Phthursday Musings: Scam Likely

I started collecting baseball cards around age 9. The first set I got was the 1985 Topps set, at a card show at the Cherry Bowl, I’m pretty sure in November 1985.

Kids of our generation would from time to time encounter a particular kind of reminiscence / warning / lament / meandering from our fathers and our uncles. Tidbits of such soliloquys would involve references to baseball cards in bicycle spokes and how so-and-so had a Mickey Mantle card and gosh if only I still had those cards today but gee we just didn’t know.

My father’s variation on the soliloquy usually involved a sentence kind of like this:

Something is only worth what someone will give you for it.

In other words, no baseball card has any intrinsic value. For that matter, no car has any intrinsic value, and no house has any intrinsic value, and really nothing has any intrinsic value. Take it to its fullest extreme and not even money itself has any intrinsic value.

He was not really attempting to talk about economic policy or anything like that. He was talking about baseball cards. Also about comic books. In his mind the entire function of a comic book was to read it, and so the purpose of collecting was to have things to read. Over time he had owned comics which, today, would fetch a fair amount of money. But he bought them to read them. He didn’t put them in plastic, he put them in a pile. And then one day he got rid of them all because he didn’t read comic books anymore.

As regards baseball cards, he was very much right. At one point my 1985 Topps set, which I got for something around $30, was worth well over $200. This set included the coveted Mark McGwire and Roger Clemens rookie cards among others. Today, it looks like maybe you can get the set for around $100. But at the time I unloaded it, along with most of my collection, it was nominally worth about $35, but I’m quite sure I unloaded it for much less than that. It was only worth what someone would give me for it.

At a basic economic level, there is supply (the quantity of a thing that exists) and there is demand (the collective desire to be in possession of such a thing). If you have things, or if you are an agent involved in the transaction of things, it is usually in your interest to stoke increased demand, by convincing people that the thing is useful or important or cutting edge or cool or a good investment or whatever.

Some of you know where this is going already.

Picture this:

There is a creek, or maybe a small river nearby.

If you wade out into the river just far enough, at your feet you will find some rocks. They are not made out of gold or silver. They are made out of, you know…. rock.

If you reach down and dig around with your fingers you can extract a rock from the creek. Maybe several!

Then you can take those rocks into town. To the ice cream parlor, perhaps. An ice cream cone costs $2.50? Well, they’ll happily accept 17 rocks for payment instead. From the one creek only. From some other creek, maybe it would take 38 rocks. Oh, they have a way of telling. They have a machine which can verify the origin of every rock.

Only the ice cream parlor is willing to accept rocks for payment, though. At least, for now. Maybe tomorrow that will change. And somebody else somewhere must accept rocks, right? After all, what is the ice cream parlor going to do with all those rocks?

Now imagine that the creek isn’t exactly a creek… it’s a computer.

The rocks aren’t exactly rocks… they’re large, complicated computer files, generated by a program on the computer. It’s just that it happens to take the computer 17 days to generate a single file.

The ice cream parlor… oh, maybe it really is an ice cream parlor. Or maybe it’s Elon Musk. Who knows.

That’s crypto.

Here’s a much shorter explanation:

Just this week Ed Zitron wrote:

I suppose it could be argued that at the most abstract conceptual level, crypto is not inherently a scam. But real life isn’t that abstract.

I might also just argue that crypto is cool and its coolness, plus its scarcity, is the thing from which it derives its “value”. And I think this would essentially be true. Think back to the 1985 Topps set. That Mark McGwire rookie was very cool for a long time. The Thad Bosley card that I shared last week? Well, I might think Thad Bosley is cool, but the market might disagree.

I’m not going to get into the “deeper” concepts of crypto here. Whatever validity such things might have had or even might still have, we’re not in an abstract conceptual state here. We’re in a state here where numerous ads trying to encourage you to invest in cryptocurrency were aired during the Super Bowl. The people placing those ads spent huge amounts of money. These aren’t just rocks from the local stream at this point. Crypto has gone mainstream.

Mainstream scam, that is.

