Thoughts on Nassar

Emily Morales hugged after testifying.

The thing that really hit home with me was this list. It’s the list of the women and girls who testified in court about being sexually assaulted by US Gymnastics doctor, Larry Nassar. 156 victims spoke. I’m pretty good with numbers, but I find that seeing the names right there in black and white hits harder than the number alone. These are people. They are more than just statistics—they’re humans who were hurt by this man when they were children.

What’s more, this isn’t even the list of Nassar’s victims. This guy worked with the national team starting over 30 years ago, with the earliest allegation going back to 1994. Other people who were molested decided not to testify.

Was the list of women who decided not to testify larger or smaller than the list of women testifying? I don’t know, but 30 years is a long time, and I can imagine a lot of women might not have wanted to think back such events. It wouldn’t surprise me if fewer than half the women he assaulted decided not to appear in court.

The sickness

The thing that makes me really queasy about this case isn’t actually Nassar himself. A certain segment of the population has no scruples. To get what they want, they won’t hesitate to harm others. People like Nassar exist and will always exist. I expect the Nassars.

The bigger issue for me is the infrastructure that rose up to protect this guy. Numerous complaints surfaced over the years. The first arose in 1997 and the complaints continued for twenty years. Girls complained to their coaches. They complained to officials at Michigan State University where Nassar worked. They complained to their parents. They complained to doctors.

But it didn’t matter. The people who could have prevented this decided not to help. Maybe they didn’t care. Maybe they didn’t want to get involved. Maybe it seemed like too much work to accuse a national and university team doctor. Maybe they were worried about their own reputation, that they didn’t prevent the assaults or act on them sooner. Or maybe they didn’t want their university’s reputation sullied with a sexual assault scandal. Or maybe they just didn’t believe the girls, or didn’t believe them enough to actually investigate.

Maybe it was all these things.

The denial and cover up went to extreme levels. Several times, girls who accused him of molestation were forced to apologize to him. Even in 2016, when Nassar was arrested, MSU coach Kathie Klages asked her team to sign a card to let Nassar know that her team was thinking of him.

That’s the thing that makes me sick, that the whole system was corrupt, allowing this girls to be assaulted for years. Years.

The challenge of gymnastics

Yet, in a way, maybe we should expect this outcome from high-level gymnastics.

For as long as I can remember, I’ve been hearing stories about coaches who—at minimum—mentally abuse girls in order to create champions. As long as these girls win, the coaches get a free pass. They’re called unconventional or strict, or admired for encouraging the girls to work hard. And if girls disagree with the coaches’ methods, they’ll be accused of having a bad attitude.

What’s more, at the top levels, you constantly hear stories about the physical toll gymnastics takes on girls. These athletes are working long hours as a child at a physically-demanding job with a diet optimized not for health, but for gymnastics, and there are consequences to that. Girls frequently face delayed puberty, or growth issues, or even have their hair fall out.

Acceptable costs

But society considers developmental issues an acceptable cost. Medals are more important than anything, and certainly more important than the welfare of children. Gymnasts or parents who aren’t comfortable with paying those costs will likely be weeded out of the programs. Successful coaches will have already trained themselves to ignore the complaints of the kids, to look beyond any physical damage the kids might be suffering and focus on the gold.

So, maybe we should look upon high-level gymnastics as an institutionalized grooming program. Girls are encouraged to take whatever the authority throws at them without complaint. They are trained to accept a loss of control over their own bodies, ignoring any negative physical consequences. When you add to that the evidence that complaints by the girls are ignored or minimized, it starts to look like pedophile’s dream.

It makes me wonder if Nassar deliberately chose a career working with gymnasts because the system is all but deliberately designed to cater to his particularly type of perversions. And, if that’s the case, is it also possible that Larry Nassar and the 156 testifying women are only the tip of the iceberg?

The bottom line

When this news first broke, I found it surprising that there weren’t more cases of sexual assaults coming out of gymnastics, but I think I understand it now. It’s not because the assaults aren’t happening. It’s because up until this week, nobody in a position of authority cared enough to stop the sexual abuse of these children.

Cryptocurrency Mining Results

A comic about cryptomining.

At the start of a new year, I typically look through our investments, calculate annual returns, and figure out our general financial situation. Back in October, I mentioned that I started mining zcash, a cryptocurrency (like bitcoin). So, this year, I looked at how much money we made from crypto.

The system

I’m using an EVGA 1070 graphics card for mining. Though the 1070 chipset has been out for a while, my 1070 is quite a good card. Until Nvidia released their new GPU last month, the 1070 chipset was Nvidia’s second best consumer video card chipset, just behind the 1080. My card is powerful enough to do virtual reality, one of the most computationally taxing tasks the typical person would want a graphics card to do.

So, when I mine cryptocurrency, I’m using one of the best graphics cards available. I haven’t actually tried cryptocurrency mining on my CPU on this machine. But if I did, it wouldn’t surprise me if the graphics card produced 100 times more currency than the CPU.

This would be true partly because the graphics card is powerful, and partly because graphics cards generally are optimized to do mathematical computations quickly in parallel. So if I wanted to multiply 100 numbers in my CPU, I might need to do 100 operations, while on the graphics card it could do it in one operation. Since cryptocurrency mining is essentially doing a bunch of math, graphics cards mine much faster than CPUs.

Effectively, this means that there’s no point in mining with my CPU, only the graphics card.

The results

I’ve been mining probably 98% of the time on this computer. I shut down my miner when playing certain games or using spreadsheets, since it can impact the performance of those applications. I’ve also had late-night Windows updates cause reboots that terminate my the miner.

Nevertheless, over the 3+ months, I’ve mined about 0.6 of a zcash coin. Back when I started, zcash was trading in the $250 range (all currencies in US dollars). So, my mining would have generated about $150.

