Tag: humor

Foreword

For the past few months, I have been working with my favorite financial journalist, Matt Levine of Bloomberg on a new series of podcasts that will be released all at once at a date to be announced. Here’s a sample of some choice clips.

As usual, a reminder that I am not a financial professional by training — I am a software engineer by training, and by trade. The following is based on my personal understanding, which is gained through self-study and working in finance for a few years.

If you find anything that you feel is incorrect, please feel free to leave a comment, and discuss your thoughts.

#1

ML: So, JB, what do you make of the Tesla stock price action today? Tesla previews some bad delivery numbers and TSLA stock is down?

JB: Yes, Matt. That’s because the stock market is forward looking. The numbers suggest strongly that demand for Tesla vehicles is drying up — the wait for a new Tesla vehicle is dropping and Tesla is still ramping up production. Soon, the legendary line of buyers may just run out and then they’ll have a huge oversupply problem.

#2

ML: We talked about TSLA stock being down the other day, but it seems the stock is up strongly today. What’s your take, JB?

JB: Well, Matt, that’s because the stock market is forward looking. Elon announced a series of price cuts, and it appears demand for their vehicles is up again, despite the ongoing supply ramp. It appears the market is pricing in a steady state of more demand and supply, leading to high growth for the foreseeable future.

#3

ML: Wow! TSLA stock just dropped 5% today after hours. What’s on your mind, JB?

JB: That’s because the stock market is forward looking, Matt. Investor Day was a dud — the market was expecting new products at lower price points to attract new customers, but Elon kept talking about their existing products and incremental improvements. The market is looking at the future, and right now, there’s not much in that future to be excited about!

#4

ML: And just like that TSLA is BACK! What’s up with that?

JB: Matt, Matt, Matty! That’s because the stock market is forward looking! The consumer spending numbers are good, so future demand for Tesla cars should be good, and the market sniffed that out.

#5

ML: So what’s the market sniffing out this time? There’s no news and TSLA is down 9%!

JB: Ah, Matt, that’s because the stock market is forward looking! The last consumer spending numbers were too good, and the market is now predicting higher inflation for longer. The Fed will need to hike harder, driving stocks down. It’s all about discounting the future, and the discount rate just went up!

#6

ML: So… TSLA is up 15%. In one day. What?

JB: We’ve talked about this Matt, the stock market is forward looking — the Fed is going to hike rates too much, and that is guaranteed to lead to a recession. The market sniffed that out, and is now pricing in the Fed cutting rates to fight the recession! Rates down, stocks up. Simple as!

#7

ML: … and TSLA is down 14% since the last episode. Any comments?

JB: Well, the stock market is forward looking, and it appears the stock market is pricing in the Fed hiking rates again after the coming recession to fight the next wave of inflation. It appears they’ll overdo the liquidity injection in the future.

#8

ML: Holy <bleep>, TSLA is up 50,000% since we started recording. What is happening?!

JB: Ah yes, the stock market is forward looking and hard at work. With the next wave of inflation so high, and the Fed forced to hike to 20%, it appears stocks will drop by 99%. With Tesla’s Bitcoin holdings, the market is pricing in Tesla buying out the entire US stock market for pennies on the dollar. TSLA is the new SPY, baby! The future is bright and the stock market sees it!

#9

ML: After the last session, I bought TSLA with all my life’s savings and now it’s down 99.99%. This podcast better work, or I’m ruined!

JB: I’m sorry Matt, but the stock market is forward looking. After Tesla buys out the entire US stock market, Elon sold a large chunk of his TSLA shares to fund SpaceX’s research. It won’t happen for another 20 years, but the market sees the future, and is pricing that in now. I’m sorry man, Elon selling stocks 20 years from now is causing you the pain, I’m afraid.

#10

ML: OK, for some reason, TSLA is up again and I’m at least at break even. What a ride!

JB: Indeed, Matt! The stock market is forward looking, and pricing in SpaceX coming up with a fast and cheap transport to Mars, leading to a whole new world of resources for humans to gather and exploit. The future is bright again!

#11

ML: Yep, down again. I’ve been meaning to ask you JB, I get that the stock market is forward looking, but why would TSLA stock go up if SpaceX discovers transport to Mars?

JB: Oh Matt, Matt, Matty… the stock market is forward looking, and it appears it thought of the same question! Tesla and SpaceX are two separate companies, duh! That’s why the stock market is correcting, it is looking forward and it sees this!

