basic human right: the right to work. There can be no “if”; all humans, everywhere and always have the right to work. To work is to provide for oneself (or those in your care) with those things that make life possible (food, clothing, shelter). To deny this right is tantamount to murder. Of course by “right” I mean that in the negative, not positive, sense. No one may interfere with my right to work, however no one is obligated to provide me with a job either. If no one will (willingly, free of state interference) employee me then I am free to work for myself.

The sentiment expressed on this poster transmutes this negative right into a positive one through mere fiat, that is, the right to work becomes the privilege to work, a privilege that may only be granted by the state. So naturally once the state has given you something valuable, they want to foster a sense of dependency and gratitude by warning you to remain vigilant against those who might try to do the very thing (deny work) the state is doing through their E-verify program.

This is where the hypocrisy gets really rich. The big concern about all of these “illegal” immigrants is that they are coming here and acting as a burden on our social safety net. But, if they had jobs they would not be a burden. So naturally the response is to make it impossible for them to obtain jobs by filtering all potential employees through the E-verify net thus thrusting them into the open arms of state social support. Brilliant. E-verify does not change behavior; it merely removes the least bad option and replaces it with an even worse option.

Even if you are in the “keep them out” anti-immigration crowd, do you really desire to see America become a neo-fascist utopia where employers are mere puppets of the state? Where providing for oneself depends on the integrity of a US government database that is assumed to never produce false negatives? Where we have become so xenophobic that we willingly turn our borders into prison walls and slowly transform America into a permission based society, where all is forbidden except that which is blessed by the state? Is that price not too high?

Stop mining!

Yes, I am a big dumb idiot. I, like many others, fell prey to the bitcoin frenzy last fall as the price continued to climb, and climb and climb, and just when I thought it couldn’t go any higher, it did. Although I had managed to purchase a small amount of bitcoin (0.16 BTC)  at the Cryptocurrency conference in Atlanta (October 2013) for the now-unbelievable price of $120/BTC (using a bitcoin ATM they had there), I felt I had for the most part missed the boat on this whole bitcoin thing. But better late than never. I looked into mining equipment. Too expensive and too complicated (I’m an old school Mac guy, I’m not into compiling my own code in Ubuntu just to get some command line miner to work – I want point and click). But this cloud mining thing looked interesting. I knew just enough about Austrian economics to dupe myself into believing the business model of cloud mining companies made sense (“they are simply renting out time on their hardware to make an additional return on it” I thought). I read stories on line about how mining is for suckers, that the difficulty changes too quickly to make anything, but I dismissed those in my fervor to get some bitcoins at a really good price. I did some back of the napkin calculations that showed I could indeed make my investment back and then some. I was convinced! As it turns out, lazy, back of the napkin calculations don’t work. You actually need to do the fully detailed calculations… which I did not do until several months into it at which point it hit me like a ton of bricks, “YOU’RE AN IDIOT!” – it is mathematically impossible to make money in cryptocurrency mining. But so many people are doing it you say? That’s because they are wishful thinkers like I was or simply have not done the math yet.

From a strictly basic economics approach it should have been obvious to me that this business model made no sense. Why would you spend money on a piece of hardware and then you yourself not use it but rather rent it out at a rate of say $100/period even though if you used it yourself you could make $150/period? That’s the premise behind cloud mining: make more than you spent, otherwise what is the point. Intuitively it seems to make sense since we invest in all kinds of assets that produce returns (stocks, bonds, depreciable capital equipment, etc). The key difference here though is that if a stock produces a 2% dividend for me the stock itself still has value (assuming no insane market crashes). I can sell that stock at some later date for as much if not more than what I paid, and even if I sell for less, as long as the loss there does not exceed the dividends produced during that period, I still have realized a profit. But, with crypto currency mining the asset your are purchasing is simply time. As soon as it is used it is gone and worthless. When a mining contract is over there is no underlying asset for you to sell. In other words, for crypto mining to work you have to expect an investment return that approaches Ponzi-esque levels: a minimum 100% return during the holding period (of the contract). Even if we assume the crypto price in terms of fiat is increasing, the numbers still do not work. Why? Because you could have simply bought the crypto on the same day you started the mining contract and would have realized the same gain due to fiat inflation.

