Current Water Use of California’s 800 Commercial Computer Data Centers

Interesting analysis in the Wall Street Journal of the current water use of California’s 800 commercial computer data centers:

California’s data centers consume 158,000 Olympic sized swimming pools of water per year, or 104,280,000,000 gallons of water per year. That sounds like a lot. Enough, in fact, that one might wonder what else might consume that much water every year.

It turns out that a single day’s supply of newspaper newsprint requires about 300,000,000 gallons of water. Multiply by 365 days per year, producing the US’s annual consumption of newsprint consumes 109,500,000,000 gallons of water per year.

109,500,000,000 gallons per year for US newsprint > 104,280,000,000 gallons for California data centers. Interesting! Of course newsprint consumption is falling due to substitution by online media! And we know online news is a very small % of online use.

So, for a small fraction of the water use by data centers, over time we can likely eliminate nearly all of the water use for newsprint, not to mention reducing the deforestation caused by newsprint production. Less tree use, less water use = environmental win/win! It’s interesting to consider what other current environmental resource uses will be reduced or eliminated by data centers and online media!

Source – Tweets: 1,2,3,4,5,6,7,8,9,10


VC is the Most Aligned Capital for Companies that Want to do Something Big

A common trope in discussions about startups and venture capital is a potential misalignment of incentives between startup team and investors. I don’t think this perceived misalignment actually exists in most, maybe all cases — and I want to explain why.

The argument goes, “When you take VC, you have to shoot for the moon; smaller outcomes that may be great for the team are precluded.”

First, obvious but important: No startup is forced to take venture capital. In fact, vast majority of successful new businesses do not. The main reason TO TAKE venture capital is in pursuit of a bigger outcome than the startup team believes it could achieve on its own. Hence, taking venture capital ALIGNS interest in a big outcome between the venture investors and the team.

Most non-VC investors are more risk averse than VCs; a startup shooting for a big outcome that raises money from non-VCs ends up MISALIGNED.

The argument continued: “VCs can tolerate higher risk of failure due to portfolio of bets, whereas founders and employees have only one bet.” In the modern era, that’s also untrue. Founders and employees generally make multiple bets as well, in two dimensions:

Founders and employees often have running room to try multiple products within a single startup; hence popularity of the term “pivot”. And, founders and employees often start or join multiple startups throughout their multi-decade careers = a personal portfolio of bets. In fact, some of today’s most successful startups are founded by entrepreneurs whose previous ventures didn’t work nearly as well.

In short: VC is very much not for every company. But for companies that want to do something big, VC = the most aligned capital there is.

Source: Tweets – 1,2,3,4,5,6,7,8,9,10,11,12,13


Sharing Economy Services Reduce Income Inequality

Sharing economy services like AirBnB, Lyft, Uber, et al reduce income inequality as follows:

Once upon a time, only rich people who could afford to build hotels could offer rooms for guests to rent. Thanks to AirBnB, now anyone with a home or apartment can offer a room for rent. Hence, income inequality reduced.

Once upon a time, only rich people who could afford to buy a taxi fleet or medallion could offer car rides to other passengers. Thanks to Lyft and Uber, now anyone with a car can offer rides to other passengers. Hence, income inequality reduced.

The same dynamic of reduced income inequality will play out in each new sharing category. Delivery, field service, personal care, etc. This expansion of economic opportunity and reduction of inequality is a direct result of widespread deployment of disruptive tech, the smart phone. As history has repeatedly shown, putting means of production and technology in the hands of the masses increases their opportunity and income.

Since we are at the very beginning of understanding the full range of real world applications of the new wave of technology, we are also at the very start of the creation of thousands of new opportunities for economic growth and progress for a huge number of people.

Source Tweets: 1,2,3,4,5,6,7,8,9,10

Two Different Types of Relationships Between Prices and Information

In financial markets, one observes two different types of relationships between prices and information.

  1. Type D for Deductive: Consider the available information and then calculate a price. The classical model of how to value things.
  2. Type I for Inductive: Consider the price, assume it contains informational content, and derive the information from the price.

In theory, financial markets operate mainly with Type D, but I think in practice, markets operate mainly with Type I. In the real world, one observes investors and analysts assiduously building models to explain and thereby justify prevailing prices. Paradox? The more one believes the market is Type D, aka the EMH, the more the market actually behaves as Type I. The more you believe the market is efficient, the more information you assume is embedded in market prices.