However, cryptocurrencies fluctuate quite a bit. I’ve been holding onto zcash rather than following my initial plan to convert it to ethereum, and zcash has risen to $700. So, at this point I’ve made about $420. When I looked at it over the weekend, zcash was above $900, so yesterday, I was at about $550.

Of course, from this revenue, it’s necessary to deduct the cost of electricity. Unfortunately, without equipment, it’s difficult to determine the amount of electricity my computer uses. What’s more, before I was mining, I’d typically leave my computer on all day, only shutting down at night. So, even if I did keep track of the exact amount of electricity my computer uses, it would be tricky to determine the increase in my computer’s electricity usage as a result of mining.

What I do know, however, is that my electricity bill actually fell year over year over those months. I don’t know exactly why. It might be weather-related, or my perhaps my new computer is actually more efficient than my old computer at using electricity, or perhaps our usage patterns have just changed. Regardless, it’s clear that mining didn’t cause a massive increase in our electric bill.

The bottom line

One other interesting thing to note is that you can buy my 1070 graphics card for about $540. So, if I had decided to buy two graphics cards with my computer, I would be close to paying off the second graphics card after only three months. Thus, I think it’s perfectly reasonable to buy a graphics card today and hope to pay it off in under 6 months just by mining cryptocurrency. There’s a large degree of speculation in doing that—if cryptocurrencies crash, you might not be able to make enough to pay for the card. But if you want a good graphics card anyway, this is a good way to get one.

Besides, mining crypto is fun.

Spoiler-Free Thoughts On The Last Jedi

Finn and Captain Phasma battle

I went to the The Last Jedi with my family over the weekend, and we all thoroughly enjoyed it. To me, this Star Wars has a slightly different feel than the other Star Wars movies, while still being Star Wars.

The same old

Ever since the first Star Wars, iconic imagery have been a core part of Star Wars. I’m thinking here about Luke staring into the binary sunset on Tatooine in the first movies, or the relentless march of the AT-AT walkers in The Empire Strikes Back. To me, such images are a core component of the Star Wars experience, as central as the characters or the score. This movie doesn’t let us down in that respect. That shouldn’t be a surprise—some of the images in the trailer were gorgeous—but it’s nevertheless worth noting.

The score is solid, while not breathtaking. I didn’t notice many new iconic melodies akin to The Imperial March, the Skywalker Theme, or The Duel of the Fates but many of the old melodies were reused. It also wouldn’t surprise me if, being absorbed in the action, I missed new musical themes. (And I don’t think that’s a bad thing.) In any case, the music certainly added to the movie, and didn’t distract.

The technology was mostly the same as the familiar old movies as well. BB-8, while not identical to R2-D2, is very similar, playing almost the same role. The First Order Tie Fighters are very similar to the Imperial Tie fighters, though in this movie the First Order technology simply seems far more menacing. I suspect that this is because computer-generated images have improved the ability to illustrate space combat, which benefits this movie greatly.

What’s different

Maybe it’s just that the old movies are so familiar, but I feel like The Last Jedi simply has more depth than previous movies. It starts with the characters. With the exception of Anakin/Vader, most of the characters from the previous movies don’t have much depth. Han shifting from being a selfish smuggler to a big-picture rebel is about the largest change that the characters in the old movies make, and that shift doesn’t come with a lot of soul-searching.

In contrast, the characters in this movie are far more well-developed. Each character has internal conflicts that are fleshed in realistic ways that alter the course of the movie. Kylo Ren is particularly noteworthy. While in the first movie, he was a bit too much “emo whiny kid”, he is much better developed in this movie, and is probably the most compelling character. Just as important, the chemistry between him and Rey is solid, adding to the movie.
Even beyond the characters, this movies feels like it has more levels. In the past, the Star Wars universe has been black and white—you’re either on the dark side or the light side. Of course, that dichotomy remains today, but this movie adds layers. In the real world, it is never as simple as dark/light, but rather different perspectives in shades of gray, and this movie steps in that direction. Thus, while the movie remains “beleaguered good guys fight the fascists”, the movie becomes much more than that, and that’s a welcome change.

My bottom line

To me, this movie is one of this best of the franchise. It’s hard to match Star Wars and The Empire Strikes Back, but The Last Jedi is only slightly below those, better than my fourth favorite movie, Revenge of the Sith. I think it will hold up over time, becoming one of the classics in the series, possibly heralding the beginning of new subtlety and depth in the Star Wars franchise.

The Best Free-To-Play Models

Get out your credit card

In my last blog, I discussed different ways software companies generate revenue and the recent rise of virtual goods purchases. In general, I like the free-to-play model—it’s great to be able to play a game and never spend a penny on it. But software companies adopting strategy need to be careful, there are good and bad ways to implement this model.

The best in-game purchases

The ideal way to implement in-game purchases is to have them not impact the game play at all, but rather be limited to superficial changes to the appearance of the game (i.e. skins). Players don’t want to look like the generic characters in the game and are often willing to pay to add a hat or a brightly colored vest. This sort of model is a win for everyone—the software company gets revenue, the people who want customized appearances can get their wish, and the people who just want to play a free game don’t need to spend a penny. Thus, I view this model as ideal.

An alternative to this model that is almost as good is the “free to play for a limited time” model. With this monetization strategy, the user can play the game a limited number of times each day for free. If they want to play more frequently than that, they have to pay. Thus, the game play isn’t affected, only the duration of play. This model has the nice feature that the better, more addictive the game, the more likely users will be willing to pay to play more. Thus, good games make more money, and bad games don’t.

