Nepotism vs Meritocracy: Which would you prefer?

If you ask anyone who works at any company, which would they prefer, they would most likely say meritocracy.  Meritocracy is the form of corporate governance that bases rewards and prestige on how much one contributes to the company and the value of those contributions, as opposed to nepotism, which rewards people for who they know, or if they have a personal connection with those in power at the company.

 

I was thinking a lot recently about nepotism and trying to challenge my own preconceptions of the practice and whether or not it is a good practice in the perspective of the corporation as a whole.  I find that when you really sit down and challenge the preconceptions of some of the things around us which we accept without question, we often find that the answers are illuminating and not at all what you would imagine at first glance.

 

Nepotism:  “the practice among those with power or influence of favouring relatives or friends, especially by giving them jobs.”

 

So what is the problem with this behaviour? Especially as China seems to make nepotism a common practice among those in the corporate world so much so that they have a special word for this — “guanxi”.  Most westerners would grimace at the thought that a company would reward some coveted positions in the company only to those who have personal relationships with those in power.  But this practice is widely seen in countries like Japan and Korea as well.  It is very common to see the daughter of a famous politician working at top tier western investment firms, or sons of wealthy businessmen finding their way into positions of power at legal firms.  But is this so bad?

 

 

After all, what is so bad about giving jobs to relatives of those who stand to potentially give your company favorable treatment in the future?  How much different is this from sales and client relationship management?  The line is definitely grey.  Who is to say that the potential business and profits that this practice may bring in isn’t more than the investing the money and effort into developing better talent for actual skilled workers?

 

If you think a bit on this and you ignore all the personal reasons or the negative secondary effects that this practice may breed (a negative impact on moral of the other employees for instance) then really the only problem with using nepotism as an effective way of increasing profits is that it shifts the company focus from the importance of internal capability and talent to that of a dependence on external parties.  Instead of building up your own capability to create value, you defer this to an IOU that you hope an external party will one day reciprocate.  Most of the time, this may pay off if the external party is influential enough to make a significant difference to your bottom line, otherwise employing nepotism won’t be worth the risk of the negative stigma that it would entail.  That is why it is rampant everywhere in corporate life around the globe. Because it works, in the short term at least. (But isn’t this true of most forms of corruption?)

 

But if it is a viable way to curry favour and increase the bottom line of your company, then why is nepotism seen as being an “unfair” practice?  After all, if you don’t like the fact that the son of the golfing buddy of the CEO just took your senior management position in your firm, why don’t you stop whining, and start practicing golf yourself instead?  Why do people complain that it isn’t ‘fair’?  Most likely because the fact of the matter is that nepotism tends to favour people within the same social circles.  And it is much harder for people of lower class statuses to mingle or even get to know people of the upper classes.  So it’s not so much the skill of your golf game that matters, it’s the fact that you would never have a chance to play golf with the CEO at all, because you are not of sufficient social wealth and influence to even interact within those circles.

 

Said tersely, nepotism favours those who have ‘earned’ their right to their position OUTSIDE of the confines of the system, while others in the company must earn their right to their station while operating WITHIN the system of evaluation of the companies’s KPI.  The tension is between those who work hard at the company and do their job well to earn the company profit, and who earn their way up the corporate ladder through merit, vs those who are rich and influential (or their progeny) who earned their wealth doing something outside of the company’s purview.  Those who earned their station via hard work, naturally feel it unfair that those who got a free ride into their position, by way of ‘cheating’.  In fact the game analogy fits very succinctly here.  Those who get their job via nepotism can be seen the same way as a team that wins a football match via paying off the referees.  Namely, they exploited an advantage that is external to the rules of the game, in order to beat their opponents at it.  Nepotism is bribing a judge at the Olympic figure skating championship; it is greasing the ball in the pitchers mitt; it is using steroids before the 100m sprint.  You are winning because you exploited an advantage that was outside of the rule confines of the game.

 

The notion of a ‘fair game’ is one which treats all the players equally and fairly.  Such that the winner wins based solely on their merits of performance within the rules of the game as agreed upon by all the participants.  This is a game which everyone can play, without fear that they would be taken advantage of, and this is the only type of game in which the losers can accept their defeat gracefully, without complaint, commotion, or resentment.

