Moving to matthenderson.me

After 14 years of operating this blog at dafacto.com, it’s time to move on to matthenderson.me. Here’s why:

  • I now prefer to outsource the management of the publication to Ghost, rather than continuing to operate WordPress myself.
  • After 14 years, the content here has gotten to be a mess, and it’d take too much effort to clean it all up.

Although I’ll leave dafacto.com in place, since it still gets a lot of traffic from Google searches, if you follow me via RSS, be sure to visit the new home, and subscribe from there. Look forward to staying in touch!

The Dummies Edition of The New, New World Order

In the midst of this possibly one-in-a-lifetime shock, I’ve been very interested in thinking about and imagining what life will look like moving forward. As input to that thinking, I’ve been summarizing interesting essays and interviews of others, including Raoul Pal’s gloomy economic forecast and Ray Dalio’s socioeconomic outlook.

Today, I’ve come across a fantastic speculative vision put forward by Joe McCann, entitled The New, New World Order. I absolutely encourage you to read it beginning to end, but for the attention-challenged, I’ve tried to summarize the key themes below:

  • Self-suffiency — Self-sufficiency will become a national security interest. Whereas profitability and lower product costs drove manufacturing abroad, this crisis has exposed the risk of moving any critical link in the supply chain outside the country. Expect to see domestic manufacturing, in some areas, return to the US.
  • Socialism — It has started with the direct deposit of $1,200 in to everyone’s bank account, and will not stop, as it would be political suicide for any politician to terminate people’s “stimulus checks”.
  • QE ∞ — In the Quantitative Easing post-2008, the Federal Reserve started buying stuff like mortgage-backed securities. Today, it’s buying junk bonds, and in “unlimited amounts”, meaning we now have “unlimited quantitative easing”. This will completely distort markets, as natural price discovery is no longer possible.
  • Indirect nationalization — By propping up industries financially through bailouts, like the airlines, we are nationalizing them indirectly.
  • National healthcare — The crisis has exposed the US healthcare system as a vulnerability in national defense, and this will now be addressed as a national security issue. We will see regulation stripped away and mountains moved to advance this industry technologically.
  • Proof of health — Just as proof-of-identity is required of so many things, we’ll begin to see proof-of-health (immunity, antibodies, etc.) become a thing, for entering large events, boarding planes, etc. Expect to see technology advancements in this area, including public blockchains to solve the global standards and trust issues.
  • New working-class divide — Remote working will persist, and grow dramatically. This will have impacts everywhere, including real estate. But most importantly, it will create a new social divide, between those whose work happens virtually, and those that happen on land.
  • Education — Online education will grow and thrive. The Ivy’s will remain, but expect to see closures of many of the second tier (and lower) universities. Expect to see vocational training surge, as training related to the repatriation of manufacturing will be in demand. Also expect to see the nature of that training change, as the nature of human involvement in manufacturing won’t look like it did in the 1960s, given automation.
  • eSports and eEntertainment — Expect to see less Hollywood productions, and less live sports, and more user-created content, eSports, distribution channels, video and streaming.

The case for owning Bitcoin

In this article, I’m going to make the case for considering to allocate a small amount of your savings to Bitcoin. I’ll do that by explaining what Bitcoin is, along with how and why it might become valuable.

What is Bitcoin?

Prior to the invention of Bitcoin, there were many attempts to create “digital money”, but they all suffered from the same basic problem: How do you prevent a unit of digital money from being copied, the same way you can copy an MP3 file? If you could duplicate a unit of digital money, you could then spend it more than once, making it worthless.

An anonymous person (or group) named “Satoshi” published a solution to this problem, in which a global network of computers in which anyone (known as “Bitcoin miners”) can participate, compete to process collections (“blocks”) of Bitcoin transactions every 10 minutes, adding those transactions to an ever-growing global database of all transactions, known as the “Bitcoin blockchain”.

Once the database has been modified (a new block of transactions added), the only way it can be changed is for a majority of all miners to agree to modify it. This solved the “double-spend” problem. I can try to spend a Bitcoin twice, but the network of Bitcoin miners will simply reject it, since its original spend is permanently recorded on the blockchain.

Miners are incentivized to compete to process transactions since, anytime they “win”, and get to add a block of transactions to the database, they earn both newly minted Bitcoins, as well as all the fees present in the current block of transactions.