For example if it is $1/BTC on day 1 and you spend $1000 to mine for a year, you could have just bought 1000 BTC instead. So let’s say you mine for a year and only mine 500 BTC, but the price has gone to $10/BTC. You think you made out well because you spent $1,000 but now have $5,000… but you must recognize that you could have just bought 1000 BTC on day 1 and would now have $10,000. The loss must be accounted in the crypto currency you are mining relative to what you could have bought at the market price on the date the contract started.

I actually also dabbled in some Litecoin mining as well and bought one of those pre-built rigs off of Ebay. It was mostly plug and play… but it was extremely LOUD and HOT. As I considered where I could relocate this rig in my house I decided to run some detailed calculations to determine when I would turn a profit. And that is when I discovered I would never get my money out of what I paid for the rig, let alone all the electricity use as well. So I made the smartest move one can make when mining; I sold the rig. Because I sold it a mere 3 weeks after I had bought it the difficulty level had not changed appreciably and the market rate for the rig was the same. I sold it for exactly what I paid for it and managed to pocket the litecoins produced. So in all I netted about $100. So it is possible to make money mining but you must (a) buy the actual equipment so you have something to sell when done and (b) mine for under a month so difficulty increases do not depreciate your equipment by an amount exceedeing what you made in mining (as denominated in the currency being mined). Of course that is not really practical, but it is possible. The only other way to make money is if you just happen to already own the hardware needed to mine and can build a rig yourself (and live where electricity rates are low). Of course you must factor in the opportunity cost of any other endeavors you could have participated in that could have made more of a return. It wouldn’t make much sense for a neurosurgeon to waste his time building a rig, although for someone in high school or college it might (if they are not employed) in terms of opportunity costs.

So to help people out I have put together a spreadsheet using Google docs where you can estimate mining returns. It is set up for BTC but one could do the same for any crypto currency, the principle is the same. The document shows an example of the currently most expensive Cloudhashing.com mining contract (1 TH for $2999) using the Global Hash rate of 8/19/2014 as the starting point and an average change in difficulty of 20%. With those numbers you can see you lose 75% of what is spent. The only way to make a return is if difficulty changes were 1% or less (or they could cut their price by a factor of 4). The spreadsheet is Read Only on the web but you can download it and then make changes to it offline. Trust me, no matter what mining contract you see, plug it in here and you’ll see it’s a loser. And if it is a winner then you can be sure it is a “pre-order” contract. Don’t do it, trust me. I fell for the pre-order Butterfly Labs mining contract last December. Had they delivered that product on the day I purchased it, I would have made a return. But they knew it would be months before it was delivered so they could price it aggressively such that it appeared to be a money maker. Six months later after no delivery on the contract I luckily qualified for a 100% refund (which I had to wait another 45 days to get). But to their credit they did finally refund all of my money. I made out far better getting my money back than if they had delivered the contract in the February time frame originally promised. Their reputation for taking money and not delivering for months (if ever) suggests to me they are simply using their customers as a source of 0% financing. They collect pre-order money from suckers like me, then hold our money for 7 months, and then finally return it with 0% interest. But like a Ponzi-scheme, this will only work as long as they continue to entice new suckers into doing the same. I will give them the benefit of the doubt and assume it is not a pure Ponzi scheme, but rather that they are using the “loaned” funds to invest in their business and grow it. I’m just glad I got out when I did.

