Solutions without Historical Templates: Cryptocurrencies and Blockchains

Crypto-blockchain technologies are leveraging the potential of computers and the web for direct political-social innovation.

We're accustomed to three basic templates for system-wide solutions or improvements:

1. an individual "builds a better mousetrap" and starts a company to exploit this competitive advantage;

2. a company invents something that spawns a new industry (the photocopier, the web browser, for example) and/or disrupts existing business models;

3. the central government decrees a strategy or investment, i.e. makes something happen (the Interstate Highway system in the 1950s, the space race to the moon in the 1960s, for example).

I don't think any of these templates really captures the eventual impact of cryptocurrencies and blockchains, which I define broadly as any decentralized, distributed ledger.

As for the better mousetrap-- the creators of bitcoin explicitly designed a form of money that they reckoned was superior to centrally controlled fiat currency. A decentralized form of money that isn't borrowed into existence like fiat currencies is certainly revolutionary, but that is only one aspect of the crypto-blockchain technology.

Since bitcoin and the blockchain technology behind it aren't owned by a corporation, the template of a company benefiting from disrupting existing business models (for example, Apple's iPod, iTunes and iPhone) doesn't fit.

It's certainly true that cryptos and blockchain are spawning a new industry, much like micro-processors and digital memory launched the computer revolution and the world wide web and its protocols launched the Internet revolution.

There are between 1,600 and 1,900 cryptocurrencies and tokens based on them, and hundreds of enterprises are developing applications for blockchain and related technologies.

The difference between these old templates and the crypto-blockchain technologies is these have explicit social and political applications and ramifications--consequences that cannot be mapped onto consumer product innovation or process innovations such as increasing computational power.

These technologies have the potential to re-order the structure and processes of governance and of social relations. In this way, crypto-blockchain technologies are leveraging the potential of computers and the web for direct political-social innovation.

Here's an example (described in an email to me from Decred's lead developer, Jake Yocom-Piatt) of a software platform that is not connected to a cryptocurrency that could be applied to the kinds of decentralized governance, community development, guaranteed paid work and markets that I describe in my CLIME system (community labor integrated money economy):

"The big idea with Politeia was to create a time-anchored filesystem with a minimal on-chain footprint, so you can be certain that the information in the filesystem existed on or before a particular date. Additionally, it includes identity data, so that person/entity X can attest to data Y at time Z in a way that cannot be altered after-the-fact. I felt that having a plain old website for our governance system wasn't sufficiently censorship resistant.

As I expect you can see, Politeia is an incredibly generic tool, and you can make use of it without holding any Decred."

This sort of distributed ledger--stripped of the computational weight of the blockchain-- could power community democracy, the distribution of a labor-backed currency (as I describe in my book A Radically Beneficial World) and render market transactions transparent to all participants.

These applications don't enrich a corporation--they re-order the power structure of the economy and society.

I don't think there are any historical templates that fully capture the potential for such a direct (i.e. not a byproduct or second-order effect) re-ordering of political and financial power.

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Our Institutions Are Failing

Our institutional failure reminds me of the phantom legions of Rome's final days.

The mainstream media and its well-paid army of "authorities" / pundits would have us believe the decline in our collective trust in our institutions is the result of fake news, i.e. false narratives and data presented as factual.

If only we could rid ourselves of fake news, all would be well, as our institutions are working just fine.

This mainstream narrative is itself false: our institutions are failing, and the cause isn't fake news or Russian hacking--the cause is insider plundering and collusion, aided and abetted by a decline in transparency and accountability and the institutionalization of incompetence.

In other words, the citizenry's trust in institutions is declining because the failure of institutions is undeniably the fabric of everyday life in America.

When was the last time you heard the top management of a university system take responsibility for the unprecedented rise in the cost of tuition and textbooks? The short answer is "never." The insiders benefiting from the higher-education cartel's relentless exploitation of students and their families act as if the soaring costs are akin to cosmic radiation, a force of nature that they are powerless to control.

The same can be said of every other cartel plundering the nation: healthcare (i.e. sickcare, because profits swell from managing chronic illness, not from advancing health); the Big Pharma cartel; the military-industrial complex; banking; student loans; the governance-lobbying cartels; the war-on-drugs gulag, the FBI and so on in an endless profusion of insiders whose self-serving plunder and gross incompetence rarely generates consequences (such as being fired or indicted) due to an absence of accountability and transparency.

Incompetence has been institutionalized, and is now the accepted norm.Schools fail, municipal agencies fail, oversight agencies fail, state agencies fail, and the public feels powerless to effect any systemic change.

Changing the elected officials who are the citizens' representatives does nothing to rid the system of incompetence or enforce accountability and transparency; the insider elites have wired the system to avoid responsibility and maintain their institutionalized skims regardless of who is in elected office.

Budgets never decline, they only expand. The system is organized to punish frugality and reward incompetence, sweetheart contracts, overtime, and ever higher public spending.

Calls to trim waste are met by gestures of powerlessness: rising costs and institutional failure are presented as the equivalent of gravity: we can't change the system, it's unstoppable.

