Venture capitalist Albert Wenger muses in his blog Continuations on the advantages and mechanics of universal basic income, and how cryptocurrency can help build such a system.
“This could happen at the existing nation state level and I was pleased to find out that some central banks are actually thinking along this direction. Even more tantalizing is the idea that with crypto currencies such as system could come into existence that lives outside the confines of nation states and helps bring about a global Universal Basic Income.”
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On the usefulness of Google Trends for spotting previously invisible correlations…
And continuing the theme, this interesting post from Dominik Vacikar on Hacker Noon opens with a comparison of searches for “bitcoin” vs “blockchain”. I confess I didn’t realise the disconnect was so strong.
He goes on to explain the difference between hype and bubble – useful and interesting, and it leads me to the conclusion that the talk about bubbles could be pure hype (confusing, I know).
“Trading cryptocurrencies is very social driven — check Twitter, Reddit, Facebook, etc. There are many people trying to hype their own investments, but also many scammers (and I’m not even talking about all the click-bait articles). Given the extreme volatility of most of the coins, this is causing (and will continue to cause) many irrational market moves.”
Dominik throws in a good explanation of crypto trading, and his predictions for the rest of 2017.
“I’m expecting a lot of inexperienced investors will lose money on ICOs — which will further foster discussions about regulation”
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Etienne Brunet offers us a really useful list of companies operating in the ICO space – from protocols to lawyers, from hedge funds to venture capitalists… with a cool market map ‘n all.
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On Thursday I told you about eyebombing… It turns out that there’s a Googly Eyes Foundation!!! Which will send you some much-needed googly eyes! This just gets better and better.
For once I totally agree with Izzy Kaminska of the FT. While I usually enjoy her anti-crypto musings (and occasional rant), I often come away feeling like she’s missing the point. But in today’s article, I think she nails it:
“For the most part, the question that really needs asking is this: What sort of legitimate organisation really benefits from a decentralised or headless state? Also, what sort of company benefits from decentralised funding options or from providing decentralised services? The answer is almost none.”
Notice that she qualifies the answer with an “almost”, which is wise. It leaves open the possibility that there may be some cases in which it would work. But few.
“Decentralisation is, in almost all cases, not an efficiency. To the contrary, it’s a cost that adds complexity and creates an unnecessary burden for both users and operators unless centralised layers are added on top of it — defying the whole point.”
In fact, as Ronald Coase – the originator of “the theory of the firm” – would tell you, centralization emerged as an antidote to the high cost and low reliability of decentralization.
“Decentralisation also undermines professional and corporate accountability. If no-one is prepared to take credit for building an organisation which adds value to society, it implies there’s either an unheard scale of altruism at play or the organisation in question is probably not adding value to society because there’s no real credit to claim.”
Ouch. But, yes.
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Bloomberg published an article that, judging from its title – “This Blockchain Bubble Might Be a Good Thing” – promised to explain to us how the current froth in the digital token market was beneficial. It failed.
Apart from a list of recent initial coin offerings, and a tentative hint that maybe public projects could be financed this way (not sure what that has to do with ridiculously inflated prices), the article had very little to say about why bubbles could be productive.
It did, however, offer this gem:
“A recent token offering called PonzICO promises to apply the proceeds towards buying the founder a Tesla. Token holders get nothing more than the right to vote on the color of the car, and somehow even that project collected nearly $3,000.”
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ICOs are cool. It's also still possible to make a business that earns money though.
Grab your kid (if you have one – if you don’t, skip this step), a bag of googly eyes, and your camera or smartphone. Head outside. Stick eyes on just about anything. Take a picture. Keep going until the giggles take over.
These are from Vanyu Krastev of Eyebombing Bulgaria. (I didn’t know there was a term for it! Eyebombing! That just made my day.)
Maybe there’s something in the airwaves, but cars and blockchain seems to be a hot topic this week. Apart from the two posts that I published here, The Economist posited that true autonomous vehicles were a ways off still. And Ian Bogost opens his article in The Atlantic with a musing on why his car can’t pay for its own parking.
The article contains some contradictions, not least that Ian seems to conflate blockchain and cryptocurrencies – not the same thing. True, blockchain emerged from cryptocurrencies, and the coopting of the technology by centralized financial institutions might upset some of the cryptoanarchists. But I doubt they care that much.