Cloudhashing.com is a bit different from Butteflylabs.com. Cloudhashing actually delivers their contracts when you buy them, it’s just that given their pricing it is not possible to ever make a return. They have a “revenue reinvestment” scheme which sounds like it makes sense; reinvest your mined returns in order to stay ahead of the difficulty changes. But all you’re doing is running to stand still if you participate in the RRP. But in theory and in practice it can’t work as it falls prey to the same problem of mining itself; you’re better off just buying the BTC. Ultimately I think they and all other mining companies operate on the same principal. Instead of investors they have customers who freely give them their money, they use that money (risking none of their own) to buy the equipment, they then charge the customers 10% of their return (and may very well be mining on the side using the equipment paid for by their customers). A parallel would be this: I sell the ability to receive a dividend from some penny stocks. You give me $100, I use that $100 to buy shares of penny stocks. Those stocks pay a $2 dividend per month. I give you $1.80 and I keep $0.20. After 1 year you’ll be lucky to have made $20 (thus an $80 loss), I’ll have $2, and then the “contract” is over. I’m making $2 per account/per year risk free by using your money to buy the stock. After a year the penny stocks are worthless so there is no way to recoup that initial investment. Now all I need to do is scale up to a massive level and make a pretty decent amount of money risk free.

So, this whole essay begs the question, “If it always make more sense to buy than to mine, shouldn’t it be impossible for any crypto currency to get off the ground?” Yes, quite literally that is true. But, fortunately, turning a profit is not the sole motivation behind everyone’s actions. I’m certainly not saying turning a profit is bad, simply that people do things for reasons other than profit. A painter might paint his whole life for pleasure and never realize a profit from that endeavor. Then when he dies his painting shoot up in value and then people are buying and selling them for profit. In a sense that his how crypto mining operates. The miners don’t make anything, but the traders who buy their product do.

Mine because it is fun. Mine because you want to help grow the market. Mine because you want to be a part of history. Mine for any number of reasons, just don’t mine because you want to make a profit. You won’t. The only people that make a profit in the crypto currency game are those that are (a) very lucky and found good deals on hardware or (b) people selling mining equipment or mining contracts. If you just want to make money then just buy what you can afford to lose. It is a purely speculative market so the only profit you’ll see is if the crypto you buy gains value relative to other goods.

So there you have it, the perspective of a former miner and cloud miner on why neither makes any sense if your sole intention is to make a profit. I hope this information gets out there and helps others to avoid buying mining contracts that are a total loss from Day 1. I was a victim of my own lack of due diligence and placement of trust in companies that I expected to deliver what was implied (net gain) by the nature of the product. That’s the free market, if you aren’t careful you can get hurt. Well now I’m here as part of that market to warn others away from participating in these “products”. Eventually there will be enough of us warning everyone else that these companies will simply go away, but sadly not without having made off with a lot of money. Caveat emptor.

Postscript Jan 9, 2018, Just found this article, guess my speculation on what Butterfly Labs was doing was vindicated:

Ferguson is the New Black

I was shocked and saddened, as most were, to read about the shooting death of Michael Brown in Ferguson, Missouri last week. What I was not, unfortunately, was surprised. Stories of police overreaction to the most innocuous of infractions (or none at all) are seemingly no longer the exception in a society where mere behavior, words, or possessions are sufficient evidence of criminality that is too frequently repelled with lethal force. The trivial nature of Brown’s misdeed (walking in the street) coupled with the rapidity and disproportionate response of the officer involved (6 bullets, including 2 to the head!) was illustrative of the small amount of daylight between life inside and outside the prison system.

I (fortunately) lack any direct experience with the prison system; however, what I have read is a realistic portrayal of that system can be found in the television series “Orange is the New Black” (warning: definitely not family friendly). In this series the main character is incarcerated (as are many others) for being involved in one of the many victimless crimes related to the “war on drugs.” The prison depicted is a federal, minimum-security women’s prison. But even under this lightest of all prison environments, life is clearly a stressful and miserable experience, in no small part due to the capricious and vindicate nature of the guards coupled with the lack of autonomy over ones life.

Naturally this is what one would expect; we all know prison is not supposed to be a vacation. It is supposed to be miserable so that it may act as a deterrent. And even when it is not a deterrent then we the public can still rest satisfied in knowing the “bad” people are being appropriately punished. But as it becomes clear that the vast majority of these prisoners are party to “crimes” with no victim, it makes the US prison system less like Dostoyevsky’s Crime and Punishment and more like Stalin’s Gulags. But I digress.