Pay-to-win model

Less ideal is the revenue model where the gameplay changes based on whether or not the users have spent money. Thus, the player can pay for better characters, better weapons, and other in-game advantages. These advantages can be extreme, so that it’s literally impossible for a free-to-play player to compete against a player who spends money. In that case, the game become pay-to-win.

While Electronic Arts (Nasdaq: EA) has focused on this model recently, there are major problems with it. The most obvious one is that the game will be less fun if players can’t compete without spending money. Even for players willing to pay, there’s no challenge in obliterating every opponent, which makes the game less fun. And it’s certainly less fun for the free to play player being obliterated by people who simply have big wallets.

What’s more, the game manufacturer will face the constant temptation to inflate the power of new additions to the game and a reluctance to weaken (nerf) overpowered items. New, powerful items encourage people to spend money to get them. If those powerful items are nerfed after people have bought them, then the customer will feel jilted. Thus, you often get into a situation where the game becomes unbalanced, where skill doesn’t matter, but just possession of the magical item. And, if the game manufacturer isn’t willing to nerf the overpowered item, there’s no easy way to correct the imbalance.

When players realize that the gaming company doesn’t actually care about balance, it disincentivizes them to play the game or to purchase the “latest, greatest item”. After all, why would I spend time today trying to improve my account if anything I do is likely to become worthless when the gaming company capriciously introduces a magic “kill everything so I win” wand tomorrow? Why would I buy that magic wand if, a week later, a new “kill everything faster your stupid old wand” wand is likely to be introduced into the game?

Teaching the next generation

In fact, the problems are even worse than that, in that many of these games have added a random component to the acquisitions of paid content. Thus, instead of buying the wand, the player might actually be buying a loot box that has a tiny chance of containing the wand, but a big chance of containing some item that isn’t nearly as useful.

So, since many of these games are targeted toward kids, these games are teaching our kids to gamble—to put up real money for a small chance at getting a good item. And when I say small, I mean tiny—people have said they’ve spent a thousand dollars buying loot boxes to try to get the Millenium Falcon in Star Wars Galaxy of Heroes, and haven’t got it. Thus, these games are essentially selling kids lottery tickets.

The best way to implement pay to win

Despite the many downsides, pay-to-win isn’t necessarily the death of a game, and can be implemented in a reasonable way. All the game needs are ridiculous prices.

If the magical blasting wand costs $10,000, then only people who are willing to pay $10,000 for a virtual item will actually have the wand—a very low proportion of people who will be playing the game. The game will partition into two classes of players—those who have the wand, and those who don’t. Assuming that the ranking system is good (i.e. people only compete against people in the game of similar power), the free-to-play players will make up the vast majority players, and they’ll be able to ignore the people who are willing to dump those levels of cash into the game.

My bottom line

Though I’d like to believe that pay-to-win video game manufacturers will settle on this approach, striving to maintain balance for the long-term health of the game, I suspect that this mostly won’t be the case. Instead, I think gaming companies will focus on extracting the most cash they can from their customers.

To that end, gaming companies, like casinos, will have teams of psychologists trying to find the best way to turn people in compulsive gambling addicts. They’ll look for ways to increase the addictiveness of the game and add even more gambling until regulations are passed to restrict their ability to do so.

The Latest Video Game Controversy

Battlefront II promotions at a gaming convention

Video games have evolved greatly since I was a kid back in the 1980s. But even more noteworthy is the evolution of the business model around video games, and that is what’s recently led to one of the biggest video game controversies of all time.

The original model

The obvious way to make money from a video game is to sell it, and that’s how it worked for decades. The company would create a video game, put it in a box, and ship it to electronics stores. The consumer would come in, buy the video game for, say $50, install it on their computer, and play the game as much as they wanted.

This is the typical software model, and compared to other businesses, this is a fantastic way to make money because the marginal cost of an additional sale is negligible. You’ve put a bunch of effort into creating the game, but once you’ve created software, the cost of manufacturing the box and the CD for delivering the game is almost zero. So, if you have a big hit, your video game company ends up with super-high margins.

The problem with this model—if you’re a video game manufacturer—is that you aren’t making enough money and you have no recurring income. If you want to make more money, you have to create a new game, and attempt to sell it to consumers all over again. You have to find new customers for every sale.

Strategies to avoid this problem

There are a several of ways to avoid this problem. One is to sell the same game with slight differences year after year. Electronic Arts (Nasdaq: EA) is the master of this strategy with its sports franchise, creating a new version of its game every year. What’s more, since many of these games are multiplayer, old versions of the game are rendered obsolete as the player base migrates to the latest version. Thus, though the game play evolves slowly, customers still have significant incentive to upgrade every year.

The second way to avoid this problem is to not sell the game, but rather sell monthly subscriptions to the game. This method is popular with massively multiplayer online (MMO) games like World of Warcraft. In such games, a massive world fantasy world is created, and, for a monthly subscription fee, players can adventure in that world with their online friends for as long as they want. Thus, the software provider gets an ongoing revenue stream from the monthly subscriptions.

The third strategy to avoid this problem is to not sell games or subscriptions, but rather sell virtual goods within the game. The software provider gives their software away for free, but charges for skins (different character appearances), weapons, abilities, or characters in the game. Essentially, the software developer is selling nothing physical, but deliberately engineering a “rarity” into the game, and then charging its users if they want access to that “rare” item.

And I use rare in quotations, because it’s not really rare. These are all virtual goods. The software company can create as many items as they want out of thin air. It’s only rare because the software company chooses to only give those items to people who pay.

If the items that can be purchased are extremely good relative to other items in the game, then the game becomes know as “pay to win”. Essentially, you can’t become a top player without spending large amounts of money. For instance, in a first-person shooter game game, maybe the company sells an automatic machine gun for $100 when everyone else only has revolvers, and the machine gun does fifteen times the damage of any other weapon. Realistically, you can’t be competitive in the game without owning a machine gun.