 

If we can all generally agree that nepotism, while potentially beneficial to the corporate body as a whole, in the long term breeds ill will among its honest employees, and also sacrifices internal talent and competence for dependence on the favours of external parties, then why pre-tell, are we in the crypto industry so hell bent on creating Proof of Stake systems? (as in Ethereum)

 

After all Proof of Stake systems, in which your influence in the blockchain system is proportional to the amount of native tokens that you have locked up or ‘staked’ and put at risk to ensure you perform your validation duties faithfully, are just the same thing as nepotism.  It uses the same model which rewards those who earned value external to the system, and bestows advantages to them by giving them influence in the system.  The similarities are plain to see if you just take time to look.  In a Proof of Stake system, you lock up some value in the native token (this is the opportunity cost that you pay to buy your influence).  This amount is static and you don’t need to pay any continual costs while you enjoy this position of influence.  Isn’t this very much like the daughter of the US Senator who got a sales manager job at Goldman Sachs? Her family earned a lot of money outside the system (the company) and they then pay some opportunity cost to get an influential job within the system (commits to spending their time at the company as opposed to working elsewhere), and then while employed, she doesn’t really need to do any real work, because she got the job due to her connections, and the company hired her only to curry favour with the father who is an influential politician.

 

Sounds a lot like a PoS validator!  (Sorry Ethereum, EOS, Tezos, and all the other Proof of Stake blockchains).

 

Compare and contrast, if you will, the lowly programmer, who works their butt off to develop great software products for the company.  Their position in the company is based entirely on their performance and value that they have created by way of real work delivered as software products.  Their commitment to the company is constant, as they constantly have to perform and ‘give time and effort’ to the company in order to maintain their status.  They cannot rest on their laurels.  They not only give up opportunity cost by choosing to work at this company and not another, but they also have to pay the daily cost of their labor to the company, and if they ever ceased to perform or ‘pay’ this maintenance cost or labor effort, then they would be fired.  Doesn’t this remind you of something?  Yes, Proof of Work miners!

 

Proof of Work is the only system that ensures that the game is fair, and that all participants are treated equitably and are equally incentivized to keep on paying the constant maintenance costs to earn wages in the company.  And very much like the system of corporations and capitalism, Proof of Work mining is the only blockchain verification system that has positive externalities.  Just like how employees of a company all pursuing their own advancement has the net positive externality of the company earning profit, PoW mining may soon incentivize research and development in efficient power generation and transmission, developing unused power sources, and even space exploration.

Who says Proof of Work mining is a waste of energy?

 

This is why Bitcoin Cash and only Bitcoin Cash makes sense as a global blockchain.  Because it is the only one that has both the history, and the focus on PoW miners being the most important part of the growing ecosystem.

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Coming to Consensus: Governance is just as important as Blocksize

One of the heated debates that has raged over the years in Bitcoin space is whether the idea of a developer team lead by a benevolent dictator is the appropriate model to employ for a network worth more than 15 billion dollars in market capitalization.  Many have cited examples of how Satoshi, and then Gavin himself were benevolent dictators, and also how some well known projects have been successfully managed under the watchful eye of a wise and benevolent (though sometimes abrasive) dictator such as the Linux project.  It is also true that most civilizations evolve from dictatorships, starting with the tribal chiefs, to feudal warrior kings, to aristocratic monarchs, to emperors.  The transition to a democracy is not always a smooth one, and is mired by both slippages into oligarchies, totalitarian fascism to misguided experiments into socialism.  It is important then, to keep in mind that while most organized groups start as dictatorships, they eventually evolve into a system that is more inclusive of the common people’s will.

Oh, Glorious Leader, shepherd for the weak, show us the way!

Firstly, let’s get the obvious out of the way.  Dictatorships are vastly more efficient than a republic or democracy.  635984715851776795-AFP-551724097This is due to the fact there is little bounds on the leaders power, and his followers will carry out his instructions in the most expedient fashion.  Contrast this to a democracy where leaders are continually second guessed by their opposition, and their political opponents who are all vying for their own chance to run the show.  In a dictatorship, the only way a change of regime is possible is through open and widespread revolution.  This is why despotic Chinese emperors of old made it illegal to congregate in groups of 3 or more, restrict what can be discussed in public and on occasion just committed mass murders of all the academics and scholars for fear that they may spread seeds of dissent and dissatisfaction among the peasants with their pesky logic, philosophy, and ideals of morality. Continue reading

Why Trump Won — If you are reading this, you probably voted Hillary, THAT’s WHY.

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If he can win a rigged election as an outsider, maybe we should give him a fair chance at running the country?

So now that it is all over, all the posturing, all the fake allegations and all the pretentiousness can be dropped.  I can finally say that I am relieved that Hillary did not win the election, and that all the social justice leftists have been shown some humility.  I was one of the few people who was not surprised that Trump won.  I mean, folks in the underground have been warning of poll rigging for a while already and even went as far as predict his win as of Nov 3rd.  I was silently hopeful that all the whispers of poll rigging were true and that most of America was not delusional, and only mainstream media, and the establishment were.  The morning after, everyone around me was asking me, “How the hell did he win?”, “How come nobody saw this coming?”.