And while some starutps see blockchain as a decentralizing, empowering technology, most incumbents view it as an opportunity to improve processes and lower costs. Even die-hard anarchists are unlikely to have a problem with that.
The last paragraph makes no sense:
“Likewise, Bitcoin’s triumph hinges mostly on the financial success of speculators who never had any intention of using it as currency, and who appear to have strip-mined it into oblivion in the process. Similarly, blockchain’s future seems tied to the short-term vision of investors and entrepreneurs willing to speculate on a hypothetical, distributed utopia without hedging against the consolidated autocracy it seems equally likely to realize. “This is what happens,” Greenfield says, “when very bright people outsmart themselves.””
True, bitcoin is more about speculation than currency today. But all investments, even bitcoin, are valued according to future potential. Bitcoin has value because it could one day serve as an alternative form of payment. (Note that I am not saying that it deserves its current valuation – that’s subjective.)
As for taking apart the last two sentences, I don’t know where to begin, so I’ll just leave it.
To be fair, Ian does come clean at the beginning of the piece that he doesn’t really understand cryptocurrencies (in which case I would suggest not writing about them). And his articles are usually excellent – even in this one, his writing flows, and that’s not easy, especially when writing about blockchain technology.
(And Atlantic, please, please get rid of the ads that break up the text – they very much detract from the quality of the prose. And please don’t tell me that I should pay to be able to enjoy your writing – I already pay for a print subscription, and telling me that that’s not good enough for your web articles makes me feel unvalued as a subscriber.)
In it, he exposes the tulip bulb mania as a myth – it was futures prices that went ballistic, not actual trade prices. And there was a crash, but it was for external reasons (in this case, war).
He goes on to highlight the importance of myths. And shows how cryptocurrencies are a myth, but so are fiat currencies.
“The U.S. dollar is worth, well, a dollar because…well, because the United States government says it is. And because currency traders have established it as such, relative to other currencies. And the worth of those currencies is based on…well, like the dollar, they are based on a mutual agreement of everyone that they are worth whatever they are worth. The dollar is a myth.”
And so is gold.
“Gold, of course, has intrinsic value because…well, because us humans think it looks pretty, I guess. In fact, it turns out gold — at least the idea that it is of intrinsically more worth than another mineral — is another myth.”
I especially liked the part where he pokes a bitcoin-sized hole in the argument that the cryptocurrency is worthless because it can’t be used in stores.
“Can you use Bitcoin to buy something from the shop down the street? Well, no, but you can’t very well use a piece of gold either, and no one argues that the latter isn’t worth whatever price the gold market is willing to bear. Gold can be converted to dollars which can be converted to goods, and Bitcoin is no different. To put it another way, enough people believe that gold is worth something, and that is enough to make it so, and I suspect we are well past that point with Bitcoin.”
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I can’t really explain why I love this so much… Maybe it’s the continuity in spite of the fragility? (Via MyModernMet.)
The news last week that messenger app Kik is creating its own cryptocurrency for users caused some ripples in the blockchain sector, but deserves even more.
First of all, Kik is a pretty big deal for the millennial generation. Apparently it has over 15m monthly users, most of whom are between 13 and 24 years old.
The cryptocurrency – called Kin – will be used to reward developers, and to let users buy things within the app.
Why reward developers? For building and maintaining apps for the platform. In other words, for strengthening the ecosystem.
If this sound familiar, it should: the bitcoin protocol also issues bitcoins to reward the maintainers of its ecosystem. Although the mechanism is different, the principle is similar.
Why does Kik want an ecosystem? The more one can do with a platform, the more people will use it.
To get a glimpse of the potential, we only need to look at Tencent’s WeChat, a Chinese messaging platform on which users can buy things online and offline, book trips, read the news and make doctor appointments. And a whole lot of other regular activities, including – whaddyaknow – send messages. Its 889m monthly users would make any potential competitor drool.
If that sounds familiar, it should. Last week Coinbase also hinted that its new Token platform was inspired by WeChat’s business model.
Compare this to Facebook’s model – it started out hoping that developers would build for its platform, but pivoted to the acquisition method of growth.