Finally, only 21 million Bitcoins will ever be created, ensuring the “scarcity” that’s such a fundamental characteristic to anything used as “stable money”.

(There is no limit to how many US dollars can exist. Since the United States government can create new money at will, and have always done so, the value of the US dollar, in terms of its purchasing power, can drop as much as 90% over a typical person’s lifetime.)

Once the last Bitcoin, i.e. the 21 millionth Bitcoin, is issued to some miner, future miner revenue will come exclusively from the fees people pay to make bitcoin transactions, and the fees themselves are determine in a free-market process.

In short, Satoshi described, and set into motion, a system of money that runs on the internet, solves the double-spend problem, is permissionless in the sense that nobody can stop you from acquiring or spending Bitcoin, in exactly the same way that nobody can stop you from sending and receiving email, and above all is “sovereign”, meaning that, just like the internet, it’s under the control of nobody and everybody at the same time, such that no state or government can globally stop it.

What gives Bitcoin value?

There is only one thing that gives Bitcoin value, and that’s social agreement. It’s the fact that an ever growing segment of the global population agree that it has value. And since that segment is growing, the demand for Bitcoin tends to exceed the supply (or people willing to sell their Bitcoins) such that, over time, the value of Bitcoin measured in US dollars has increased from zero to (at present), nearly $7,000.

This might seem strange, but there’s nothing to stop society from agreeing to assign value to a scarce commodity. In fact, we’ve been doing that for thousands of years—i.e. gold! With Bitcoin, it’s exactly the same.

Why do people value Bitcoin?

Bitcoin has many of the same money-like properties that make gold valuable, but with improvements:

  • Scarcity — There will never be more than 21 million Bitcoin. If you own 1% of the Bitcoin supply today, you will own 1% of the Bitcoin supply in 50 years from now.
  • Divisibility — The smallest unit of Bitcoin is a “Satoshi”, which is one hundred millionth of a single Bitcoin. With Bitcoin, you can transact in extremely small values, far more conveniently than with gold.
  • Durability — Bitcoin is digital, and therefore doesn’t degrade over time as most commodities do that have been used as money in the past.
  • Transportable — Sending and receiving Bitcoin is as easy as sending and receiving email; far more convenient than gold. Furthermore, given that a Bitcoin wallet can hold any amount of Bitcoin, you could literally cross a border with a billion dollars of Bitcoin stored in your head!
  • Unseizable — If you acquire Bitcoin and choose to hold it yourself (rather than keeping it stored with an institution), no person or government can seize it from you, because no person or government controls the Bitcoin network.
  • Uncensorable — Nobody can stop you from sending Bitcoin to anyone in the world, and nobody can stop you from receiving Bitcoin from anyone in the world.
  • Sovereign — Bitcoin is a truly sovereign network. Just like the internet itself, it can not be stopped by any person, group of people, or government. This is the first time in history that humans have created a truly sovereign form of value, independent of any country. Just as we have international standards for weight and distance, the “Satoshi” (Bitcoin’s smallest unit) could become an international standard of value.
  • Utility — Given the sovereignty of the Bitcoin network, all sorts of innovative applications are emerging that are built on top of the Bitcoin network, which in themselves work to increase its value.

So who does control Bitcoin?

Just like the US government has three branches to provide for checks and balances (the President, the Legislature and the Judicial), Bitcoin has three fundamental groups that independently and inter-dependently control Bitcoin:

  • Software developers — Bitcoin is open-source software. Anyone can participate, and through consensus, changes are proposed and integrated into that software. The Bitcoin “Core” development community have been extremely conservative regarding changes to the software. They prioritize security, simplicity and stability to features.
  • Miners — Bitcoin miners run the computers that run the Bitcoin software that processes blocks of transactions every 10 minutes, adding them to the blockchain. If miners as a group disagree with a new release of the Bitcoin software, they can collectively choose not to upgrade.
  • Users — These are people like you and I. If our evolving needs are not met by the current Bitcoin network, we can vote with our feet, moving to another crypto currency.

In a famous historical dispute, one group wished to increase the number of Bitcoin transactions that get processed every 10 minutes, thereby allowing the Bitcoin network to function more like the Visa network (high transaction volume, low fees). Increasing the number of transactions per block would result in only those with the most powerful computers being able participate in Bitcoin mining (transaction processing).

