Andy Kessler

WSJ: The Bitcoin Valuation Bubble

https://www.wsj.com/articles/the-bitcoin-valuation-bubble-1503868225

The price of a Bitcoin broke $4,000 this month. It’s up 400% in 2017, and only two years ago it stood at around $230. With 16.5 million Bitcoins in “circulation,” and the potential for 4.5 million more, the market value of Bitcoin is now a whopping $72 billion. Sister currency Ethereum is worth another $32 billion.

Early Snapchat investor Jeremy Liew thinks Bitcoin will reach $500,000 by 2030. Tech eccentric John McAfee believes it’ll take only three years. That’s $1 trillion of digital coins. Now companies with an idea for applications built on top of these currencies are raising hundreds of millions through initial coin offerings. Is Bitcoin the greatest rocket ship ever or will it end up a giant smoking hole in the ground?

In its simplest form, Bitcoin enables financial-transaction services on a peer-to-peer network that no one controls. Decentralized and anonymous, it uses an innovative software structure known as the blockchain to store a public ledger across an ever-growing network of servers. Unlike Visa or Mastercard , no single company buys computers. Instead, an ingenious incentive system pays entrepreneurs fees and rewards in a made-up currency to add servers to run the intense math of cryptography algorithms. Many sit in places where electricity is cheap, like Iceland, to minimize operating costs. This blockchain is the future and the path for decentralized innovation to roll out on the cheap.

And how does one value Bitcoins? Those who own them believe they are a currency or an asset like gold, valued for its scarcity. Others like the Securities and Exchange Commission and the Internal Revenue Service view them as a security to be regulated and taxed.

But Bitcoin is actually a business. It’s software as a service—transactions for a price, like credit cards. To record a transaction on the blockchain, a customer pays an average recommended fee of 450 satoshi per byte. (A satoshi is one hundred millionth of a bitcoin.) Miners also get bitcoin rewards for adding blocks to expand capacity. Around 1,700 bitcoins are paid daily in rewards. But business-wise, this is more like being paid in equity. Each day sees about $1 million in fees and $7 million in rewards.

WSJ: Studies Are Usually Bunk, Study Shows

https://www.wsj.com/articles/studies-are-usually-bunk-study-shows-1502660991

An interesting detail went overlooked in the fury over fired Google engineer James Damore’s “diversity memo.” At the end of the document he calls for an end to mandatory “Unconscious Bias training.” Large corporations often force employees into re-education classes, this one a dull, hourlong, 41-slide seminar supported by study after study. Can these studies be trusted? Doubtful. Hands down, the two most dangerous words in the English language today are “studies show.”

The world is inundated with the manipulation of flighty studies to prove some larger point about mankind in the name of behavioral science. Pop psychologists have churned out mountains of books proving some intuitive point that turns out to be wrong. It’s “sciencey,” with a whiff of (false) authenticity.

Malcolm Gladwell is the master. In his 2008 book, “Outlier,” he argues that studies show no one is born better than anyone else. Instead success comes to those who put in 10,000 hours of practice. That does sound right, but maybe Steph Curry shoots hoops for 10,000 hours because he is better than everyone at basketball in the first place. Meanwhile I watch 10,000 hours of TV. Facing criticism, Mr. Gladwell somewhat recanted: “In cognitively demanding fields, there are no naturals.” News alert: Professional sports are cognitively demanding.

When reading people like Mr. Gladwell, you’re probably thinking many of the studies’ conclusions sound right but don’t really reflect your own experience. That’s probably because you’re not a hung-over grad student. Andrew Ferguson of the Weekly Standard studied behavioral economic studies and discovered many are done by grad students observing their peers doing trivial tasks. Then researchers draw hard conclusions from this. Rather than a study of human nature, behavioral science is, Mr. Ferguson observes, “the study of college kids in psych labs.”

Many of the studies quoted in newspaper articles and pop-psychology books are one-offs anyway. In August 2015, the Center for Open Science published a study in which 270 researchers spent four years trying to reproduce 100 leading psychology experiments. They successfully replicated only 39. Yes, I see the irony of a study debunking a study but add to this a Nature survey of 1,576 scientists published last year. “More than 70% of researchers have tried and failed to reproduce another scientist’s experiments,” the survey report concludes. “And more than half have failed to reproduce their own experiments.”.