The development of Kin (to be built on ethereum) is likely to inspire other mobile services to think about how to incentivize their communities to take care of the ecosystem – and to increase “stickiness”. If you can both earn and spend on the app, without friction, users will stay longer.
And the generation and use of an app-specific currency will foster the development of microcosms of economic activity – with the impressive data harvesting potential that that implies. Given the massive sizes of the potential markets, the microcosms could soon become macrocosms.
And in the process, show the market that initial coin offerings (ICOs) are not just about circumventing venture capital. Kik plans to issue Kins through an ICO (selling 10% of the total coinage) within the next few months, despite having raised over $120m to date. The most recent raise gave it a valuation of over $1bn status. This would make Kik the most well-funded company to raise an ICO, as well as the most-used service.
The fact that WeChat’s owner Tencent is a major stakeholder in Kin just adds to the intrigue.
So, who’s next? Facebook, with its sprawling ecosystem and obvious desire to emulate WeChat, is an obvious candidate. In terms of size, its 1.9bn monthly users dwarfs that of WeChat. But WeChat’s users spend an average of4 hours a day on the app (vs an average of 1 hour for Facebook).
Could it be that the metrics are shifting more to engagement than size?
The International Business Times compares the regulatory environments for blockchain startups in Singapore and the US, and advocates a “sandbox” approach.
““There is much more clarity in Singapore than there is in the U.S.,”… Blockchain technology is moving too fast for regulators to keep up. So startups are “stuck trying to minimize the risk” of legal issues, Isakovic said, rather than focusing on their building product and their user base.”
The problem is that the US simply can’t do agile legislation with so many regulators looking at financial and data services.
According to Wikipedia, these are the financial regulators responsible for US-based activity:
Securities & Exchange Commission (SEC)
Commodity Futures Trading Commission (CFTC)
Federal Reserve System (“Fed”)
Federal Deposit Insurance Corporation (FDIC)
Financial Crimes Enforcement Network (FinCEN)
Financial Industry Regulatory Authority (FINRA)
Office of the Comptroller of the Currency (OCC)
National Credit Union Administration (NCUA)
Consumer Financial Protection Bureau (CFPB)
National Association of Insurance Commissioners (NAIC)
National Futures Association (NFA)
In addition, each state has its own banking authority
And here is the list for Singapore:
Monetary Authority of Singapore (MAS)
Spot the difference?
Streamlining the US regulation will mean consolidating organizations, something that all stakeholders are likely to lobby against.
So, it doesn’t look like there is a solution, which means that the US will lose out to other financial centers as a seat of innovation.
We don’t know what the long term effects will be, but it is likely that we start to see the results in the growth and trade figures in the medium term.
“Analysts said that despite tighter scrutiny, the outflows were likely to remain strong for years to come, with companies and individuals looking for better investment opportunities while safeguarding their money against a weakening Chinese economy and a falling yuan currency.”
The most interesting part is that bitcoin is not mentioned. At all.
You may remember that the need to stem outflows was given as one of the reasons for the central bank’s clampdown on bitcoin exchanges a few months ago.
It turns out that the main methods used are fake invoices, false trade records and invalid customs forms. This disclosure could end up boosting blockchain investigation, since use of the technology would make document falsification much more difficult, if not impossible.
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Catching up on podcasts… This from an FT Tech Tonic episode from last November, which featured an interview with Yuval Noah Harari, the author of Sapiens and Homo Erectus:
“We often tend to confuse intelligence with consciousness when we speak about AI – people jump to the conclusion that it will also be artificial consciousness. But actually consciousness and intelligence are very different things. Intelligence is basically the ability to solve problems, whereas consciousness is the ability to feel things… For millions of years, intelligence has been progressing by way of consciousness. In humans, the two are inseparable. We solve problems by using our emotions and feelings… Maybe with AI and computers we are discovering a completely independent way towards intelligence that bypasses the neural states of consciousness. The future might be super-intelligent entities devoid of all consciousness. This is a very frightening thought.”
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An excellent and well-deserved profile of my friend Rose Chan, founder of the blockchain working group at the World Bank. She spoke at Consensus last week, on the “Global Issues” panel – the video should be up on the CoinDesk site soon, it’s worth watching.
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This is amazing… The youngest ever qualifier for the national spelling bee is 5 years old. (Via Axios.)