The Core community preferred to keep the number of transactions fixed, thereby trading off higher fees (as many transactions compete to be included in the next constrained-sized “block”, the transaction fees get bid up) for ensured broad distribution (minimal centralization) of Bitcoin mining.

The conservatives won that dispute, and the “big blockers” duplicated the Bitcoin software, creating what’s known today as “Bitcoin Cash” (a completely different cryptocurrency.) Bitcoin Cash (known as BCH) has never achieved the value of Bitcoin Core (BTC).

What could Bitcoin become worth?

There are many scenarios that would lead to different values of Bitcoin in the long term:

  • Digital gold — If one-third of the existing gold market moved to Bitcoin, a single Bitcoin would be worth more than 50,000 dollars. However, given the advantages of Bitcoin over gold, if Bitcoin emerges as a “digital gold”, then the market of people interested in holding a state-independent money could well increase beyond gold’s current seven trillion USD market.
  • Increasing utility — Innovative technical solutions are being built on the Bitcoin network. For example, a company called Abra built an app that allows people anywhere in the world to connect a bank account, transfer in money in any currency, and buy US stocks.Unbeknownst to the users, the app is built on top of the Bitcoin network. When a person transfers in 1,000 USD, they are, under the hood buying Bitcoin, and the amount of Bitcoin they own will fluctuate such that the app will always show them that they own “1,000 US dollars”. If they purchase four shares of Apple stock with that 1,000 USD, the app deploys a “smart contract” on the Bitcoin network that tracks the price of Apple stock. In actuality, they own Bitcoin, and the amount of Bitcoin fluctuates up and down to show that they own “four Apple shares”. As far as they can see, they’re working with US dollars and Apple shares, but under the hood, it’s all Bitcoin. Why did Abra choose Bitcoin? Because they considered it the most secure network in the world, and it allowed them to democratize the purchase of US shares without having to get a money-transmitter license in any state or country. Innovative applications like Abra increase the buy pressure on Bitcoin, and therefore its price.
  • Stock-to-flow model — An anonymous economist on the internet has built a mathematical model that predicts the price of commodities like gold, silver, diamonds, palladium, etc. based on something called “stock-to-flow”, and with those commodities the model has been extraordinary in its price prediction. When applied to Bitcoin, the stock-to-flow model predicts an eventual price of one Bitcoin to be worth multiple millions of dollars.
  • Crash and burn — At the other end of the spectrum, a bug could be discovered in the Bitcoin software, or a competitor could emerge, that would cause the value of Bitcoin to go to zero. However, at the time of this writing, Bitcoin is over 10 years old, has been the target of continual, unsuccessful hacking attempts, and has a lead in “network effect” that would be extremely difficult for any other cryptocurrency to overcome.

What we can be fairly certain of, is that in ten years from now, Bitcoin will not be $7,000. It will likely either be worth zero, or much much more than it is today. And as every year passes, the latter outcome appears more probable!

Should you own some Bitcoin?

The dramatic range of possible outcomes for the price of Bitcoin in the long term (zero to millions of dollars) makes investing in it a tremendously asymmetric bet. For that reason, it would seem to make sense (as recommended by successful entrepreneur Wences Casares) that everyone should own a small amount of Bitcoin, perhaps one to five percent of your wealth.

At that level, if it goes to zero, your life won’t be impacted too much, but if it increases by 100 from where it is today, it would have a big impact on your net worth.

Moving on from COVID-19

Seeing so many fragmented discussions about how and when we move on from COVID-19, I wanted to try to capture the considerations in a single, coherent note.

The vaccine and its timeline

Let’s start with the vaccine. Once a vaccine is available, then this crisis is mostly over and the world can return to normal, as getting vaccinated will (for most people) immunize them against getting sick from infection.

From the time of this writing (April 2020), we’re looking at 12 to 18 months before a vaccine will be available. Why so long? Because you can’t inject billions of people with something that isn’t very, very, very well tested.

Since closing the global economy for 12 to 18 months would be a financial and humanitarian catastrophe, a lot of energy is being spent thinking about how we can “open up” earlier. But this is far more challenging than many realize.

Herd immunity

If everyone in the world could get infected, most would live, and we’d find ourselves in a state in which the large majority of people have immunity through COVID-19 antibodies. This is often referred to as herd immunity.