#12

ML: … words fail me.

JB: The stock market is forward looking, and it’s apparently pricing in Elon Musk attempting a private take over of TSLA 40 years from now! $420million per share, funding secured!

#13

ML: <bleep>, <bleep>, <bleep>!

JB: Ouch. Matt. The stock market is forward looking, and it appears it is pricing in space aliens attacking Earth after Elon Musk, our future lord and savior departs for Mars permanently. Earth will be in ruins Matt, your life savings is really quite insignificant compared to that. Kids will be murdered, Matt! Kids! Oh, why does nobody ever think of the kids!?

#14

ML: … And we’re back again. To the Moon! I mean, Mars!

JB: The stock market is forward looking, truly amazing! It appears in the future humanity fought off the aliens! Whew, that was close! For a moment I was worried that I may have to learn a new language.

#15

ML: Wait, is TSLA trading at $0? Is that even legal? Who is giving away TSLA shares for free?!

JB: Yep, I was afraid of this. The stock market is forward looking, and it appears it is pricing in the Sun imploding — no Sun, no plants. No plants, no oxygen. No oxygen, no life. No life, no customers. Imagine what that will do to Tesla’s ROI. Man, what a nightmare!

#16

ML: Wait, is that $8? Why is it sideways…?

JB: That’s infinity Matt. The stock market is forward looking, as always. With the Sun having imploded, all life is gone, and money is worthless. So you might as well buy TSLA shares with infinity dollars per share. I guess hyperinflation is coming after all.

Podcast details

Thank you! I hope you enjoyed the little selection of clips from our new upcoming podcast.

If you are looking for details on how to download the podcast when it comes out, or if the talk of the Sun imploding is causing you trauma, and, this is very important, if you are a financial advisor, follow these instructions in bold and immediately stop reading: Look up, smile politely and say, “I’m afraid I can’t help you”. Then show the person in front of you out of your office.

If you are looking for details on how to download the podcast when it comes out, or if the talk of the Sun imploding is causing you trauma, and I guess you can’t be a financial advisor — I think it is probably prudent for you to stop managing your own finances. Go out, find a financial advisor, show them this blog post, and they’ll know what to do.

If you are either laughing, rolling your eyes, or trying to get the last 10 minutes of your life back, and you are a financial advisor, please treat the person in front of you delicately. I think they desperately need your help.

And finally, if you are either laughing, rolling your eyes, or trying to get the last 10 minutes of your life back, and just a regular person, here’s the truth: Given any situation, it is always possible to find reasons for why it would make stocks go up, down or sideways. This is even more true if you have an arbitrary “future” point in time for which to extrapolate to.

“The stock market is forward looking” is true to some extent, but the stock market is just a bunch of people trying to outsmart each other — there is no magic. Yes, some of them are indeed very smart and have done the research. But the vast majority are just regular folks like you and I, and we’re just doing our best. So, not everything the stock market does is rational, and not everything can be explained, and sometimes the stock market moves, simply because it just wanna.

Stockclubs

There is no podcast, but if you want to see what I’m doing in one (out of 10+) of my brokerage accounts, do check out Stockclubs, an app that I’ve invested in, which lets you share your trades and see what others have shared.

Foreword

As a fairly senior software engineer in a large tech company, I get asked to do interviews of new candidates very often. For some reason, most of the time, I get asked to do the dreaded “system design” question. For those who are not in the industry, a “system design” question is one where the candidate is asked to design an entire system, as opposed to an algorithm, or just part (or even the crux) of the issue. The candidate has to consider all relevant parameters, and then come up with a solution that addresses everything.

There’s going to be a bit of rambling in this post, but I promise, there is a financial point to it all.

As usual, a reminder that I am not a financial professional by training — I am a software engineer by training, and by trade. The following is based on my personal understanding, which is gained through self-study and working in finance for a few years.

If you find anything that you feel is incorrect, please feel free to leave a comment, and discuss your thoughts.

Google

Let’s say we are doing a system design interview right now, and the question is:

We know that Google search sometimes returns wrong results. For example, sometimes the results are not personalized enough, returning results that are only relevant to people living on the other side of the world. Other times, it is too personalized, returning results that are just creepy. Describe a potential solution to address this.

As with all system design questions, it is generic, vague and requires the candidate to think a bit out of the box — there are generally no preset, “optimal” answer, and the solution is an exploration of the space with the interviewer.