Yesterday I talked about how the blockchain can underpin shifts in the car industry. As I mentioned, most of the utility revolves around the handling of data. Let’s look at that some more, because I believe it’s a much bigger use case than most realize, and one which will generate entirely new business models. What’s more, I don’t think it’s optional.
A report issued last year by McKinsey valued the annual revenue opportunity in car data by 2030 at between $450m and $750m. (I tend to not trust value figures given in reports like this as the variables used are subjective at best, but it serves to show that we’re talking about a lot.) Another McKinsey report highlighted that data collection will become a key focus of the automotive sector over the next few years.
I believe that the change will be deeper than that – driverless cars will do to the car industry what smartphones did to the telecommunications sector. The main function is still there, but the additional services blur business boundaries and move a large part of the value to the peripheral service providers.
Here is a list of just some of the services that autonomous car data can fuel:
Bear in mind that the car companies can provide some of these, but most will end up being offered by tech or financial startups, or even innovative incumbents.
Toll payments is a particularly interesting use case, given that it could transform the financing of public roads. And it points to an entirely new, autonomous, data-driven business model.
In the current system, the user/driver pays the toll. But what if the car itself paid the toll, from its account that gets topped up when individuals pay to ride in it?
Each driverless car could become a self-sustaining business. Income would come not only from usage, but also from the “selling” of the data each car generates. For instance, a vehicle tootling around a city could earn 1 ether for each GB of data transmitted to municipal sensors. The local government could use that information to optimize its expenditure on road maintenance, garbage collection and other services.
Or, a municipality could use the data to calculate tariffs on roadside billboards, charging advertisers according to the number of cars that drive by (much like advertisers pay according to traffic on websites).
Vehicles could also earn income through in-car advertising. This could subsidize or even pay for in-car entertainment, which itself generates data that would be of value to content producers and lifestyle companies.
Autonomous cars will effectively be an extension of our mobile phone, something both Apple and Google are very aware of. After all, what will we do in the driverless car as we are ferried to our destination? Pretty much the same stuff we currently do on our smartphone: talk to friends or colleagues, listen to music, watch a video, check the news…
So, it makes sense that an account on our smartphone pays for our automobile use, automatically and according to how many kilometers we travelled. We hop in, press the sign-in button on the dashboard (which then connects the car to our phone), and sign out before we hop off.
Here’s where blockchain technology becomes an essential platform: the colossal sharing of data between our phones, the cars, the municipality and the related services.
Under today’s system, the sharing of data is possible but complicated, with permissions, APIs and security measures adding layers of friction and risk.
On a blockchain platform, access can be on a selective, needs-driven basis. Ownership can be shared when desired, and validity can be trusted in a frictionless, secure and flexible ecosystem.
Surprisingly, according to the McKinsey survey, privacy doesn’t seem to be a big issue. 88% of consumers were comfortable openly sharing their data with third parties. Interestingly, the figure went up to 93% in China, the country in which over three quarters of respondents would switch to a driverless car if no additional cost were involved.
The report does highlight the changing perception of data – that it can be used to pay for things.
“Data connectivity will generate a vast set of benefits that customers will likely want to pursue, leveraging their personal data as “currency.” The value represented by this “currency” is already significant and expected to grow rapidly over the years to come.”
While the survey focuses on the smart cars in production today, the findings are even more relevant to the autonomous cars of tomorrow.
Blockchain’s main innovation is a new way of handling information. So it’s not hard to see how, in an emerging sector that both generates and depends on data, the technology evolves from being a luxury to a necessity. Without it, friction will persist, inefficiencies will keep costs high and adoption will have to overcome even more obstacles.
With the development of resilient blockchain platforms that underlie the new services and business models, the rollout of autonomous cars will trigger a wave of further innovation and growth, based on the fluid and efficient handling of information. And metaphors referring to data as the “new oil” become even more appropriate and relevant.
Replacing a CEO is a big thing. It implies a change of culture, strategy and direction, which – coming from the second largest car maker in the US (by sales) – sets the tone for the entire market.
According to the New York Times, outgoing CEO Mark Fields failed to convince the board and investors that the company was moving fast enough on driverless cars.