The seeds of a customer revolt

The interesting thing about these “virtual goods” games is that they often make huge amounts of money, particularly in the mobile universe. If you look at the top ten games that earn the most on both Android and iOS, most use this “virtual goods” model.

One of the most popular games right now, another Electronics Arts game, is called Star Wars Galaxy of Heroes (SWGOH). In SWGOH, you do battles with a team of Star Wars characters, and as a reward, receive “shards” of other Star Wars characters. When you have enough shards, you can unlock a character and use him or her in your future battles. Of course, if you’re an impatient type, you can also spend money to buy shards, essentially buying characters.

To further improve the economics of the business model, SWGOH has special events that unlock super-powerful characters. These events only come along a few times a year, and require certain prerequisite characters to participate. So, while it might take months to unlock a character, Electronic Arts will give perhaps a week’s notice of a special event that requires certain prerequisites. So, people who want the super-powerful character will have no option except to spend large amounts of money to obtain the prerequisite characters before the event vanishes for months.

This model has proven very lucrative for SWGOH to the extent that Electronic Arts isn’t really even trying to sell to the people who are willing to spend less than $100 on virtual goods in the game. Instead, they’re targeting people who will spend thousands. Based on the math of how much characters cost and how quickly they appear in the game, it’s very clear that some people are spending over ten thousand dollars to get virtual characters in the game. I suspect there may be people who have dropped over a hundred thousand dollars on the game.

Electronic Arts’ mistake

Electronic Arts has another Star Wars game that mostly uses the old “sell the software and play as much as you want” sales model, a first-person shooter called Star Wars Battlefront. I imagine Electronic Arts looked at the in-game purchases an SWGOH, and decided that they wanted some of those sweet in-game purchases in Battlefront II.

So, while charging $80 upfront for the game, they decided to lock the iconic characters such as Darth Vader and Luke Skywalker. To unlock anything other than the most generic of characters, you needed to either play the game for a long time—I’ve seen estimates of 4,500 hours to unlock all the characters—or pay about $2,100 to EA.

Thus, EA wants their customers to pay $80 for a game, but then not actually deliver the game they promised with all the cool Star Wars characters. Instead, they want to force their customers to pay large sums to actually unlock the key content.

This decision led to an uprising among gamers. When EA attempted to defend its decision, it claimed that it wanted players to have a sense of pride and accomplishment when they unlocked the top characters. That comment has received the most downvotes of any comment on Reddit.

Players know why EA crippled their own game, and it wasn’t to create a sense of pride and accomplishment. If EA truly thought the sense of pride and accomplishment coming from unlocking characters was important, they certainly wouldn’t allow people to unlock character simply by spending money. Where’s the pride and accomplishment in that?

The comment was so widely derided that now the phrase “feel as sense of pride and accomplishment” has become a euphemism for gaming companies deciding to screw over their customers to get money. “Pride and accomplishment” now means “pull out your wallet”.

The short term consequences

Amid the uproar and pre-order cancellations, Electronic Arts finally took a small step backward, deciding to eliminate in-game purchases temporarily. But, it’s pretty clear in their blog entry about the change that while they are desperately looking for a way to appease their customers in the short term (because if people don’t pony up the $80 for the game, EA won’t make anything from it), they have every intention of bringing back in-game purchases when things have calmed down.

After all, to Electronic Arts, it’s not about ethics or honesty. It’s about money.

My bottom line

To me, this evolution is good and bad. I like games that are free-to-play because I’m cheap. I won’t spend money on a game if I don’t need to, and, if the game can’t be enjoyable without spending money, I just won’t play it.

On the other hand, I’m not a fan of the idea of charging people for a game, giving them broken content, and then forcing them to pay even more to get the game they were promised in the first place. To me, that is fraud.

Though I suspect that Electronic Arts will never see a problem with the business model, I still find the occasional reason for optimism. One gaming company has recently abandoned the free to play model because they have ethical concerns about it. I find their rational behind that decision fascinating.

My Evolution as an Investor

Ape to businessman. Are they really that different?

I’ve been investing in the stock market for a while, and I was just thinking the other day about how my strategy has changed over the years.

The early years

I first started investing in when I was still in high school, probably around 15 years old. I paper traded for a while using quotations in the daily newspaper, and then opened a brokerage account. My strategy at that time was based on technical analysis (TA)—essentially betting that I could predict future movements in the price of shares based on past movements.

The theory of TA is that markets move based on emotional buying and selling by traders. Thus, if a configuration appearing on a stock chart preceded an increasing stock price, that configuration likely to lead to similar gains the next time it appeared since traders will have similar emotional mindsets.

Though I made money, I gave up on that strategy quickly because the commissions were too high relative to my account size to do trading and TA didn’t have a rational enough basis to be intellectually satisfying. Stocks represent ownership of a business, so it seemed odd to me that I was trading on the basis of squiggles on a chart rather than, say, anything to do with the actual business.

University days

In my second year of university, I made my next foray into stocks. This time, I had a discount broker, so commissions were much more reasonable. What’s more, instead of squinting at pictures, I cared much more about the actual companies I was buying. I primarily focused on mining stocks, reading The Northern Miner weekly.

At around that time, diamonds were discovered in Canada’s Northwest Territory. Probably 20 companies started drilling in the region, and that formed the basis of my new strategy.

There were few roads in the Northwest Territory, and none to the location of the diamond discovery. Instead, the companies would wait for winter, then build temporary roads over the frozen lakes and tundra to get their drilling equipment in. This restriction led to an interesting cycle in these diamond mining stocks.

In early winter, the roads would be built and the drills hauled in. In late winter and spring, the most enticing targets would be drilled. In summer and fall, the results of the drilling would be be released.