The general public has largely lost the experience of public-sector/institutional competence and accountability. As a result, resignation is now the response. So the public dutifully waits in line for hours to renew a drivers license, despite having made an appointment online, to take one common example in California, which likes to pat itself on the back as the tech / progressive capital of the galaxy, if not the universe.

How is it "progressive" to rob the working stiffs who pay all the taxes hours of their life for something that should be routine and quick? Where's the Big Data and high tech when it actually counts? If citizens had a choice to renew their drivers license at (say) Amazon or the DMV, do you reckon Amazon might not make everyone cool their heels for hours?

The list of gross institutional incompetence is truly endless in America:Universities that can't offer enough classes so students can graduate from college in four years (oops, you have to pay another rip-off tuition fee for another semester to get those last few classes you need for your worthless diploma); finance departments that can't track payments (so here's your bogus late fees that will take hours to challenge), and on and on.

As for sickcare--how about the evidence-free embrace of synthetic heroin as a "safe" and "non-addictive" pain treatment? Skeptics were bulldozed or marginalized, because there was simply too much money to be made by jumping on the Oxy et al. bandwagon.

As Scientific American reported in its June 2018 issue, "Powerful drug-marketing efforts had somehow swamped science." When a large study was finally done comparing the effectiveness of opioid and non-opioid drugs, "The results, published in March, were eye-opening. Patients given alternative drugs did just as well as those taking opioids in terms of how much pain interfered with their everyday life. In fact they reported slightly less pain and had fewer side effects."

Yes, many transactions are more complex now than they were 30 years ago.30 years ago it took less than a day to obtain a building permit for an entire house in the rural county I lived in. Now it takes 3 to 4 months in the same county to get a permit, which must now be stamped by a licensed architect or engineer (at great expense, of course).

OK, we get it-- things are more complex now. But how does a one-day process balloon into a 100-day process at best? We can understand a one-day process becoming a 3 day process, but did the complexity really rise 100-fold?

I think we all know the answer is "no." The vast majority of the wasted time, effort and cost is the result of unaccountable insider incompetence enabled by a complete lack of accountability and transparency.

Conscientious public servants and institutional insiders are thwarted by incompetent managers, lazy co-workers and institutional bloat designed to increase costs and inefficiencies because higher budgets and inefficiencies boost payrolls and thus power. Organizations within the failing institutions are loathe to surrender their gravy trains, so they resist any change, even those which might have saved the institution from its inevitable collapse.

Our institutional failure reminds me of the phantom legions of Rome's final days. Legions existed in the bureaucracy, and payrolls were sent to the pay masters, but the Legions were mere fictions--there were no soldiers, and no fighting force; there were only a few insiders skimming their take, confident that accountability and transparency had been irrevocably lost.

Systems fail one institution at a time. No wonder the super-wealthy are building bunkers.


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Big Pharma and the Rise of Gangster Capitalism

$8 per vial in competing developed-world nations and $38,892 in the U.S. That says it all.

Thanks to decades of gangster films, we all know how gangster capitalism works: the cost of "protection" goes up whenever the gangster wants to increase revenues, any competition is snuffed out, and "customer demand" is jacked up by any means available-- addiction, for example.

This perfectly describes the pharmaceutical industry and every other cartel in America. You might have read about the price increase in Acthar gel, a medication to treat Infantile Spasms. (via J.F., M.D., who alerted me to the repricing of this medication from $40 in 2001 to the current price of $38,892.)

The compound first received approval in 1950, and various branded versions have been approved in recent years. Let's be clear: this medication did not require billions of dollars in research and development, or decades of testing to obtain FDA approval; it's been approved for use for the past 68 years.

Yes, you read that correctly: a medication that's been in use for 68 years went from $40 a dose in 2001 to $38,892 today. Don't you love the pricing? Not a round 38 grand, but $38,892. You gotta love these gangsters!

There's another related term to describe this form of capitalism: racketeering.That's what mobsters do--operate rackets.

The Big Pharma racket enriches a number of gangs practicing gangster capitalism: the drug companies themselves, of course, but some doctors are profiting from the racket, and so are pharmaceutical lobbyists:

Study highlights role of doctor conflicts of interest in Medicare spending on Mallinckrodt drug Acthar Study published in JAMA indicates nearly 90 percent of doctors prescribing HP Acthar Gel took payments from drug's manufacturer.

Here are the money quotes:

In 2014 Mallinckrodt raised the price of Acthar further to $34,000. The Federal Trade Commission and attorneys general from five states sued Mallinckrodt for anti-competitive behavior with regard to the acquisition of Synacthen Depot and the monopolistic pricing of Acthar, and in January 2017 the company settled, agreeing to pay $100 million and to license Synacthen Depot to a competitor. According to Kaiser Health News, Mallinckrodt responded by increasing its Congressional lobbying to $610,000, and its contributions to Congress members to $44,000, in the first quarter of 2017.

As an off-patent pharmaceutical, a similar drug, differing in formulation, available in Europe, made by a different manufacturer, sells for $8 per vial.

So a medication to treat infants costs $8 per vial in Europe and $38,892 in the U.S. Don't you just love gangster capitalism to death? Because death and suffering is the gangsters' ultimate threat: pay up or die.