The most frightening aspect of the TV series is not its portrayal of life within prison but rather the realization that we ourselves live in a much larger prison known as the State. This prison has no escape, no furlough and no time off for good behavior. Consider: in prison perceived disrespect toward a guard or failing to immediately and mindlessly follow their directives is met with an immediate and violent response. The same fate is not uncommon for any of us who might fail to immediately comply with the “lawful order of a police officer.” In prison the guards can search the prisoners or their living space at any time for any reason. This is likewise true in many parts of the country under “stop-and-frisk” laws or with the now infamous no-knock-raids. In prison the mail correspondence and voice conversations are closely monitored. Outside prison we have the NSA to take care of that task. In prison the inmates must plead to their intermediaries (the administrative staff) for permission to engage in heretofore-unapproved activities. Outside prison we must plead with our intermediaries (elected officials) for permission (licensing) to engage in an activity so that we can avoid violent reprisals from the state. In prison the belongings of any inmate can be confiscated at any time for any reason. Outside prison our property may be confiscated (civil asset forfeiture) for nothing more than baseless whims of suspicion.The dream of the statist is to push society toward being more, not less, prison like. The statist wants nothing more than to have the power to force all to conform to their vision of the ideal society: behave this way that, not that, eat this, not that, run your business this way, not that, express yourself artistically this way, not that, smoke and drink this, but not that. Where else but in a prison are such visions of the ideal society possible through strict enforcement?

Many might say “hogwash” to all this. They’ll insist they don’t feel like prisoners, they can do whatever they want, whenever they want. That may be true, for some actions, but even prisoners may do things without asking permission or running afoul of a guard; but that does not make them free. They are simply the pinball that has not yet hit the wall. Inside prison the walls are narrow, outside prison the walls are wide – but both have walls. If you remain unconvinced and still need proof that you are but a mere serf living on the master’s (that is, the state’s) land then consider the truth found within an instinctual and visceral emotional response. What do you feel in that moment when you see flashing blue lights in your rearview mirror?

Moneyball

A US District Court judge recently ruled that the NCAA can not prohibit student athletes from receiving remuneration that goes beyond scholarships and related costs. The ruling was based on the argument that the NCAA was violating antitrust laws (trust = a small group of individuals conspiring to limit options of its customers or members). That such antitrust pronouncements emanated from a federal court (itself a monopoly) is no less ludicrous than if the KKK were to condemn the racism of the Aryan Brotherhood. Perhaps the people should file an antitrust lawsuit against the Federal Government. The executive, judicial, and legislative branches regularly conspire in trust-like behavior in order to deprive us of our rights. If we were permitted to choose from whom we will rely on for governance (without imaginary border constraints), then, and only then, could we live freely.

Apropos voluntary governance; the NCAA is a non-geographically constrained, self-governing, voluntary organization whose existence is based on the concept that those with common goals and interests can better achieve those goals through cooperation. In many respects the NCAA operates like any government. It has a legislative body that passes “laws” that its members must adhere to, it has a dispute resolution process (judiciary), and it has a chief executive (president). There is, however, one crucial difference; it relies on voluntary membership and voluntary dues payments. It cannot force schools to join merely because other member colleges happen to be nearby. All schools voluntarily join and in so doing agree to abide by its rules. Also, unlike state governments, it has competition (NAIA, NCCAA, USCAA, etc) in its metaphorical backyard. But unlike state governments, they cannot and do not use violence to inhibit such competition. Somehow this crazy, anarchical voluntary system has worked for over one hundred years! Imagine that, anarchy does work!

Or rather it works until the top gang (the Federal Government) decides it has a say concerning what the serfs do on its “turf”. You see the Crips, err, I mean the Feds decided monopolies/trusts are bad and must be stopped (even though monopolies cannot exist in a free market – only in one that suffers state interference). In order to stop them they pass “laws” that they interpret to arrive at whatever outcome supports their ideological stance du jour. Today’s seems to be “fairness.” It is only “fair” after all to allow student players to be paid. Only a troglodyte would oppose fairness. The substance of this conflict is the usual sort of economic interventionism (e.g. minimum wage, worker’s “rights”, etc) one can expect of the state. The actors may change but the narrative is always the same: Party A and Party B came to a mutually agreeable relationship, however Party C thinks that Party B is too stupid or weak to know what is best for them.