The thing is, speculative mining stocks are largely driven on the basis of drilling results. When results are about to be released, the stocks often go up in anticipation. Conversely, when no results are due for a while, the stocks tend to stagnate.

So, my strategy was to buy in the early winter, months before people even started thinking about drilling results. Then, I’d sell just before the results were released. It didn’t matter to me whether the results were good or bad. I just wanted to sell my shares at a high price the shares to anyone who wanted to make a last minute bet on the results. Doing this, I’d typical make two or three times my initial investment.

Not cheap. Caring about value

This strategy worked well for several years until the speculative fervour for diamonds died down. But by then, I was ready to move on anyway—I became less interesting in gaming stock prices, and more interested in investing.

My value phase lasted for probably fifteen years. The strategy with value investing is simple. Stocks represent ownership in companies. So, figure out what that ownership is worth, and pay less than what the stock is worth.

For instance, suppose that a debt-free company owns a building worth $40 million and has a million shares outstanding. Then each share must be worth at least $40. So, if you can pick up shares for $20, you’re probably going to do well over time.

Of course, it is a bit more complicated than that. The value of a company isn’t usually that tied to its underlying assets. In fact, in real life, asset values pretty well only come into consideration when you’re looking at a liquidation. Instead, the value of a company is mostly based on how much cash it throws off as an operating business.

Thus, as a value investor, I migrated from focusing a bit on earnings and a lot on assets to not much on assets, and a lot on cash generation.

Recent Times

But if you care a lot about cash generation, the thing that really matters is how sustainable that cash generation is. Your business might make $100 million in earnings one year, but it won’t be worth much if the next year its earnings plummet due to competition. Though that might seem unlikely, there are entire industries that historically have this dynamic (resources, airlines, semiconductors etc.)

So, recently, I been focused on earnings growth and competitive advantage. The key questions to this investing approach are, 1) how fast is the company growing its income stream and 2) is it extremely likely to continue to grow that income stream for the indefinite future?

Because of compounding, if you can identify a company that can sustainable grow its earnings for two decades, that company has a huge amount of value and often that value isn’t fully reflected in stock prices. Such companies require only one decision—to buy—and can slowly make you rich.

The Bottom Line

So, that is my strategy now. Interestingly, sustainability is the probably the key attribute that Warren Buffett has gravitated towards as well. I think he’s gone that way because such stocks are often undervalued and he can buy in quantities that are significantfor Berkshire Hathaway. If it works for him, perhaps it will work for me, too.

And if not, I’m sure my investing strategy will continue to evolve.

Why I Didn’t Get the Graphics Card I Wanted

Several graphics cards connected to a motherboard

A few weeks ago, I bought a new PC with a pretty decent graphics card, the EVGA GTX 1070. I bought that card because I recently tried virtual reality, and I wanted to have a card that could handle VR. I have no immediate plans to buy a VR system, but I like the having the option to moving in that direction if I want.

It was actually quite a struggle to get a good graphics card—the one I really wanted was on back order for over a month before I gave in and went with the EVGA card. That sort of problem is rare in Canada, being unable to get a mass-produced piece of electronics that was released well over a year ago. But I think one of the main causes for the delay was the rise of cryptocurrency mining.

Huh? What’s that?

Bitcoin and Ethereum are the two most widely-known cryptocurrencies. Bitcoin started the cryptocurrency craze in 2009 by becoming the first decentralized digital currency built on top of Satoshi Nakamoto’s innovation of distributed ledgers.

In most financial computer networks—like Visa payments, Interact Payments, or even cheque clearing—transactions are reconciled through a central repository. When a purchase is made through Visa, the merchant scans the card, the transaction is sent through Visa’s network to the issuer to see if the transaction should be approved, and the issuer sends a response back to the merchant.

In such a scenario, the issuer’s database is the central repository. Every transaction goes through that repository. It ensures the buyer has sufficient funds to make the purchase, and hasn’t already spent all their cash on a transaction that happened five minutes ago.

In a distributed ledger, in contrast, there is no central repository. Instead, the data is shared across hundreds of computers that all need to agree about the state of the transactions in the system. What’s more, you need to be able to get the machines to agree on the state of the system even if a minority of the machines are actively trying to cheat the system.

How would one cheat?

Take a simple case where I’m buying a car using a (poorly implemented) distributed ledger. I pay my $40K using a transaction that gets posted to the distributed ledger, and I drive away in my car. But there’s a problem.

The ledger is distributed, so any computer can update the ledger. So, suppose behind the scenes, I have my own computer update the distributed ledger telling the other computers keeping track of the ledger that the $40K transaction never happened.

Essentially, I’m having my malicious computer lie in order remove the record of my the payment. Then I get to keep my money, and get a free car. Woo hoo!

Satoshi’s innovation eliminates this problem by introducing the idea that whatever the majority of the computers on the system thinks is the real state of the system is the real state of the system. When I buy my car, the transaction shouldn’t be considered “finalized”, until a significant number of computers (hundreds) all agree that the transaction has happened. Then, if I try to use some malevolent computers to say my $40K purchase transaction didn’t happen, the network will say, “Um, no. The transaction did happen—the majority of the network saw it, so stop screwing around.”

Thus, the whole distributed ledger network is constantly sharing what they see as the real state of the system with the majority of machines deciding which transactions are real, and which ones aren’t. The network ensures that the agreed upon ledger is consistent, so nobody can spend the same bitcoin twice.

Making the idea actually work

This is a nice idea, but it only actually works if you have a bunch of machines around the world that are constantly trying to synchronize the state of the network. It would be very easy to corrupt the network if there were only 10 machines keeping everything in synch. So, cryptocurrencies often have the concept of miners.