Hence, the more information you assume is embedded in market prices, the more you operate as Type I, inductively reasoning from prices. Therefor, the more one believes the rest of the market is Type D, the more likely oneself is Type I. Hence the widespread belief in market efficiency leads to inefficiency, as investors reason from prices vs from a priori information?

Is this a robust explanation of boom and bust cycles within a market in which most investors are trying to be rigorously logical?

Source Tweets: 1,2,3,4,5,6,7,8,9,10,11

An Idle Musing on Space

Here’s an idle Friday musing. Unlike many of my contemporaries, although I enjoyed space novels and movies as a kid, it didn’t take the same with me. The common science fiction assumption that people would behave differently in space than they do on Earth always struck me as wrong. Which is why I’m delighted but not enamored with space exploration today. There is so much still yet to do here on Earth.

I think we will get a lot more out of making life on Earth better for the 7+ billion people already here than escaping to other planets. Or, more pointedly, it would be a shame if we just repeat the dysfunctions of human existence on Earth, in space. Which is not to imply that I am not thrilled by what explorers like Elon Musk are doing, I would love to visit Mars when I am 80.

Confirming my nerd status, I have happily watched every hour of Star Trek ever made and so: Live long and prosper, Leonard Nimoy.

Source Tweets: 1,2,3,4,5,6,7

16 Less-Obvious Ideas for How to Expand the Number of “Unicorn” Great Tech Startups

Sixteen somewhat-less obvious ideas for how to expand the number of “unicorn” great tech startups over time — per query by @trengriffin:

  1. More Montessori and Montessori-style, free-form, and/or project-based K-8 public and private schools.
  2. Entrepreneurship magnet/charter schools — specifically designed to produce enterpreneurs, vs cogs in the industrial machine.
  3. Significantly expanded summer tech, science, math, entrepreneurship programs/camps for grades 5-12.
  4. Significantly expanded internship programs at tech companies of all sizes for both high school and college students.
  5. More interdisciplinary college programs — particularly engineering + business, and liberal arts + engineering.
  6. Comprehensive inclusion programs for underrepresented groups for each of the preceding five ideas.
  7. More public research universities should pursue the Stanford/Berkeley mentality/model; also, repeal Bayh-Dole.
  8. Comprehensive legal and regulatory reform to open access to federally-funded research; also, pass Aaron’s Law.
  9. Reform, or better yet eliminate, software and business method patents. Redefine patent trolling as a form of felony extortion.
  10. Fully portable economy-wide benefits, including health care, retirement savings, and immigration status.
  11. Eliminate tax credits for home ownership, and implement tax credits for renters.
  12. Implement tax credits for child care services for working parents.
  13. “Opt in” innovation zones with regulatory relief for various categories of new technology.
  14. More long-lockup capital at all levels of corporate capital structure.
  15. Eliminate tax credits for corporate debt, and implement tax credits for corporate equity.
  16. Zero capital gains tax for equity held for 5+ years, paid for by higher capital gains tax for equity held for <2 years.

Source – Tweets: 0,1,2,3,4,5,6,7,8,9,10,11,12,13,14,15,16


The State of Bitcoin, Cryptocurrencies, Distributed Transaction, and Trust Networks in 2015

Some thoughts on the state of Bitcoin, cryptocurrencies, distributed transaction, and trust networks at start of 2015! A year ago, I articulated my views on Bitcoin in the New York Times, and I wouldn’t change a word today. Over the last several months of 2014, there were three Bitcoin counter-narratives that I will describe and analyze.

The Dumb Critique

First, what I call the “dumb” critique: “Bitcoin BTC currency price dropped to below $300, proving Bitcoin is a stupid idea.” The same class of critics slamming BTC for price falling in 2014 were slamming BTC for price rising in 2013. The only consistency is the slamming. Further, the critique that BTC is bad because it was down in 2014 changes completely if one uses a 2-year window instead of a 1-year window.

BTC was below $14 in Jan 2013. If 1-year performance has been disappointing, 2-year performance has been spectacular. As a general rule, arguments that rely on cherry-picking specific date windows are not very good arguments.

The Smarter Critique

The second critique I call “smarter”: “BTC is too volatile. It goes up and down too much and so cannot be used as a store of value.” This is largely correct at the moment, and yet misses most of the point of Bitcoin as a distributed transaction and trust network.

Bitcoin was specifically designed to use speculation early on to overcome the normal chicken/egg bootstrapping problem for new networks. Attacking Bitcoin for having speculative levels of volatility is missing the point of how the system was designed for this point in time.

