November 28, 2016
What We’re Reading this Week
I have been a long-time skeptic of Bitcoin. At a high level, my view of the cryptocurrency is that it is an answer to a problem very few people wanted an answer to; or at least, very few people felt like we needed to expend this many resources to solve said problem. Imagine a world where everyone hated the post office. I know it’s hard but bear with me. The post office was hard to use, had lot of arcane rules, and just generally seemed like a bummer. So a bunch of nerds invented a new way to send packages all over the world. This is sort of what bitcoin is to banking. Granted, there are a ton of ways that modern banks need to be improved. What’s interesting to me, is that many of our current issues with banks are new problems that stem from the ways banks have evolved. Think of it like this: We invented banks to solve “Problem A.” This created “Problem B,” so we changed banks and created “Problem C.” This continued for roughly 4,000 years. Bitcoin enthusiasts essentially want to solve “Problem Z?” by taking modern banking back a few decades without really considering what other problems it will introduce. I’m not saying it won’t work, just that it hasn’t really been thought out. So where are we now? After several years and a billion dollars what is the state of Bitcoin? Well, they have learned a little, loved a little, and lost a little. However, they seem to be back where they started. In the early days many people compared Bitcoin technology to the early days of the internet, when widespread access to information changed the way record companies and print media companies did business. Notice that record companies and print media companies still exist. Maybe the bitcoin folks are on to something, sort of? Take music for instance. I grew up during the Napster craze. The idea was that people could share music, for free, all the time. We just had to share it. This certainly changed the record industry but ultimately, didn’t end it. Companies were forced to embrace new technologies and update themselves to remain relevant to a new generation of consumers. Undoubtedly, this is the future of global financial markets too. A disruptive idea like bitcoin will spawn new technology (like a blockchain) and this new technology will be incorporated into the mainstream (like banking) but it won’t make banks obsolete. If bitcoin sits at one end of a spectrum and banks sit at another, the final destination is somewhere in the middle.
More Fake News
Last week I wrote about fake news stories on Facebook. Most of Facebook’s criticisms come after the recent election and the idea that fake news stories led to Donald Trump’s election. I am all for the removal of fake new from Facebook, mostly because people seem to be really bad at figuring out what is real and what is fake. Mike Caulfield astutely points out that fake news “trains people to be extremists.” We need less of that. I have to admit, I am partially to blame. Facebook first gained popularity when I was at Michigan State. It was a younger, more carefree time and the method Facebook used to vet potential users was fairly limited. I used this opportunity to create and maintain a Facebook profile for Fidel Castro. His interests were Grey’s Anatomy and waterboarding, to name a few. You see, I was an early adopter of using social media to spread misinformation. Boy, it was fun. Eventually, Facebook figured it out and closed down the profile. This is sort of what they are doing now. Under increased pressure, Mark Zuckerberg has decided to crack down on fake news. In a recent Tweet he states, “The bottom line is: we take misinformation seriously. Our goal is to connect people with the stories they find most meaningful, and we know people want accurate information. We’ve been working on this problem for a long time and we take this responsibility seriously. We’ve made significant progress, but there is more work to be done.” He goes on. However, I’m not really sure people do want accurate information. Personally, I think people want to be entertained and to have their own biases supported. I think people read and share fake news not because they think it’s true but because they want it to be true. That’s what is in it for consumers of fake news, but what about propagators? It turns out there is a fairly robust ad economy for these sites. In digital marketing most advertisers are looking for heavily trafficked sites. Fake news sites do have a lot of traffic and clicks, and creators of fake news can make a lot money selling that add space. Apart from limiting fake news, Facebook is also taking a deeper look at its reporting tools and use of disclaimers.
In the past I have noted that Trump’s campaign has had enough power and charisma to instill optimism in the heart of Wall Street. Indeed, analysts all over the world have appropriated Trump’s promise to “Make America Great Again.” Will Trump Make America Great Again? What about TIPS? Certainly, he can make the coal sector Great Again! It will be interesting to watch Trump hysteria play out. The economy has been starving for good news but this sort of feels like presidential honeymoon stuff. It also feels like all the analysts are taking the week off? Johnson, did you finish your report on holiday retail spending projections? Uhhh, yeah, Trump will make it Great Again! Good work Johnson…
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