Now, let’s say the candidate says something like this:

The problem is that Google cannot possibly understand the nuances of the user’s intent, and so the only solution, is to just create a new search engine. Let’s say we have a hypothetical search engine, where the entire repository is on every user’s machine. Then each user can simply run a grep (simple text search) to find the documents with the keywords. Each user can then write a small snippet of code that looks at each document, and determine which is preferable.

To which I’ll say

That’s an interesting idea. But for this idea to work, we’ll need to download the entire repository, which is a representation of the entire web, to every user’s machine. That alone will take decades per machine. Then we need to figure out how to store that much data in a single machine — no single machine on Earth currently has the disk space for this. We then need to address the issue of how grep can even search through the entire repository fast enough that user requests can be answered promptly, and finally, most people don’t know how to write code, how do you propose we fix that?

Now, a rational candidate (read: someone who isn’t definitely going to fail the interview) will realize the premise of their solution “download the web and have every user’s machine become a search engine” is flawed, and simply unworkable, even if it technically can solve the asked problem of search results personalization. They will then rethink, and hopefully come up with something better.

But let’s say our candidate says this:

First of all, we need to devote about 10% of humanity to researching better compression methods. If we can, say, compress data at a 1,000,000,000:1 ratio (that is, every piece of data can be compressed to 1 billionth its size on average), then we’ll significantly reduce the number of bytes we need to transfer and store.

Next, we’ll devote another 10% of humanity to researching better network transmission protocols. Currently, the fastest network link is on the order of 200 Tbps. We need to increase that to, say, 200 Zbps (1 Zetta = 1,000,000,000 Tera). This will let us transfer the repository 1 billion times faster.

Then, we’ll need to devote another 10% of humanity to research permanent storage. The current largest harddrive is about 20 TB, we’ll need to increase that to say, 2 ZB. This will let us store a few copies of the entire web on a single harddrive multiple times over, so that we can keep multiple copies for redundancy.

Next, we’ll devote another 10% of humanity to improving and optimizing grep, so that it can work in compressed space, as well as being a few orders of magnitude faster.

Finally, we’ll need to negotiate with every government on Earth, so that every human being is given a undergraduate level course in computer science, so that they can write their own search engine filtering code snippet.

The good news is, the transmission protocol of our repository is a solved problem. We’ll just put it on the blockchain.

Real world

One constant refrain from blockchain/crypto advocates, is that “blockchain can do X better”. Where “X” is some random facet of the financial system.

For example, corporate actions such as stock splits can take a day or two to sort out, and often, some broker will forget to update their database, and customers will be confused for a day or two more.

Now, a naive view is that “blockchain can do stock splits better” — just create a new token for the post split stock, and enforce an exchange of X old tokens for Y new tokens. The change is atomic (for each user), etc. All that good stuff.

Which is great… if the entire world of finance was invented simply to do stock splits. In that case, you have a winner!

But what if, just what if, we need the financial system to do… other things? Like, say, transact a few billion trades a second? Or being able to handle mutations because, you know, humans make mistakes and typos sometimes need to be fixed? Or provide privacy for the portfolios of private citizens? While providing transparency for the portfolios of certain public entities? Or provide regulators and other deputies a chance to veto/correct certain transactions? Or…

It’s still early days

And then you’ll get the “it’s still early days” argument (1). Fine. You have an idea, it’s still in its infancy, great.

But, you know, maybe don’t keep annoying the rest of us with it until you have it all figured out? Or, you know, at least know the parameters your solution must address.

BTW, I have this great idea for solving global warming. First, we need everyone to poop in their pants instead of bathrooms. There’s still some kinks, but it’s still early days. Trust me, though, it’ll definitely work.

Footnotes

1. Bitcoin was invented in 2009, 13 years ago. Blockchain (or Merkle trees) was first invented in 1979, 43 years ago. Cryptography was invented centuries ago. Etc. It’s still early days.

Foreword

Sometimes, someone makes an argument so profound, so beyond my understanding, I just have to concede that they are playing 4D chess.

As usual, a reminder that I am not a financial professional by training — I am a software engineer by training, and by trade. The following is based on my personal understanding, which is gained through self-study and working in finance for a few years.

If you find anything that you feel is incorrect, please feel free to leave a comment, and discuss your thoughts.