Now, yes, in the long run, BTC does need to stabilize, which I think will happen with a combination of scale plus the use of derivatives (hedging). In the short run, Bitcoin is still highly useful as a transaction and trust network in many use cases even with high volatility.

For example, payment applications of BItcoin don’t require users/merchants to hold BTC for any period of time. All of the benefits are still gained. Further, all other uses cases of Bitcoin and the blockchain are unhampered by volatility of BTC. The system continues working just fine.

The network bootstrapping process is happening pretty much exactly as Satoshi designed and anticipated. It’s a thing of beauty.

The Innocent Critique

The third critique I call the “innocent” one. “Are there enough sufficiently compelling use cases for Bitcoin to succeed at scale?” I previously identified many use cases here ranging from eCommerce to remittance, micropayments, and anti-spam. Two particular areas of focus today are (A) used outside the US where currencies plus banks are often awful, and (B) machine-to-machine payments.

At our venture firm, we continue to see an escalating stream of fascinating new Bitcoin use cases and applications from entrepreneurs. In addition, there are entirely new vistas of technological creativity opening up, such as sidechains. The price of BTC has very little to do with the level of creativity of thinking that’s going into new Bitcoin apps, or their usefulness.

By loose analogy, the price of domain names didn’t determine the usefulness of the Internet. This is a broad-based technology phenomenon. What to watch in 2015: New apps, new use cases, international adoption, consumer education, technological innovation and spinoff ideas!

Final thought: The entire Bitcoin system is 6 years old. TCP/IP was 6 years old in 1981. Big things take time. Onward!

Source Tweets: 1,2,3,4,5,6,7,8,9,10,11,12,13,14,15,16,17,18,19,20,21,22,23,24,25,26

Lessons from the Secular Stagnation Theory

Wrapping up my series on the secular stagnation theory with some more things I learned along the way. Again, filter on #stag as desired.

Glaeser: 72.7% of US college grads ages 25+ are employed, vs 39.4% of high school dropouts in same cohort. I’d like to quote Mokyr’s entire essay in the Vox ebook but that would be rude, so read the whole thing here.

Olivier Blanchard: Post-crisis reforms require financial institutions to hold another $3 trillion in safe assets. (!) #stat

Reference for all of the above:

Source Tweets: 1,2,3,4,5,6,7,8,9,10,11,12,13,14


A Few Tentative Conclusions on Secular Stagnation and Our Economy

A few tentative conclusions on secular stagnation and our economy, with a vigorous disclaimer that I am far from a macro economist. It seems a core dynamic of our times is too much capital relative to the number of productive investable economic opportunities. Coupled with a massive global capital flight to quality since 2008, it’s hard to see interest rates rising dramatically anytime soon.

While I am a bull on technological progress, it also seems that much of that progress is price deflationary in nature, so even extremely rapid tech progress may not show up in GDP or productivity stats, even as it equals higher real standards of living. I think economists, particularly on the center-left and left, are really underestimating two factors that are inhibiting investment. The developed world and the sheer level of regulatory burden on business formation and growth, per George McGovern.

On this point I agree deeply with : Many sectors of Western business are now wired to prevent or inhibit new investment. In the developing world, often brutally high levels of corruption and expropriation are making new investment extremely risky. It seems straightforward to identify ways to increase rate of investment and also hard to see how any of that politically happens.

For these and other reasons, we may be living with an oversupply of capital relative to opportunity set for a long time. But this is not necessarily a terrible world to live in. In fact, it might be a wonderful world to live in, for these reasons: Oversupply of capital means that any investable project can get funded. We see that today in tech, and it may broaden from here. We may experience a massive global demographic tailwind, as a huge number of young people worldwide are fully connected to the modern economy.

Virtuous cycle of science and tech advances, with fast-growing number of scientists and technologists globally, may overwhelm expectations. In this world, we can have massive advances in real standards of living even with a formally low investment, GDP, and productivity growth. Beyond that, a world where 7 billion people decide they really do want and deserve an upper-middle-class American-equivalant lifestyle may make all of these current stagnation theories look as silly as Alvin “Secular Stagnation” Hansen now looks 76 years later.

Source Tweets: 1,2,3,4,5,6,7,8,9,10,11,12,13,14,15,16,17,18

Excellent Survey of The Original “Secular Stagnation” Thesis of Alvin Hansen in 1938

An excellent survey of the original “secular stagnation” thesis of Alvin Hansen in 1938 by .

Source Tweets: 1,2,3,4,5