He’s being replaced by Jim Hackett, who had been running the “mobility services” division, which covers future products such as autonomous cars and ride-sharing functions. Previously Mr. Hackett was CEO of office furniture maker Steelcase – in other words, he knows a thing or two about usability.
The change highlights the automaker’s awareness that just making cars is no longer an option. Profits have been declining, and competition is looming from outside the industry – Apple and Google are investing heavily in driverless car technology, and Tesla has a greater market capitalisation than Ford even though the latter’s sales are more than 22x.
It’s not like Ford has been doing nothing on this front. Earlier this year it invested $1bn in Argo AI, with the aim to build driverless cars. It’s a bit behind the competition, though: early last year, GM spent almost $600m on Cruise Automation, with the same aim.
Toyota began work on autonomous vehicles back in 2005, and allegedly holds more patents in the field than any other company. Earlier this year it test-drove its second-generation prototype autonomous vehicle.
Once the mechanics are worked out, blockchain is the logical next step. Why? Because of the data.
With autonomous driving, data is just as important a fuel source as electricity. Data on the surrounding environment feeds the decision-making process that propels the cars down the road and avoids obstacles.
To build intelligent algorithms, a lot of data is needed, much more than one company’s sensors can generate. What’s more, data held in proprietary silos is obviously not as useful as data shared across a decentralised database that can be verified, updated and easily accessed by all operators.
One of Toyota’s partners, BigchainDB, last week revealed the Autonomous Vehicle Data Exchange (AVDEX), a live prototype which allows researchers to buy datasets from data producers. The objective is to pool and monetise collected information.
Another partner, Gem, will adapt the blockchain applications it has been developing for the healthcare industry to the automotive sector, developing usage-based insurance policies.
Dallas-based Oaken Innovations, winner of the Dubai Blockchain Hackathon and finalist in CoinDesk’s Consensus 2017 startup competition, is developing a blockchain-based car sharing application which handles access and payments through a mobility token.
And Israel-based Commuterz is working with TRI on a P2P carpooling solution.
These are by no means the first blockchain applications aimed at the automotive industry. Among other projects underway are the blockchain-based platform developed by German energy conglomerate RWE’s subsidiary Innogy to charge electric cars. AT&T recently filed a patent for cryptocurrency car payments. German auto parts maker ZF Friedrichshafen, Innogy and Swiss Re are working together on a blockchain project called Car eWallet, which hopes to enable cars to pay for their own tolls, parking and charging. And startup BlockBox won the Consensus 2017 Hackathon with its application to collect crash data in blockchain-based “black boxes”.
Also, other car makers are looking at the technology. In April of this year, Porsche launched a blockchain startup competition. And Daimler announced that it was joining the Hyperledger blockchain consortium.
These pilots and applications are merely scratching the surface of the potential – just the data handling alone will be huge. But they are a good start, and provide a relatively broad base on which to build.
And as the developments at Ford attest, the entire sector is pointing towards an intensification of driverless car development – which in turn, will fuel the development of blockchain applications aimed at making our roads safer and cities cleaner… and saving users money.
I’m back from Consensus 2017, which was intense. Fascinating panels, charismatic individuals and more ideas than one can possibly absorb… My only regret is that I didn’t have time to talk to more people. I’m already looking forward to the next one.
Benedict Evans writes about how we can figure out if a technological innovation is a fad or is the beginning of something:
“Imagine if you had seen the Wright Brothers’ Flyer in 1903. It was small and flimsy, and it could only carry a single person a few hundred meters. But it was a theoretical breakthrough, and it was entirely clear that it could be expanded upon to get to something that could carry several people several hundred miles, and perhaps more.”
It doesn’t sound as obvious as it should be:
“The question, then, is not whether something works now but whether it could work – whether you know how to change it. Saying ‘it doesn’t work, today’ has no value, but saying ‘yes, but everything didn’t work once’ also has no value. Rather, do you have a roadmap? Do you know what to do next?”
Benedict totally nails one of my main concerns about current blockchain initiatives, especially in banks – that we’re trying to use a new technology to do the same old things.
“This is how generational shifts work – first you try to force the new tool to fit the old workflow, and then the new tool creates a new workflow. Both parts are painful and full of denial, but the new model is ultimately much better than the old.”