So why don’t we just let the virus run its natural course, and reach herd immunity as fast as possible? For two reasons:

  1. An unacceptable number of deaths. Say 60% of Americans were infected through herd immunity. With a mortality rate of 1%, that would result in close to 2 million deaths. A reasonable ethics question is whether the costs (economic and health) of stopping the economy compensates the loss of such life? The United Kingdom, in fact, originally planned to attempt herd immunity, but back-tracked in the face of the second problem.
  2. Because of how extremely contagious COVID-19 is, letting the virus run its course quickly overwhelms the hospital system—which, in turn, results in a skyrocketing effective mortality rate, as many who would otherwise survive, die from lack of medical treatment.

Hospital saturation

For those who develop life-threatening COVID-19 complications, hospitalization, and in particular, access to an Intensive Care Unit (ICU), is their only hope of survival.

As it happens, there aren’t many ICU units in the world. As a consequence, a relatively small outbreak can immediately overwhelm the local hospital system. If on average there’s one ICU per 10,000 people, and a COVID-19 outbreak quickly results in 1% requiring an ICU, that’s one ICU available for every 1,000 who need one.

And when that happens, the consequences can be terrible, as we saw in Italy and Spain, where at one point, people over the age of 65 arriving to hospitals were simply sent home to die, as there was nowhere to treat them. Under such circumstances, the natural mortality rate of COVID-19, which appears to be roughly 1%, can increase to 10% and more, because so many die due to lack of hospital access.

And that brings us to possibly the most misunderstood aspect of this crisis:

The main problem with COVID-19 is not the individual risk of death. Rather, it’s that the virus’s contagiousness leads to outbreaks that immediately overwhelm local hospital systems, and that, in turn, results in a spike in deaths.

Mandatory lockdown works

How do you prevent outbreaks? Simple. You prevent humans from coming in contact with each other, which is what countries are doing through mandated lockdowns. Here in Spain, it’s illegal to leave your home except for necessary trips to the grocery store, pharmacy, doctor, etc.

When lockdowns are in place, people stop coming in contact with each other, and you soon start to see the “flattening of the curve”:

Voluntary lockdown, less so

The approach in the United States began mostly as an appeal for voluntary “social distancing”, which helps. However, in a voluntary system, not everyone will follow it. In fact, many—especially the young—don’t even understand the need to, as they perceive the problem to be one of individual mortality, which is a low risk for them.

And so we get situations like Albany, Georgia, where a group of people who likely didn’t really understand the risk, or perhaps believed that COVID-19 wasn’t present in their community, gathered for a funeral, which prompted a local outbreak, and immediate overwhelming of the local hospital system.

The problem with opening up

Donald Trump often speaks about wanting to open up, as soon possible, even if on a limited basis. This sentiment is echoed by politicians in other countries. Just today, as the curve is flattening in Spain, the scope of people allowed to return to work was increased.

So what’s the problem?

We are nowhere close to reaching herd immunity, and so new outbreaks will occur. And it only takes a very small outbreak to overwhelm the hospital system.

There is clear optimism of re-opening in the United States, as daily new cases have stabilized. But as of today, 60% of all cases in the United States are concentrated in only five states!

At present, there are 560,000 cases in the US. Since testing has been limited, let’s assume the total infected and/or recovered is 10 times higher, or 5.6M. With a population of 350M, that would represent less than 2% of the country’s population having been infected today. As such, the United States, like nearly all countries, is nowhere close to herd immunity.

So as soon as the United States, or any country in a similar situation, “opens up”, there will be people who mistake individual-mortality as the core risk, or are otherwise uninformed, will gather with other people, new outbreaks will occur, requiring new lockdowns, to flatten the new curve. This will happen over, and over.

This has already been observed in countries like Japan and Singapore.

What’s the solution? Test, Isolate, Trace

In the short-term, there’s little that can be done. We can watch each day as Donald Trump speaks of opening up soon, followed by Dr. Fauci trying to reign in false hope.

In the medium term, the solution seems to be a process called test, isolate, trace. Let’s call it TIT.

In a TIT process, the general population would be broadly, randomly and frequently tested, in order to try to find the real danger—those who are infected and contagious, but are asymptomatic. These are ones that cause outbreaks.

Such testing would obviously require a cheap and fast testing technology. When available, one could imagine traffic stops, voluntary drive-ins, random stops in malls, etc. Testing would be happening everywhere.