Miners keep the ledger synchronized, but also generate new coins by doing what’s know as a proof-of-work. For cryptocurrencies, the proof-of-work is typically a mathematical problem for which it is very difficult to find an answer, but very easy to verify whether a given answer is correct. Miners look for the solution to the math problem. When they find a solution, they broadcast the answer to the network—keeping the distributed ledger updated at the same time—and in return are rewarded with some newly-created cryptocurrency.

Thus, the miners are the glue that holds the distributed ledger system together, synchronizing the ledger and ensuring a malevolent entity can’t corrupt the system unless they control thousands of computers.

Back to my own woes

I was blaming my inability to get a particular graphics card on cryptocurrency mining, and that’s because the mathematical problem that miners must solve can be run much more efficiently on graphics cards than CPUs—easily ten times faster or more. So, cryptocurrency miners are buying up graphics cards so they can mine cryptocurrencies efficiently.

I think the card that I wanted is in particularly high demand because it’s reputed to use relatively low amounts of electricity and remain relatively cool. In mining, electricity costs money, and heat is bad for computers, causing errors and even melting chips.

Getting something back

Though it has cost me my card, I’m not bitter about the cryptocurrency boom, because the card I have is quite decent still. It has great performance, is quiet, and still remains cool.

And, it can be used to mine cryptocurrencies.

So I’ve been doing that, mining Zcash which I’ve been converting into Ethereum. Counting the cost of electricity, I’ve been making about $1.35 per day… enough to pay for my graphics card in about a year.

The Latest Greatest Show

An encapsulation of This Is Us

In North America, the new television season is about to start, and there’s one show that I’m really looking forward to—This Is Us. At the recent Emmys, not only was This Is Us nominated for best drama, but no fewer than seven actors received Emmy nominations for their work on the show. Sterling K. Brown won Outstanding Lead Actor in a Drama Series for his role as Randall Pearson.

The premise is simple: vividly illustrate the life and experiences of an extended family across multiple generations. Show the big decisions as they are made and the small rituals that make a family a family. Show love and loss, fear and pride, and how people influence each other over the years.

The same description could be applied to many other shows. But here, it really works.

A small detour

One of the big differences between American TV and British TV is that America TV usually has more episodes. It’s totally acceptable and common for a British show to have a nine episode season. Sherlock, in fact, has three episode seasons. In the USA, however, most shows have 22 episodes a season, if not more.

While more content is great, it leads to the problem that it’s actually difficult to produce 22 episodes in a year. Or at least, it’s hard to do in a high-quality way. I think that’s one reason why police procedurals dominate the airwaves—such shows are formulaic, delivering an almost identical product every week without much thought required. What’s more, this strategy means the show can be rebroadcast and syndicated in pretty well any order.

For TV shows that aren’t just paint-by-numbers police procedurals, writers take a different approach. They create filler episodes—one-off episodes that don’t advance the show’s plot or characters, but rather just take up space. While this approach does deliver programming, it tends to dilute the impact of the series.

Probably the most egregious implementation of this strategy that I’ve seen is Lucifer. Lucifer has a great premise taken from Neil Gaiman’s iconic Sandman comics—Lucifer retires from running Hell to open up a nightclub in L.A. It’s a bizarre idea, but dripping with potential. The TV show was also able to cast the brilliantly charismatic Tom Ellis as Lucifer Morningstar. With that combination, the show seemed like it would be compelling and innovative, a sure hit.

And it was compelling, until the writers realized that they needed to fill episodes. So, they took that great premise and decided to turn the series into a “buddy cop” TV show. They made Lucifer team up with a female detective, and the two of them go around solving crimes. It’s almost laughable if it weren’t so tragic—I never would have guessed that the series would go in that direction.

My only explanation for such a horrible decision was that the writers knew how to write cop shows for filler, but no idea how to write a supernatural drama. So, they decided to stick with what they knew. (And I’m really curious what Neil Gaiman thinks of that decision).

So how is This Is Us different?

In contrast, This Is Us doesn’t seem to have fallen into this filler trap. If there is filler among its 18 episodes, I certainly didn’t identify those episodes on first viewing. Every episode has meaningful developments and is cohesively tied to the episodes before and after it.

And that leads to brilliance. The show is compelling, with every episode touching your emotions. It isn’t my favorite show, but it’s the most emotionally engaging show I’ve ever watched. And by emotionally engaging, I mean, weepy. I feels impossible to watch any of the episodes and not feel pain ranging from pinpricks in the heart to a dagger twisting in the gut.

Now, I wouldn’t have thought this was possible. I always thought that in TV, you needed a long buildup, a slow ratcheting up of character and plot development over the course of a season in order to deliver the emotional impact later in the season. That’s why TV is better than movies, because you have the time to develop the story so the emotional impact can be powerful.

But This is Us blows that idea away.

Every episode advances the characters and the plot. Every episode is laden with subtext. And every episode is emotional. There is a slow build, but the writers don’t allow that slow build to stop them from creating jumbled piles of beautiful and sad moments along the path. They show each character evolve and grow, ripping our hearts out along the way.

The writers never get lazy. They deliver in every single episode. There’s just no filler in there.

The bottom line

So, I’d recommend This Is Us to anyone who likes weepy drama.  The closest TV show I can compare it to is Friday Night Lights, but This is Us takes the emotion to the next level. It never lets the audience have a break, not even for a single episode.

Seven best actor nominations for one show is kind of nuts. But I think those nominations are actually deserved.

The Most Entitled Generation

A lot of people looking at devices.

The most common word I hear being used to describe the Millennials is “entitled”. This view, almost always put forward by Baby Boomers, has become so mainstream that Millennials’ narcissism even became a cover story in Time.  The narrative seems to revolve around the ideas that a) Millennials use technology—and particularly social media—a lot (and that’s allegedly a narcissistic activity) b) Millennials are ambitious—they want to do interesting jobs and get promoted, and c) Millennials aren’t working hard (like we used to).