If he’s right, we will end up with new processes, paradigms and attitudes towards finance, data handling and communication. There are signs that it’s happening, but unfortunately most of the innovative applications out there (I’m thinking of Brave, Storj, Melonport, Civic and the like) are probably before their time. If they can hang on until the zeitgeist catches up, they’ll be industry transformers. If not, someone else will build on what they did, a few years down the line.
“One way to solve this problem is to try to separate the fundamental capability that’s being proposed from the specific uses. Edison thought that sound recording would be good for sermons, not music, and it’s hard, and perhaps impossible, to tell what people will use the new thing for. But sound recording and one-to-one and one-to-many sound transmission were much more fundamental changes than the ability to listen to a sermon on demand. What mattered was seeing the value of the capability, not predicting any particular applications.” (emphasis mine)
I’ve written elsewhere that I thought that the emphasis on decentralization was ignoring the possibility that we don’t really want it. But perhaps I’m the one that’s missing the point. It doesn’t matter whether or not we want it. The question is, now that we can have it, what shall we do with it?
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Balaji S. Srinivasan and Naval Ravikant published an epically insightful overview of digital tokens on Medium.
“The most important takehome is that tokens are not equity, but are more similar to paid API keys. Nevertheless, they may represent a >1000X improvement in the time-to-liquidity and a >100X improvement in the size of the buyer base relative to traditional means for US technology financing — like a Kickstarter on steroids.”
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Chris Burniske of ARK Invest shared on Twitter is Token Summit presentation on ICO valuations – technical, but illuminating. One thing is calculating estimated future value if the asset has a market price. But what if it doesn’t yet?
TechCrunch gave the best explanation I’ve seen on why messaging app Kik’s decision to issue an ICO is such a big deal. Apart from being the first mainstream service to use this relatively new crypto financing method, it reveals an innovative strategy for incentivizing the ecosystem of developers.
“Most people are aware that a token sale (or ICO) is used to generate funds, but what is often less understood is that holders of the coins that are sold gain ownership of the means of production, or indeed the total output of the decentralized system. That is where Kik believes it can build an ecosystem that rewards developers financially without having to resort to advertising.”
On Thursday I had the honour of attending a session in the European Parliament on blockchain regulation. I won’t go into more detail here, but CoinDesk published my (very brief) summary of the event.
I will say that it was inspiring to see such an influential governing body take an innovation-first approach.
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China’s infrastructure plan: will it provide the base for strong economic growth (possibly displacing the chaotic US as global economic superpower)? Or will it tip China’s debt over the edge?
A huge gamble, but one that it seems it has to take.
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Interesting insight into why low-income people prefer check-cashing companies to banks. Cost, transparency and service. Hmmm, I wonder how else they could get those advantages, without actually having to go to the outlet? Would they want to even if they could? Maybe the human contact is part of the appeal.
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This is intriguing: Palestine is contemplating a blockchain-based currency. It sounds quite official, but it could just be another central bank jumping on the bandwagon – “contemplating” is a long way from implementing. And while the use case is there and the advantages are apparent, the level of coordination needed to execute will be tough in an economy with fractured infrastructure.
What makes this situation unusual is that Palestine is an implicitly recognized state. In other words, it’s sort of sovereign, but not really. Only 70% of the members of the United Nations have recognized it as a state. That is a majority, but it’s… complicated.
Funny, emotional, uplifting, sad and happy. And beautifully written. We all know someone like Ove. This is a book that changes the way you see people.
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According to an article in Wired, the internet dumps us in silos of like-minded people much less than we think.
I’m not convinced, but it is an interesting take that points to a more inclusive future. While I hope it’s right, I think it is focusing on a small, relatively enlightened (the word “relatively” is important here) subset.
I will probably be quiet over the next few days – I’m fighting an awful cold and have to get better before heading off to New York next week for Consensus. Have to.
I’m pulling out the big guns, taking garlic pills, vitamin C, Echinacea and over-the-counter cold remedies. I’m inhaling eucalyptus vapour. And I’m sipping the most vile infusion of garlic, thyme and rosemary – it tastes so awful it has to be good for me.
So, I shall crawl into bed and continue watching the extraordinary Korean series Man x Man on Netflix. I’m thoroughly confused as to the plot, but it is engrossing – I keep hoping all will become clear in the next episode.