Matt Levine

Matt Levine wrote an interesting paragraph in his regular column “Money Stuff” on Bloomberg on Monday, June 13th, 2022:

See, I genuinely think that there are some people who would sneer at a bank saying “we have a fortress balance sheet and exceed out regulatory requirements for capital and liquidity, as you can tell from our quarterly financial statements”: “Sure,” these people would scoff, “we’ve heard that before.” And then they’ll read a Medium post from a crypto project that claims to have, but does not describe, a “comprehensive liquidity risk management framework” and put all their money in it.

Matt Levine, Bloomberg, https://www.bloomberg.com/opinion/articles/2022-06-13/merger-buyer-s-remorse-sometimes-works

It’s interesting, because I seem to be getting a lot of arguments in a similar vein, especially in the past few weeks.

Crypto

One of the arguments for crypto is that they are “not controlled by any central government”, and thus cannot be “printed”. This is weird of course — most major central banks understand very well the lessons learned over the course of millenniums, and so don’t actually print money, at least not in the way envisioned. But if you consider crypto, and how staking or mining works, you’ll be hard pressed to call it anything but “printing”.

More to the point, “printing” is apparently bad, because it causes inflation, which leads to the second argument — that crypto is an inflation hedge. Which was a great argument to make… all the way up to November 2021. When inflation actually started really going wild. Yes, our inflation hedge went down in value, as inflation went up.

To correct my clearly flawed understanding, someone recently noted that I misunderstood. It’s not that crypto is an inflation hedge, but it is a hedge against fiat debasement. Which, to me, is weird. Because that’s the same argument as before, just with different words — “printing” is “fiat debasement”, which leads to “inflation”, and as described before, things like QE isn’t really fiat debasement, and well, until 2021, there was no real inflation since crypto’s invention, and of course when inflation hit its stride in November 2021, crypto went down.

All very profound arguments that I’m still trying to understand.

Crème de la Crème

But the pièce de résistance, the crème de la crème of arguments, is this gem:

Crypto is a long term hedge for fiat debasement / inflation (1). Daily, weekly, monthly, quarterly, even yearly fluctuations are just noise.

Various

So let me get this straight:

“Fed swapped Treasuries for Federal Reserve Notes with muted inflation consequences for a decade and a half.”

Response: “OMG! Fiat debasement!”

“Government issues massive fiscal stimulus to help those in need during a once in a century pandemic, resulting in US dollars losing 8.6% value in a year due to inflation.”

Response: “OMG! Hyperinflation!”

“Crypto drops around 70%, on top of the same 8.6% due to inflation, with some coins essentially becoming worthless in 7 months.”

Response: “Meh, just noise.”

Yeah, that’s some real 4D chess argument right there.

Be consistent

All jokes aside, it is important to recognize that a lot of the financial-sounding arguments put forth by many crypto advocates simply do not make sense.

There are reasonable, interesting properties of crypto that we may want to explore. But attributing mythical, but contradictory and illogical prowess is basically turning crypto into a cult.

Cults are (debatably) a “solution” if you are feeling spiritually lost. Not so great when you are financially lost.

Footnotes

1. I’m still not sure which one they’ve settled on.

Foreword

Let me introduce you to the latest, and greatest new investment opportunity! It is a disruptor in the space of retail and ecommerce, growing its business at the unprecedented rate of 50% per month! Sales grow entirely linearly with investment into the business — this is basically an infinitely scaling sales machine!

As usual, a reminder that I am not a financial professional by training — I am a software engineer by training, and by trade. The following is based on my personal understanding, which is gained through self-study and working in finance for a few years.

If you find anything that you feel is incorrect, please feel free to leave a comment, and discuss your thoughts.

Sales metrics

Before I tell you more about this incredible business, let me first throw out some numbers:

Age of company	2 years
TTM annualized revenue	$1 billion
MoM sales growth	50%
YoY sales growth	110x (that’s 11,000%!)
Total investment raised	$500 million
Valuation assuming 2x FTM P/S	$220 billion
Unrealized gain for existing investors	440x (that’s 44,000%!)

Sounds wonderful doesn’t it! 440x returns! In 2 years!

Imagine if we scale the business for 2-3 more years, before tamping down on customer acquisition spend to ramp up profits!

Would you invest in our business?