I think there is some sincerity out there on the part of people engaged in crypto mining and trading. But I also think there is some sincerity out there on the part of people engaged in exotic financial instruments like derivatives and complicated market bets. By “sincerity” I am getting at the idea that money is a game and so long as you don’t outright break the rules - well, maybe bend them just a little - it’s all good.

I’m not a believer in zero sum thinking. I subscribe to something more along the lines that a rising tide lifts all boats. I also believe that a healthy economy requires that money is constantly changing hands, that goods and services constantly flow.

Nevertheless, wealth generally comes from sort of extraction, either of resources (agriculture, timber, mining, etc.) or of labor. Extraction takes other less overt forms as well. You may know how politicians and others have long cited the idea that government takes tax money and directs it into poor minority communities. The reality though is that such mechanisms overall have tended to extract wealth from poor communities and direct it toward rich ones. Not unlike what Ed Zitron said.

Whatever nominal merit you or I might have found in cryptocurrency from concept through its earliest stages, at this point it’s obvious that it’s just the latest exotic way that shady types in the finance and tech sectors are trying to make a lot of money without doing anything remotely productive for society.

Admittedly it can be hard to evaluate the relative level of scamminess of things. Also it can be hard to separate raw scamminess from other untoward qualities of things. And, yes, one of the things I’m getting at here is the obvious comparison of cryptocurrency against actual currency, which is intimately associated with governments which have done all sorts of terrible things. I think though that buying too deeply into this line of argument leads to nihilism or some other flavor of antinomianism. If that’s where you want to go, well, okay, have at it. But the dissonance of stomping your feet down Nihilism Road whining about how legitimate what you’re doing is… well then.

If we get away from the construct of what cryptocurrency is and just try to talk about the idea of “investing in it” then I would just argue that while it might not be in form, in spirit, crypto is just a Ponzi scheme. If you engage in actual crypto mining, that’s a little different. But if you “invest” in other people doing so, what you’re frankly “investing in” is the idea of getting in at the ground floor and getting out before the Secretary of Agriculture announces that the orange crop is terrific. You’re not in it for the oranges. You’re just gambling on being early enough to the game - which is exactly what an investor in a Ponzi scheme is doing, whether they know it or not.

I wasn’t expecting to go off on crypto. Others have done so far better than I have. But after watching the Super Bowl, it struck me that the biggest story coming out of it was all those damn crypto ads, and I had more to say about that than anything else from that night. If you want my quick takes on the rest of the night though:

• Halftime show was excellent, remarkly well conceived and executed. I am not the biggest rap or hip-hop fan but that was thoroughly entertaining.

• I don’t really watch football anymore; while I understand the allure of the way the game is played today, I really thought that for a close game, it was mostly dull, the pacing all weird, the game at this point totally overshadowed by the surrounding spectacle, tha spectacle including the stadium itself.

• I do feel like watching the game is sort of an act of keeping up with the Joneses and that’s not a complaint, just an observation. However dumb I found a lot of the surrounding trappings, especially all of the commercials featuring singing and dancing foolish white people, I do at least appreciate feeling like I’m somehow in tune with what all is going on. If I hadn’t seen all those crypto commercials I would have been very confused by news stories this past week.

• Stan Kroenke is still a jackass.

Since I mentioned Ponzi schemes, I’d be remiss not to share a song from The Ponzi Scheme, the second studio album from Firewater, which came out in 1998. It doesn’t seem like any official videos exist from the album but we gave “Dropping Like Flies” solid rotation on WESN when the album came out:

For the longest time, I misunderstood the title of The Fall’s 15th album. I thought it was The Infotainment Scam but it’s really The Infotainment Scan but then really who knows what Mark E. Smith was ever thinking. I do enjoy though this incoherent after-the-fact video, constructed by could-be-anyone, for “Paranoia Man in Cheap Shit Room” which inexplicably includes footage of Randy Johnson pitching:

My god, what would Mark have had to say about crypto? “Paraguayan Hydropower” does seem like it could have been a Fall song…

Happy mining!