When an infected person is discovered, they would immediately be transported to an isolation center, where they would be kept until testing negative. Here in Spain, the federal government has been asking counties to identify hotels, convention centers and similar venues where infected people could be placed in such a TIT process.

When an infected person is discovered, an attempt would then be made to identify everyone they’ve been in contact with, and then those people would be located, tested, and for the positives, the process would start again.

It’s believed that a TIT process—combined with societal behavioral changes including social distancing, wearing masks and frequent hand-washing—would allow life to return to something resembling normalcy prior to the availability of a vaccine.

How do we implement TIT quickly? First, we need fast and cheap test kits to be available. Second, we need governments to organize and execute the process. Finally, we are likely to see achieving a TIT process tremendously accelerated through private technology initiatives.

Apple and Google have already announced a collaboration to develop mobile device based contract tracing technology, that preserves individual privacy.

There’s tremendous scope for technology to help. In addition to contact tracing, I would imagine that app-based tracking would also help in widespread testing, as it would be easier to identify those who have previously been infected, have antibodies, and can be skipped. At a certain point, random testing could be replaced with notifications of those requiring a test.

Therapeutics

One final possibility to shortening the path to re-opening the world would be the discovery of one or more therapeutics that prove effective in the treatment of COVID-19. You’ve probably already heard mention of some leading candidates in the press—i.e. remdesivir and hydroxychloroquine.

Such therapeutics, if effective, wouldn’t provide the preventative protection of a vaccine, but would lower the effective mortality rate of infection in those places where the medicines are broadly available. For example, if something like hydroxychloroquine could improve the mortality by a factor of ten, then COVID-19 would become more akin to the common flu.

Conclusion

I’d like to conclude with a summary of what I believe are the key take-aways:

  1. It will likely be more than a year before a vaccine is available.
  2. The main problem with COVID-19 is not the individual risk of mortality. Rather, the main problem is that its contagiousness leads to outbreaks which overwhelm local hospital systems, resulting in a spike in deaths.
  3. The problem with opening-up prior to a vaccine, is the near certainty of new outbreaks, overwhelmed hospitals, requiring new lockdowns to flatten the new curves.
  4. The medium term solution will be a process called Test, Isolate, Trace i.e. TIT.
  5. Private technology may result in TIT moving from a medium-term solution, to a short-term solution.
  6. Therapeutics offer the potential to shorten the time to re-opening, as a means of lowering the effective mortality rate.

iCloud Drive stuck uploading and downloading files in Mac OS X Mojave

Recently, my MacBook Pro, running Mac OS X Mojave, got into a state in which the Finder wasn’t uploading or download files to and from iCloud Drive. Since I couldn’t find any solution to this through Googling, I wanted to document how I solved the problem for others who may be experiencing the same.

I think, but can’t be sure, that the problem was related to allowing GitHub Desktop to store my repositories in the “Documents” folder, which is synchronized with iCloud Drive.

One of my repositories had literally tens of thousands of files, and even though I had deleted it long ago on my Mac, I discovered through troubleshooting that it was still present in iCloud Drive, when accessed via the web.

To solve the problem, after moving my GitHub folder outside of Documents, I then backed up all the files in Desktop and Documents on my Mac that I need, and disabled “iCloud Drive” in the iCloud area of the system preferences, and instructed the Mac to delete all the local files.

I then went into iCloud Drive via the website, and started deleting everything from there.

Step one was selecting my repo folder in Documents, and deleting it.

Step two was going into “Recently Deleted”, and then purging the folder from there.

But this turned out to be very confusing, because although the purging of the repo folder appears immediate in the browser UI, it’s actually a very long process that’s happening—in the browser! While that’s going on (with no UI feedback) other files and folders in “Recently Deleted” area appear grayed out. You can select them, but you can’t delete them.

After a while of frustration, an error message popped up saying certain files in my repo folder couldn’t be deleted, at which point the folder re-appeared in the “Recently Deleted” area. Ultimately, I had to go into the folder, and delete its contents in small batches. Once that whole folder was deleted, the grayed out files and folder then lit up, and could be deleted themselves.

So the fact that deletions are getting processed one by one in the browser, but there’s no UI to indicate that, can cause terrible confusion when trying to perform the kind of mass cleanup that I was doing.

In the end, when everything was finally deleted and purged, I re-enabled iCloud Drive on the Mac, and everything returned to normal.