Problematic numbers

If you looked at the numbers, and immediately noted that:

• The valuation is based on FTM P/S (forward twelve months price/sales ratio),
• The valuation assumes that the business will grow at the same incredible rate of 110x in the next year,
• That rate seems unsustainable,

then give yourself a pat no the back! Yes, those numbers do seem incredible, and in a regular business, would almost definitely be unsustainable — any $1B business that grows at 110x a year would be doing more business than the world’s combined GDP in the span of about 3 years, and clearly that has not happened.

But what if I told you that I can guarantee the business will grow by 110x or more, as long as we continue investing in it? Would you buy into the business now?

Doing business

Hopefully you said no — because up till now, you still have no idea what the business actually does!

To be honest, the business is a very simple direct to consumer sales, with some very large B2B customers. We sell $1 US dollar notes, for 50c. That’s it. We’re, literally, a half-off dollar company.

Now that I’ve revealed the secret, can you see why I say the business metrics are real? And that we can definitely grow 110x or more per year, as long as we keep investing in the business?

But would you invest in this business?

Terrible business

There are no lack of businesses nowadays whose sole focus is to grow revenue at all costs. Many of them sustain massive losses while they “scale the business”, with the hope that at some point, they’ll be able to reduce the cash burn somehow, and thereby turning profitable.

To be fair to these companies, there are some truths to the basic idea. When a company is first starting up, it will not have a lot of economies of scale, so it tends to need to spend more to manufacture its products. At the same time, the company needs to spend on advertising and have other customer acquisition costs (such as retention, etc.). These costs tend to level out once a company has reached sufficient scale,.

However, some companies take the basic idea and push it to extremes which no longer make sense. For example, our half-off dollar company has basically no hope of ever turning profitable — any attempt to sell that dollar for more than $1 will immediately lead to complete customer base loss.

In other cases, the scale required by the business to be profitable would require the business to have more customers than there are people on Earth. Perhaps they have some insights into alien civilizations that I am not privy to, but this business model also seems suspect.

And in yet other cases, the business is in a commodity space (here “commodity” meaning “easily copyable” as opposed to actually trading physical commodities), and the moment the business stops spending on customer acquisition and retention, their customers will quickly be stolen by any competitors that are still spending on customer acquisition. Businesses like these are basically just racing each other to the bottom. Yes, maybe one of them will eventually crowd out the competition and win the race, but by then, the business would likely have burned so much cash that it may never return a sufficient return to investors. Even more condemning, the eventual winner may not be the one you actually bet on!

Before making an investment in a (currently) money losing business, it is imperative to figure out if there is actually a plan to profitability, and to then vet that plan for feasibility. Otherwise, you aren’t investing, you are making charitable donations for the benefits of the company’s employees.

Numbers game

When vetting such companies, you need to be careful, and think critically of the numbers presented. At a minimum, the gross profit (revenue – costs of goods sold) should be positive, or at least becoming less negative over time. This would indicate that the business is not simply selling products for below costs to attract customers — businesses selling products at below costs, like our half-off dollar company, often find that when they try to raise prices to become profitable, customers tend to leave.

Next, you need to verify that both operating and non-operating expenses are not growing faster than revenue. These are supposed to be “fixed” costs, and if they are moving linearly (or worse, super-linearly) to revenue, then something is very wrong indeed! Either maliciously or not, there is a chance that the business is classifying some costs of goods sold as operating/non-operating expenses. You need to figure out what’s going on here, before investing, and as before, understand the plan, and the feasibility of that plan, for reducing expenses in the future.

Finally, you need to then figure out if the company’s projections for when it’ll be profitable is reasonable. If the business needs to have 10billion active customers to be profitable, then run away as fast as you can! Or somehow figure out how to create 2billion humans out of thin air(1).

Total addressable market

One sneaky trick that needs special mention, which many companies like to pull, is to talk about TAM, or total addressable market. This is the amount of total potential sales that the company estimates is in its industry, and is often thrown around, conflated with “potential future sales of the company”.