Whether students should be paid or not is irrelevant. This is not a moral issue; there is no right or wrong answer because there is no rights violation. All relationships are voluntary (NCAA, schools, students). The only ones that get to decide what is best are the students and the schools. If a school wants to pay an athlete, then they must weigh the costs and benefits of leaving the NCAA. If enough students demanded pay, then the rules would change. The fact that the rules have not changed (other than this recent external one) suggests that the vast majority values the free education and experience more than they value the other things they could be doing. In other words, if someone offers you $10 for something that you value only at $5, then it is ill advised to demand $50.

Although this issue is often cast under an egalitarian light, this ruling will result in a rather perversely inegalitarian outcome. The 1% (of athletes) will attract the lion’s share of money to themselves leaving that much less for others. On the margins fewer athletic scholarships will be given, thus harming those most in need. To paraphrase H.L. Menken, “[the student athletes] know what they want, and deserve to get it good and hard.”

Restoring Freedom?

Following the President’s recent signing of the cellphone unlock bill (“Unlocking Consumer Choice and Wireless Competition Act”) the White House issued a press release extolling the benefits of the bill. Amidst the usual self-serving propaganda (“democracy at its best”, “broke through gridlock”, etc.) we find two telling phrases that betray the consequences of accepting dominion of the state over our lives: loss of freedom.

The first is found here, “The story of how we broke through Washington gridlock to restore the freedom of consumers…” and the second here, “…consumer will now be able to enjoy the freedom…”. The unspoken but obvious question here is, How exactly did consumers lose these freedoms in the first place? Oh, that’s right, it was due to the very institution now taking credit for “restoring” those freedoms. The state exhibits the character traits of a thief with self-esteem issues: he robs you but then returns your stolen goods in order to bask in the ego trip of being praised for having done the right thing.

The story of how these freedoms were lost has its genesis in the most basic function of the state: interventionist protectionism for the few at the expense of the many. It started with a bit of intellectual property crony capitalism known as the Digital Millennium Copyright Act. Under the DMCA it is a crime to duplicate digital intellectual “property” (music, movies, books, etc) as this is considered theft. Of course it is not really theft since IP is not intellectual property but rather imaginary property; a business model that necessitates state intervention to succeed is necessarily defective and thus invalid (more of my thoughts on this here and here). Sometimes digital IP is secured with digital locks (digital rights management or DRM) and thus just as it is considered a crime to defeat someone’s padlock in the real world, it is also considered a crime under the DMCA to defeat a digital lock, even if no duplication of the unlocked software ensues. So this is where we get to cellphones; cellphones are locked by the carriers with digital locks, thus breaking those locks is likewise considered a crime under the DMCA. For many years the Librarian of Congress (no idea why it would fall to that department) had issued waivers to the DMCA for phone unlocking, however those waivers ended as of January 1, 2013 due to the increasing availability of unlocked phones directly from carriers. There soon followed a consumer backlash, which manifested itself in a “We the People” petition at whitehouse.gov, which garnered over 100,000 signatures. Congress and the White House soon worked out a bill to permanently restore this exception to the DMCA and the rest is history.

Many are now touting this series of events as a model for how democracy should work: the people spoke, the government listened, case closed. Not so fast. This is yet another lesson in the political slight of hand that hopes to misdirect a gullible public into forgetting some recent history. To be fair we need to review the whole trip, not just the last 5 minutes. The bigger picture of this “democracy in action” includes: the passage of a bad bill that provided for aggression backed support of crony capitalist imaginary property rights, that had obviously foreseeable unintended consequences which could only be avoided with a regular legislative Band-Aids, and that took 16 years to permanently fix, that whole process, that is a model of democracy in action? No wonder the state must exert monopoly control over governmental duties because I can’t imagine anyone voluntarily choosing to pay for the service of these clowns.

With a subtle edit I think this quote by Harry Browne (1996 and 2000 Libertarian Party candidate for President) captures the essence of what has transpired here: “[The State] is good at one thing: It knows how to break your legs, hand you a crutch, and say, “See, if it weren’t for the [state], you wouldn’t be able to walk.”