My answer to them was basically, that there were those of us who did, but we did not want to speak out about it because to go against the Hillary campaign was to label oneself a racist/sexist/misogynist/hater.  And really, once you (the media) poison the dialog to be about these kinds of politically incorrect topics, there really is no sense in discussing things anymore.  The irony is that those of the extreme left who exonerate free speech and civil liberties, don’t seem to care so much about those causes when someone is saying something that they don’t like.

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Emergent Consensus: Guide to Forking Safely

Early this year, when the debate on how to manage the meta-consensus issue of hard fork management arose I wrote an article about emergent consensus.  This basically outlined the idea behind Bitcoin Unlimited‘s proposal of letting the network decide when it is collectively ready to move the block limit higher, and by what amount.  At the time, I wrote that the issue was lack of good UX tools which would be able to track network participants (whether mining node, or regular full-node) votes and show them in real time.  After all, emergent consensus can only work if there is a sufficient feedback loop so that the collective group decision making process can be facilitated, and overestimates and underestimates can be corrected.  Safe Forking!This is much like how a liquid market of bid/asks facilitates price discovery in every financial market since the beginning of human commerce.  It is only by repeated and constant dogmatization of the block size limit as a ‘sacrosanct’ part of the protocol, has the proponents of a smaller block restricted Bitcoin been able to convince everyone that the limit cannot be changed, lest the network be subject to catastrophic attacks or instability.

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Mining Centralization: The war on Bitcoin’s mining industry

We have all heard about the big problem of mining centralization in Bitcoin.  The deep set fears that somehow, if left unchecked, the miners will collude to defraud the network, and sabotage the whole system, all in order to satiate their own lust for profit.

This is often used as a reason to employ [central planned policy here] or to change the protocol to incentivize some other (more acceptable) form of behaviour.  Of all the ‘decentralization myths’ this one is the toughest to dispel; not because it is any more true than the other myths but because people have an inbuilt selection bias in that they often believe that a system not serving them directly must mean that system is broken, instead of realizing that they way they are interacting with the system may be at fault.  Mining has always been a very liquid market in Bitcoin, and has gone through several phases or generations, and as each new era came to an end there were very loud proponents in the industry that wailed and warned that this new change would mark the end of the network and everything would break.  Detractors said the same thing when mining moved from single CPUs to GPUs and experienced a 1000x increase in efficiency, then again when mining moved to FPGAs, and finally to custom ASICs.  The industry has seen hashrates go from MH/s, to GH/s, to TH/s.  That is a million times increase in just 7 years.  Every time, the complainers were the ones that had some entrenched interest in the current model and stood to lose money or competitiveness.  Maybe they had just bought 10 new Intel Xeon servers just to mine Bitcoins when some genius had the idea to move mining to GPUs.  Or maybe they had just bought $200,000 of GPUs when the first ASICs were released, and were caught holding the bag.  Needless to say, you can always identify the people who stand to lose something given a change by how loud they complain about it.  (Hint: take note on which miners complain about mining centralization the most)

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Ethereum: A Hard Fork Lesson for Bitcoin

imgresEthereum made crypto-history this week by being the first PoW blockchain to execute a hard fork. They claimed it was done after getting unanimous consensus from the community through stake voting which many have criticised as being nothing more than a farce, as less that a total of 13% of the coin population bothered to turn up to vote, and some sources say it was even possibly less than 2%. Nevertheless, the hard fork was devised and coded, hastily tested, and released, and when the fateful day arrived when it was pre-programmed to activate, July 21st 2016, the network indeed split into two. Quietly, smoothly, without much fanfare.

A week before a group of developers and supporters who opposed the hard fork on ethical principles formed a movement called Ethereum Classic, and pledged to reject the new fork which would see the seizure and confiscation of the ETH that the DAO attacker had acquired during his raid. This movement also saw the defection of about 5% of the mining power in the ethereum network.

What happened after the fork block made history. Contrary to what the ETH developers said, the fork did not remerge and the minority chain persisted. At first the block rate was a fraction of the majority chain. But now after 2 days the block rate has stabilized and the minor chain is mining blocks at about the same rate as before the fork. In addition, the difficulty of the mining is only 1% of the majority chain, which adds an economic incentive for miners to mine on the minor chain in order to make more rewards. This second chain represents the split-fork scenario that many Bitcoin core devs have been warning the community that would cause chaos and destroy both systems. Only, it didn’t. At least not yet.