To me, these criticisms don’t actually seem much like criticisms. Rather, to me, it feels like the Baby Boomers are trying to make themselves feel better about their own weaknesses. Boomers as a whole don’t understand or enjoy technology and social media, so, to feel good about themselves, they have to criticize those that do. Boomers made the decision to work their lives away in boring jobs, so, to validate that decision, they need to criticize those who desire a different path.

I (a Gen Xer) think the Millennials aren’t particularly entitled, and actually deserve far more credit than the older generations have given them.

Who’s really entitled?

The Baby Boomers who are accusing the Millennials of being entitled grew up during what’s called the “long boom”, the post-World War II economic expansion. When Trump says, “Make America Great Again”, he actually means “make America grow the way it did in the 1960s”.

Why? Because the economy was exploding. Because growing up then was so easy.

The GDP was rising 4-5% during the long boom. Jobs were plentiful—the unemployment rate actually hit a ridiculously low 3.4% rate in 1968. To go to college at UPenn in 1965, the estimated cost including room and board was $3,170. At the time, the median family income was $6,900.  Today, the estimated cost to go to college at UPenn is $65,470, while the median US family income is $55,775.

UPenn is just one school, but in general, education costs have increased at a far greater rate than both inflation and incomes. What’s more, while the average American student today graduates with debt over $30,000, federally-administered student loans were only legislated into existence in 1965.

Adjust your contrast

So the baby boomers grew up in a time where education was cheap and student debt rare. When they graduated, they had few problems finding a job in the booming economy.

In contrast, Millennials are going deeply into debt to fund their education with no guarantee of a job when they graduate. The job market has been terrible for much of their adult life. In 2013, when the Time article was written, the average unemployment rate was 7.4%, while the youth unemployment rate was closer to 15%. Plenty of Millennials are taking on huge amounts of debt going to college, but often discover when they graduate that the only job they can find involves pouring coffee.

Now, someone does need to pour coffee. But pouring coffee isn’t a great way to pay off tens of thousands of dollars of student loans.

How about housing?

A similar thing has happened with housing. I don’t have housing data for 1960s, but it’s certainly true that the American dream was to own a detached house. And, in large, that dream seems to have been realized.

The Millennials, on the other hand, don’t get the house. In 1984, houses in Toronto cost about 1.6 times the annual income. In 2012, the multiple was up to six, and today in Vancouver, the multiple is above ten.

In fact, in Vancouver, a Millennial is hard-pressed even to rent. The median income is around $80K or about $61K after tax, while the median annual rent on a 2-bedroom apartment is about $38,400, or about 63% of after-tax income. Of course, Millennials, just starting their career, will typically be nowhere near the median income.

So, the Baby Boomer got their cheap education, their good job out of school, and a nice detached house at a cheap price. The Millennial, on the other hand, ends up with tens of thousands of dollars of student loans and has to struggle to rent a terrible apartment while working as a barista.

And the Boomers call the Millennials entitled because they want more than that.

My big question

Thus, the question I have isn’t why the Millennials are entitled, but rather why they’re not more bitter. They’ve really been screwed by the Boomers.

The Boomers felt entitled to tax cuts. To get those tax cuts, they drastically cut and privatized funding for education, leading to Millennials’ huge student debts.

The Boomers took on piles of debt to speculate on housing. Then, when those speculations caused a housing crash, it trashed the economy, making it far more difficult for Millennials to get jobs.

To ensure that Boomers kept their jobs despite destroying the economy, they kept interest rates super-low for a decade, causing a housing bubble that’s made it impossible for Millennials to afford a place to live.

Now, education funding, employment rates, and housing prices are complex issues. But, to my way of seeing things, the Boomers are more responsible than anyone for the horrible situation that the Millennials have inherited. I’m ashamed of them when they turn around and call the Millennials entitled.

To me, the Boomers act far more entitled than the Millennials, and it shocks me that the Millennials aren’t furious about this state of affairs.

But then again, maybe they are, but you just don’t hear about it. Because most of the media is owned by Baby Boomers.

How the Government Contributes to Racism in Vancouver

An example of real-estate racism in Vancouver

My ethnic group is in the majority in Vancouver so I might not be the best at judging things, but from reading online message boards and overhearing people in the city, I think racism in Vancouver is on the rise. In particular, the target seems to be the Chinese. It’s an awkward topic to talk about—almost certainly someone will view something in this post as racist, discriminatory, or politically incorrect, but I believe ignoring these problems because they’re uncomfortable to talk about is a really bad idea, simply exacerbating the problem.

My (completely unproven) hypothesis is that a major cause of this increased racism is increasing inequality and a shift away from whites being the dominant ethnic group. However, I think the government is playing a major role in contributing to the growth of this racism.

 My core hypothesis

Probably the biggest thing that has lead to the growth in racism is Vancouver’s housing bubble, both because it grossly increases inequality and because of the narrative explaining the bubble.

The inequality coming out of the bubble is easy to understand. Essentially, the people who bought houses fifteen years ago are now multimillionaires, not out of hard work, but because they won the housing lottery. Meanwhile, anyone who didn’t—such as those who were only ten years old at the time— is having a hard time even finding an affordable place to rent.

While the housing-lottery multimillionaires can temporarily gain a certain satisfaction from calling the millennials “entitled” for having the gall to complain that they want a place to live, even the appeal of self-righteous fades over time. Thus, as the inequality grows, people look for an outsider to blame.