Here's another example of Big Pharma gangster capitalism at work: Insulin Drug Price Inflation: Racketeering or Perverse Competition?

Don't you wish you had a racket where you could raise prices by 10% a year like clockwork, or triple the price of your "product" every decade?

Pfizer just raised prices on 100 medications:

The increases are effective as of July 1. In most cases, the increases are just over 9%, which is in line with the annual 10% price hikes adopted by most drug companies. Putting that number in context, core inflation printed at 2% last week.

Here's a chart of the net result of gangster capitalism:

Gangster capitalism is the new model of "growth" in America, the model used by every cartel from higher education to Pentagon contractors. Eliminate actual competition, raise prices in lockstep with other cartel members, lobby the government to pay your extortionist prices, and threaten any resisters with severe consequences.

Try resisting your local government's property tax increases to cover insiders' pensions and healthcare benefits: it's always "for the children," of course, and if you don't pay up, we'll just auction off your house.

There's no difference between that and being told you're gonna be wearing concrete overshoes if you don't comply.

The U.S. economy is nothing more than an exploitive jumble of rackets, insider plundering and gangster capitalism. $8 per vial competing developed-world nations and $38,892 in the U.S. That says it all.


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Money and Work Unchained ($6.95 Kindle, $15 print)
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Resistance, Revolution, Liberation ($6.95 Kindle, $15 print)
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My new book Money and Work Unchained is now $6.95 for the Kindle ebook and $15 for the print edition.

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Will AI "Change the World" Or Simply Boost Profits?

The real battle isn't between a cartoonish vision or a dystopian nightmare--it's between decentralized ownership and control of these technologies and centralized ownership and control.

The hype about artificial intelligence (AI) and its cousins Big Data and Machine Learning is ubiquitous, and largely unexamined. AI is going to change the world by freeing humankind from most of its labors, etc. etc. etc.

Let's start by asking: who owns all this AI? This raises two other questions:who benefits as "software eats the world" (to use Marc Andreesen's pithy phrase), and to what purpose is all this technology being applied?

The answers are painfully obvious: large global corporations, many of which function as quasi-monopolies (Facebook, Google et al.), are the owners of these new technologies, and the purpose being pursued is to maximize profits and secure a monopoly that insures high profits into the future.

The hype takes two predictable pathways, one Jetson-cartoonish euphoria and the other dystopian ruin. Self-driving vehicles will change the world in wonderful ways by eliminating the source of accidents: human error.

And that's a nightmarish prospect because what will those millions of people currently driving vehicles do for a living?

Few people ask: who will profit from all this? Obviously, the manufacturers of self-driving vehicles and the owners of services which replace private vehicles.

The real race in AI is to secure profitable franchises and eliminate competitors by scaling up faster than other corporations.

This is why the market cheers Netflix burning billions of dollars every year: if they're burning billions, they must be scaling up faster than competitors, and thus they will be the ultimate "winner" in the race to create and distribute mediocre content globally.

Consider the uses which corporate-owned AI has already been used to maximize profits: Facebook's manipulation of its users' data and content feeds and its selling of their data.

After a brief downturn due to fears of regulation, the market is back in love with Facebook's immense profits, and Facebook's stock is once again at record highs.

AI and Big Data collection is the profitable heart of Surveillance Capitalism, which includes Amazon's gargantuan contracts with the National Security agencies and similar work being performed by many other lower-profile contractors (SAIC, et al.)

Rather than a Jetson-cartoonish world of intelligent robots doing all the work so we can all become poets and watch mediocre films all day long, what AI is doing in the real world is extracting profits from data collected from the populace either to market something more effectively or to control the populace more effectively.

The AI-robotics enthusiasts never seem to actually work in the AI-robotics industries. They are media types who extrapolate extrapolations without asking the key questions:who will own this technology, and to what purpose will it be applied?

We know the answers: global corporations and maximizing profits.

To dismantle just one part of the Jetson-cartoonish worldview of robots and AI becoming essentially free to everyone: fabricating a robot will never be free because robots require large quantities of energy and resources for their manufacture and maintenance. Even if human labor has been completely eliminated, the costs of extracting, refining and transporting resources remain, along with the costs of extracting the energy to do all this work as well as manufacture and assemble all the parts.

Eliminating human labor removes very little of the cost structure.

As for AI software being "free"-- it will be free like the Android operating system and the Apple iOS: free to those developing profitable uses of corporately owned franchises.

In my worldview, AI has one purpose: eliminating bias and privilege. Properly programmed software won't keep track of skin color or other sources of human bias.

The danger is corporately owned software tracks everything that can be used to market or control the populace, and this includes every nuance of bias and privilege.

The real battle isn't between a cartoonish vision or a dystopian nightmare--it's between decentralized ownership and control of these technologies and centralized ownership and control.

The CLIME system (as described in my book A Radically Beneficial World) is in effect a decentralized, distributed AI system that organizes a network of independently, democratically operated community groups that pay members to perform needed work in their communities.

Will AI be harnessed to maximize profits for the wealthy few, or will some thin, decentralized slice of these technologies actually serve unprofitable human needs?

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