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Bitcoin: Getting to the Moon 101

Easter weekend.  Family reunions, liturgical services, fasting for some, feasting for others, a time for renewal, time to dispel some crypto myths!

Everyone talks about “going to the moon” in crypto but few if any really knows what that means.  Cypherpunks care about privacy and censorship resistance, libertarians care about political ideology and businesses care about making money. But how many of them actually think through how to get there?

I don’t mean in a metaphoric sense, I mean pragmatically. What is the adoption roadmap? What do we mean by ‘moon’? Price?  Resistance to government usurpation? Censorship resistance? Self sustaining system without any oversight?

True, most people who say “To the moon!” are just pumpers or speculators trying to incite a windfall profit from the penny stock altcoin that they purchased for the express purpose of dumping it for a profit on unsuspecting suckers.  But let’s consider a moment the goal of Bitcoin –becoming a widely accepted alternate money to fiat currencies– how does Bitcoin get to there from where it is today?  What challenges and obstacles must it overcome?  What different stages of development and growth must it evolve through?

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Roundtables vs. Honey Badger (0-2)

As the ongoing debate in Bitcoin between the Core and the Classic camp rages on, early signs of tentative order emerging spontaneously from the un-orchestrated chaos can be seen.  For one, most of the intelligent proponents on either side finally seem to have recognized the fundamental irreconcilable differences of opinion on either side of the divide, having spent the last 3 months weeding through the army of trolls and sycophants which always seem to amass around idealogical movements.

escudo-shatoshi

The industry has started to look upon itself in a satirical way, from high profile jokers like Samson Mow, to the absurd display at the Miami Satoshi RoundTable, organized by Bitcoin Foundation Bruce Fenton, which sported such medieval artifacts as an actual suit of armour and a Bitcoin Magna Carta which would make 45 year old AD&D live roleplaying nerds giddy.  The industry has certainly reached its apogee of insanity, absurdity and self flagellation, and it can’t possibly get any worse, and thus, we should expect to see things starting to come back to reality very soon.

Several promising things have been happening recently that give me cause to be hopeful that we may yet see the end of this “Rite of Passage” in the life of Bitcoin:

  1. Core has started to consider a hard fork proposal themselves.
  2. Interest in Bitcoin has been re-kindled in the form of 2000+ (as of writing) new nodes added to the network.
  3. Mining pools have started to implement miner voting systems within their constituents.
  4. New consensus tools have emerged which help bring visibility to and encourage people get involved in, the decentralized crypto-governance process.
  5. A total of 4 past attempts at securing industry participants into binding agreements have all failed to produce consensus.

Let’s examine each in turn.

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How do YOU measure Decentralization?

The disagreements between the ‘big blockers’ and the ‘small blockers’ in Bitcoin are heating up.  Bitcoin Classic is poised to release its first client to compete with Bitcoin Core, and Bitcoin Unlimited has had its first vote on its new feature set.  It is a time of peril in the galaxy…

Now as the credits fade into the star field background picture a big wedge shaped Star Destroyer with the banner reading “Decentralization” filling the screen.  This word is really the Battle Cry of most crypto-currencies, and as I have written in the past, it is so poorly understood.

decentralisation

Everyone wants it, but few know what it is

It is a repurposed term, that simply describes a quality of network topology, transformed into a rallying call of rebellion.  The problem is that almost everyone that I read or encounter in the industry uses this term as a panacea for all the problems that they see in the world today, without actually knowing what it truly means. They believe it because of faith from authority, and through basic reasoning, that it is good and thus must be fought for without actually knowing why.  This is dangerous, as this is how cults start.  The Cult of Decentralization.

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Begun, this Bitcoin Clone War has!

I ask you, dear reader, please forgive me.  I am going to break from my normal “impartial observer” commentary on the Bitcoin space and speak personally about a project that I am involved in, because I believe it matters.  election-ahead-sign-375x250

There is an election going on in Bitcoin space.  At least this is what the media is going to call it very shortly (perhaps in a months time, after it is all settled, as mainstream media is apt to do… always late to the party).  This election, like any, is political.  It is a battle of wills, of differing philosophies, of ways of thinking.  But like all elections, I believe that the will of the people, the majority, will determine the results.

Bitcoin Classic, is an implementation headed by Gavin Andreson, Jeff Garzik, Jonathan Toomim and others, which aims to deliver an alternative implementation of Bitcoin, aimed at addressing the demands of the users and businesses in Bitcoin.

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