The 2 main issues with TAM are:

1. It is an estimate. There are no guarantees that it’s anything near to reality. Especially for new (disruptive!) industries, the number is often just a random pie-in-the-sky figure the company’s management dreamt up.
   • It is imperative that TAM claims are thoroughly researched by the investor to make sure they actually make sense. Or just ignore them completely.
2. TAM is the total potential sales of the industry. What makes management think they’ll be the sole company in the industry? Or that they’ll even be in the top few by sales?
   • The TAM of the global cooked food industry is huge, and my random estimate puts it in the $1 trillion range per year. But that number is for the entire industry worldwide, and since different regions of the world have different preferences for food, it is unlikely that any single company will ever gather more than a small fraction of that TAM.
   • So, if a brand new fast food startup comes to you, and starts throwing the TAM of global cooked food industry around, trying to implicitly hint that they’ll grow to that size, your only reaction should be to laugh, politely excuse yourself, and find something else to occupy your afternoon.

In short, any company that brings TAM into the conversation should also provide:

• Verifiable research into how they come up with that number.
• How much of that TAM they actually believe they can address (in general any number more than 50% is highly suspect).
• What plans they have for achieving that portion of the TAM.

Footnotes

1. Current population of Earth is about 8billion.

Foreword

Everyone’s scrambling to find the next big thing, so that they can be rich. But things don’t come out of thin air, they are borne of ideas, sometimes even great ideas, and it is these ideas, coupled with a vision and hard work that resulted in the thing.

But where do ideas come from? Well, for the most part, ideas come from nothing. So really, nothing is the root of all these.

What if, we can skip all the in-between steps and just get rich off nothing? Move over Knowledge Economy, and welcome the Nothing Economy.

As usual, a reminder that I am not a financial professional by training — I am a software engineer by training, and by trade. The following is based on my personal understanding, which is gained through self-study and working in finance for a few years.

If you find anything that you feel is incorrect, please feel free to leave a comment, and discuss your thoughts.

Atop this pedestal there is nothing…

So someone sold a statue. It is, at the same time, an extremely unique statue, and yet a very common one, because it looks exactly like the statue in the picture above. No, not the statue of the man, but the statue between his palm and his face — nothing. Yet, it is also unique, in that well, that nothing was presented on a pedestal, and sold for $18,000 dollars. 18,000 cold, hard, American dollars.

Nobody has ever done that before. Usually when someone wants to sell you nothing for real money, they have the decency to lie to your face like, “I’m gonna sell you this car for $18,000.” Then they take your money, make up some excuse (“I really need the bathroom, must be the oysters!”), and you just never see them again. Nothing sold. Money changed hands, somebody is happy, everybody understood what happened.

Nobody has really outright told anyone they were selling them nothing for $18,000, and then taken their money, legally and with both parties happy. It’s just not done, there are etiquettes and all that. But someone just did it, and it is unique.

To put it simply, the artist sold nothing, and the buyer bought it. For $18,000.

Doing it wrong

Now, I don’t want to go around besmirching the good name of great inventors and all that, much less inventors of a whole new field of economics/finance, but really, I think the artist did it wrong.

Now that they’ve sold the nothing (I mean, statue), they can’t very well sell it again. It’s not theirs anymore. You simply just can’t go around selling things you’ve already sold. That’ll be fraud. And fraud is bad.

So that means all these following tips I’m gonna throw out, will be completely useless to them. They cannot act on these marvelous tips. Too bad.

Tip 1: We must go deeper

Why stop at selling the nothing itself? All the cool kids know you have to NFT it (1). An NFT is just a reference to something. In this case, nothing. That makes it even more meta. An NFT that references something is always kinda iffy, what if that something is destroyed? Or lost? Or stolen? Then that NFT seems kinda pointless, no? Wrong, even.

But if the NFT references nothing… then, it’ll.. always do the right thing? It just reference nothing no matter what. If you got burglarized, and the burglars stole nothing, you won’t call the police — what would they do? (“Sir/Mdm, they stole nothing, so we’ll do nothing, and you’ll have recovered nothing, and everybody’s happy.” ) Instead, you’ll simply shrug, and replace your nothing with nothing, and you’ll be made whole (2), and your NFT still makes sense… kinda.

Now, because the NFT is just a reference to nothing, it’s not fraud to just churn out more of it (all pointing to nothing!), and then sell them. Imagine the merchandising deals you’ll make! Disney will be green with envy.

Tip 2: … and nothing is fireproof

Why stop at selling the nothing, or the NFT of nothing? Take the next step and just burn it, make a video of you burning it, and then sell an NFT of that video. Is your head spinning yet? That’s just called art. You just need to be better at art to understand this.