As a result, a narrative is created to explain the housing bubble, and in Vancouver, that narrative is that the rich Chinese are taking over, laundering illegally-obtained money in Vancouver real estate. The real estate industry loves this story and has promoted it for years. Though most stats only show 5-10% of sales are to foreigners, realtors want their customers to believe that they need to buy now, or be forever priced out. Saying millionaires from other countries are coming to buy Vancouver houses helps with that message. Thus, people blame foreigners for the inequality, and racism starts to rise.

The foreign influence

Like most of these narratives, I believe there is some truth to the “foreign money” explanation. One real estate company claimed over a third of the single family homes it sold in a year were bought by people affiliated mainland China. Another study showed that 88% of the most expensive homes in the most expensive neighborhoods were purchased by people with Chinese names.

What’s more, recently a study came out that showed an inverse correlation between housing prices and taxable income. In other words, the most expensive real estate is owned by the people claiming the lowest incomes, while the less expensive real estate is owned by the people with the highest income.

One explanation for this discrepancy might be that the elderly live in the most expensive areas of the city because they were able to buy before prices exploded. But, the explanation that most people seem to believe is that foreigners are buying up all the houses in expensive areas with illegally-obtained money, money they don’t declare on their income taxes.

The implication is that, when it comes to paying for government infrastructure, wealthy foreigners who cheat on their taxes are being subsidized by poorer Canadians. And that narrative becomes stronger with every anecdote of foreign students and housewives buying multimillion dollar homes.

The government’s role

So, I think there is some truth to the foreign influence in the real estate market, but I think the government has had a role to play too. What’s more, government actions are exacerbating the rise in racism.

The most noteworthy action is the government keeping interest rates at emergency low levels for a decade—an action that I believe has had as big an impact on the housing market as foreigners. I’ve written about that before, so I won’t repeat myself, except to say that this is a government action that greatly increases inequalities, and therefore, in my opinion, increases resentment and racism. If the housing market weren’t bubbly, there would be no strength behind the narrative that the Chinese are taking over.

But the bigger issue is the discrepancy between the government’s policies about immigration and housing. Christy Clark and the provincial liberal government in general—who take large political donations from real estate developers—have said that that high prices are caused by limited housing supply. Essentially, they want people to believe that if we just build more condos (as their donors want), the problem will go away.

There might be some truth to this argument, but if the government truly believed this, they’d actually try to do something to curtail foreign demand as well, when in fact, they are doing nothing, or are actively encouraging foreign demand.

For instance, several stories have arisen recently about Vancouver presale condos being marketed to foreigners before locals. Clark could have addressed this issue in the foreign buyers tax she introduced—a tax that essentially blames the real estate bubble on foreigners. But instead, she made new condo sales exempt from the tax.

One great way to breed resentment about foreigners is to sell a limited amount of a highly-valued commodity, but to give foreigners first dibs, and the government to respond to this by saying, “yeah, we don’t think that’s a problem at all.”

Other immigration programs

Other immigration programs are equally to blame. If the government truly thinks supply is an issue, why is the government increasing immigration, driving even more demand? Investor immigration programs seem to come and go every few years. With those, “investors” typically either give money to the government for a few years, or agree to spend a certain amount of money in Canada (e.g. buy a house) and then they can live here. Yet the stats show that people who enter the country as refugees end up paying more Canadian income tax than these millionaire “investors”. So, the government is encouraging foreign demand for housing in Canada without actually recruiting people who want to contribute to Canada.

The Temporary Foreign Worker program is particularly egregious. Workers are imported from countries to do jobs that “Canadian’s don’t want to do”. Anyone with a basic understanding of economics knows that there are almost no jobs that people won’t do as long as you offer them a worthwhile salary. If you increase salaries, eventually you’ll find someone who will do the job. So the Temporary Foreign Worker program is actually in existence so that businesses don’t have to pay market-rates for their labor. Thus, this program both imports bodies—further increasing the demand for housing—and decreases wages. It’s yet another good way to make locals angry at foreigners.

Foreign Money

What’s more, the government seems reluctant to discourage foreign speculation in Vancouver real estate. In fact, if you’re a foreigner, getting a mortgage can actually be easier than if you are a Canadian. If a foreigner has a 35% down, that’s all they need to qualify for a mortgage in Canada.  They don’t need a credit history, or even a source of income. That’s insufficient for a Canadian, but, if you’re new in town, you’re good to go. In a way, it looks like the system is actually designed to make it as easy as possible to launder foreign money in real estate.

Of course, government agencies such as that Canada Revenue Agency are supposed to guard against money laundering and fraud. But, when it comes to real estate, they’re afraid of examining the affairs of Chinese immigrants too closely because they don’t want to appear racist.

The bottom line

Thus, Vancouver has a real estate market that’s been pushed out of the reach of locals, in no small part because of the actions of government, while the narrative—including the narrative from the provincial government—is that foreigners are responsible. The government claims supply is the problem, but takes actions to increase the real estate demand by foreigners, to the extent of giving them preferential treatment for mortgages and ignoring money laundering laws. Confronted with this powerful narrative, if you’re a local, it’s difficult not to hold foreigners responsible for your inability to afford a house.

(My personal view is that foreigners have played a role in the housing bubble, but not as big a role as the government. What’s more, I believe, the government has the means to curtail the impact of foreigners on the housing market if it chooses to do so, so I mostly hold the government responsible.)

Regardless of the truth, in light of this narrative, it’s not surprising to me that racism seems to be on the rise in Vancouver. In no small part, Trump’s ascendency was a consequence of the traditionally dominant whites in the USA struggling as globalization drove down wages and eliminated middle-class American jobs. “Make America Great Again” is a slogan designed to speak to exactly these people. Thus, it wouldn’t surprise me if traditionally multi-cultural, left-wing British Columbia sees the rise of a similar racist right-wing politician in the next few years.