Now, normally, the “burn something” NFTs are always a little bit dangerous. Sometimes it just doesn’t work out you know? Like the statue in the picture above (yes, the man this time) — it doesn’t burn very well, I’d bet. It’s all stone and clay and stuff, and those things don’t burn. Stone and clay just don’t like to cooperate like that. And other times, they burn too well. Like, burst in flames and burn down the whole building well. That’s just inconvenient. So, after you make a great big announcement about a “burn something” NFT, either it doesn’t burn (fraud!), or it burns down your house (not fraud, but potentially painful). Dangerous.

But nothing? Man, nothing burns very well all the time. Nothing burns like thermite. Yet burning nothing will never burn down your house — nothing burns until there’s nothing left, and since there’s nothing left in the first place…

And most importantly, after you’ve burnt nothing, and even if you’ve burnt everything, you’ll still have nothing more to burn!

Folks, this is a sustainable, repeatable process. And to a businessman, that’s just the sound of money. Ka-ching!

Tip 3: Franchise, franchise, franchise

Ok, I lied earlier. This tip will work for the artist. I’m human too, I make mistakes.

Now, think of all the crime’y people trying to come up with ways of laundering their illicit cash. They go through all sorts of crazy schemes to make the money seem legitimate, and in the process they lose 50-70% of the cash due to transaction costs and taxes. But really, they should have just did what the artist did.

“This cash is not illicit! I worked hard for it! I am a financial speculator by trade, and this is the profit of my trading!” I’d imagine they’d say when the police comes knocking. “What do you trade in, sir/mdm?” the police will ask, and our crime’y folks will, with a perfectly straight face, say, “nothing. I trade nothing.”

It’s a grammatically correct, factually correct and, apparently legal (3) answer.

So, the tip here is just to go big! Set up a whole business built on selling nothing! Then sell licenses to operate a similar businesses under the same trade name to others — franchise the hell out of this! I can already see the mob bosses lining up to get in on a piece of this action.

What goes around…

So, we have a financial system that is entirely backed by the “full faith and credit” of various governments, i.e.: fiat money. Basically, they are backed by nothing (tangible).

The crypto fans are upset about this, and so their response is to create a better system. One based on blockchain, and math, and backed by ideas. And well, long story short, backed by nothing (tangible).

And then someone used either the first nothing, or the second nothing, to buy the third nothing. Albeit, the third nothing comes with a fancy presentation, pedestal and all that.

So I guess they got a good deal?

Footnotes

1. Yes, I just used NFT as a verb. I’m cool like that.
2. Mathematicians will tell you that not all “nothings” are the same — some nothings are better than other nothings. But that’s just mathematicians being mathematicians — they just like to get in on a good joke and make a mess of it.
3. Precedence set by the artist I guess?

Foreword

This is in part inspired by recent conversations I’ve had with several folks (1). While none of them were quite as… “interesting” as the fictional code review, they bear similar traits. Admittedly conversations like this can be rather frustrating — after spending time discussing ideas, it’s wholly unsatisfying to learn that all the prior discussions were based on some false premise.

But that’s life I guess.

As usual, a reminder that I am not a financial professional by training — I am a software engineer by training, and by trade. The following is based on my personal understanding, which is gained through self-study and working in finance for a few years.

If you find anything that you feel is incorrect, please feel free to leave a comment, and discuss your thoughts.

A different kind of code review

Subject: Code review of your Stack API. John <john@pchouse.com> to: Janky <janky@pchouse.com> Hi Janky, I am writing to you to do a code review about your new Stack API. First of all, welcome to PCHouse! We’re happy you’ve joined us as our first software engineer to build out our technology backend! Now, even though I’m not a software engineer, I’ve worked at PCHouse for all my life, and since PCHouse works a lot with stacks, I feel I should share my experience here. Here goes! Line 10: Your comment calls this the “constructor” and sets “size” = 0. That is just weird. If the size is 0, you’re not really constructing anything, you know? I think you should reword the comment to read “plating”, since it starts out empty. Line 15: Your comments call this the “destructor”. I think at this point, if there is anything left on the stack, it’s really just trash, so maybe call it the “cleanup”? Line 25: I don’t mean to overstep my bounds here, but “push” seems like the wrong verb to call this method. I mean, I can sort of see where you are going, like you are “pushing on top of the stack”, but that’s not how it works in practice, you know? It’s really more like, you flip over the spatula and gravity kinda just takes over? I think you were trying to avoid calling it too lengthy like “FlipOverSpatula”, but we can maybe go a bit less formal here to shorten the name. How about “Plop”? As in, you flip over the spatula, and the contents just kind of plops down on top of the stack? I think this would make the API more self-documenting. Line 30: As with “push”, I don’t really agree with “pop”. It sounds kind of violent, and I don’t think that’s what PCHouse is about, you know? We are more of a family-vibe kind of place. It’s a good thing there’s a friendly, family-oriented, PCHouse theme appropriate term here — “gobble”. Just think about it: The server plops on top of the stack, and the customer gobbles (from the top of the stack of course!). It just makes it that much easier to understand, you know? Best, John ps: What do you think about having a limit to how large size can be? It just seems dangerous to have a stack over 5 or 6 layers, you know? Gravity and all that.

Subject: re: Code review of your Stack API. Janky <janky@pchouse.com> to: john <john@pchouse.com> Hi John, Thanks for your warm welcome! I’m super excited to be here! I’m a little confused. Why are we doing a code review over email? Do we not have something like Crucible, Collaborator, GitHub, etc.? If not, I’m happy to set us up. Let me know. Also, I think you may be mistaken. “Constructor”, “Destructor”, “Push” and “Pop” are computer science terms, which describes the Stack. It’s actually clearer to use these terms in the context of the code. Maybe we should meet face to face to discuss more? janky

Subject: re: Code review of your Stack API. John <john@pchouse.com> to: Janky <janky@pchouse.com> Hi Janky, I think we’ll have to agree to disagree here. I understand this is code, but PCHouse is not a tech company — we are a family restaurant, our business is pancakes, and I hope you are not honestly suggesting you know more about stacks than me. 🙂 I think it may be instructive for you, to visit our kitchens to see the actual “plopping” going on, and maybe the dining area to see the “gobbling” as well. “Push” and “pop” just doesn’t have quite the same ring, you know? In closing, most of our employees simply cannot relate to “push” and “pop”, but everybody understands “plop” and “gobble”. Think of it this way, you are writing code, but we are speaking English. So really, I think my way is best. Best, John

Understand each other

When you are chatting in a less formal setting, it’s generally fine to use whatever definitions you want for words. Stack::Plop() does have a nice ring to it, after all.

But sometimes that gets a little confusing, if the terms you use aren’t quite what you think they mean. It’s fine if you are just talking about finance (or any other topic) in broad, layman terms. But when you start trying to make use of known finance quantities, equations or rules, and fitting your definitions to those just by using the English meaning of the words, then you can get into weird situations.

There is a reason most technical domains (finance, computer science, etc.) develop, over time, a series of domain-specific terms that use English words, but have slightly (or sometimes, completely) different meanings from their dictionary meaning. It is often more precise and concise to discuss deeper issues using the technical terms, because they refer to well known and well understood ideas — it becomes easier and more efficient to build higher level abstractions and ideas using these terms, than simply English words.

I thought you thought I meant…

So, if you’ve spent the better part of an hour talking to someone about deep issues in a particular field, only to realize you don’t even agree on basic meanings of certain critical terms, then perhaps it’s time to step back and re-evaluate the discussion. If someone tells you “your understanding of the term X is not quite right — in this field, X means …”, then well, it seems to me that the only correct responses go along the lines of:

• “I think you may be mistaken, I see from this <authoritative source> that they actually agree with my definition”, OR
• “Oops! I hadn’t realize! Give me sometime to reconsider my position, and we can discuss again later”

Ok, technically, there is a third response, something along the lines of “I think we’ll have to agree to disagree, the English meaning of the term is what I meant”. But if you choose this third response, then know that trying to draw on established results in the field, based on that redefinition of X will not work. It simply makes no sense.

Another example

As a further example, if you define “ma” as “short form of ‘mother‘”, and you’d be damned before you change your mind, then I think even Newton will have a hard time trying to discuss his second law of motion. It just doesn’t work, you know?

Like, how would you do it? “F = ma” — mother is a forceful lady? mother is a force to reckon with? The Force is with mother (2)?

And it gets even more ridiculous if you try go a step deeper. Say, how are you going to define work done? “Work gets done when ‘ma‘ becomes ‘mad‘”?

Ok, on second thoughts maybe that one works (3). Darn it.

Footnotes

1. There’s been several of these, over time. If you think I’m talking about you, you’re probably wrong.
2. Happy May 4th!
3. Not Physics advice.