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American Factory

Two weeks ago I watched the new documentary American Factory (美国工厂) on a long plane ride. I had read a few reviews but wasn’t sure if I would like it, but it turned out to be excellent. The film, distributed by Barack & Michelle Obama’s production company, tells the story of Chinese automotive glass company Fuyao buying a closed down GM factory in Dayton, Ohio and re-employing 2000 local workers – at half their former salaries… The local American workers are taught glassmaking skills by Chinese that are relocated to Ohio for 2 years.

As is to be expected in such a setting, the culture clashes start immediately. It becomes clear quickly that the Americans are very happy to have jobs again but that they only work for money. There is no pride in their work, in the company or in the products they make. The Chinese on the other hand will sacrifice everything for the business and can’t understand that the Americans are so lazy. The 2 groups try to integrate, but although a few superficial friendships develop that’s about it. For the Chinese the only thing that counts is good quality products and a higher output, even if that means working day and night to get it done.
 

Once the Chinese billionaire who founded and runs Fuyao comes to visit it is clear that he has a very different management style than the Americans are used to. He micromanages and he wants to decide everything, which is typical of self-made Chinese business men. But it’s something that’s difficult to understand and accept for the American workforce. Very recognizable to me after 13 years of working in China and now over 6 in North America. 

Things get really interesting when workers want to unionize, something the Chinese can’t relate to and of course won’t tolerate. Lots of food for thought about the excesses of capitalism, the state of the economy in (rural) US, but also more generally about the meaning of life in different cultures. Work to live or live to work?
 
Highly recommended, also if you have never lived and worked in China. It shows an important reason why the US is on the decline and what you can expect when China will start to take over the world. 
 
Watch the trailer here on YouTube  or the full documentary here on Netflix.

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Fusion energy – a solution for the climate crisis?

The past weeks my research focus has mainly been on potential solutions for the climate crisis. I looked at many climate solutions that are feasible, but most are very hard to achieve. My favourite one is carbon capture, basically sucking CO2 out of the air, which is possible but extremely expensive. When we visited carbon capture company Carbon Engineering a couple of weeks ago I think they told us that one plant would cost about half a billion dollars to build. And if I remember correctly, in order to take out all the CO2 you would need to build 40,000 plants. That means trillions of dollars of investment capital…

I was impressed with what Carbon Engineering achieved though. They may be able to pull this off (there is a demonstration plant already), which is fantastic news, although it remains to be seen if the world is willing to pay for it. But I am optimistic and think there will be solutions for this. Carbon credits come to mind for example, but also the fact that currently the oil & gas sectors get annual global subsidies of over $5 trillion (!). So the money is there, it would just need to get redistributed.

There are many other solutions to go to a carbon neutral or carbon free world, but they all seem to come with their own set of problems. Personally I am in favour of quickly changing the world to nuclear power to solve the climate crisis. Current nuclear technology is light years ahead of where it was a few decades ago, and it is now even possible to build personal nuclear reactors. But the general public is afraid of nuclear power because of accidents in conventional nuclear reactors like Fukushima. That is understandable and I was afraid of it myself for a long time as well. But I know technology has come a long way and we can now build safe nuclear reactors that will not be able to blow up. Of course there is still the issue of nuclear waste, but if that’s the price to pay for stopping climate change I believe it’s worth it.

One thing I had missed so far is the potential of nuclear fusion, which is very different from nuclear fission (current nuclear reactors are all nuclear fission). I have been following companies like General Fusion (located just outside Vancouver), but I did not realize how far they have come until I read an article by my friend Wal van Lierop in Forbes this weekend. Wal is Dutch as well and like me he also lives in Vancouver. He is the founding partner and executive chairman of Chrysalix Venture Capital, which among others invested in General Fusion.

The article that Wal wrote about fusion energy was eye opening to me. It turns out we are only 5 years away from the first proof-of-concept fusion energy demonstration plant and 15 years from a commercial roll out. It could have been much faster but it has been very hard to raise money for fusion energy.

That’s partly because of the difficult technology, but the main reasons seem to be economic and political. As Wal puts it in his article:

Fusion is an existential threat to the existing energy industry. If fusion worked cost-effectively at scale, it would complement renewables and provide abundant, safe, affordable and clean energy for everyone on the planet. International relations and economics would be upended in ways that are hard to predict. Fossil fuel companies would be rendered obsolete. This could cause massive disruption on the world stock markets.

Just a few billion dollars would be needed to bring fusion from where it is today to being commercially viable, and to shorten the timelines to the availability of commercial fusion energy. To me it seems like a no-brainer, especially in the age of the rapidly developing climate crisis. The oil and gas industry has the money to do this, but it also has the power to slow it down because it is not in their best interest. They want to keep on burning fossil fuels, and that is why they fund companies like Carbon Engineering that will allow them to keep doing what they are doing. Don’t get me wrong, I am glad that they fund carbon capture technology because it has the potential to save the world, but it does not give them an incentive to stop mining for oil and gas.

The best thing about fusion energy is that it safe, simply because the process stops once the energy input stream stops, so there is no risk of overheating and blowing up. There is hardly any waste and the waste has a half live of just a few hundred years. And it’s very efficient, to quote the article:

It takes roughly 55,000 barrels of oil to heat 10,000 homes for one year. With fusion energy, it would take one liter of deuterium and tritium, extracted from water, to power those 10,000 homes. And whereas those 55,000 barrels of oil would release 23,500 tons of carbon dioxide, fusion produces no emissions.

To me investing in fusion energy seems like a huge opportunity that will pay off big time, especially once the climate crisis starts really hitting us. It’s something I am going to spend more research on.

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Visiting Hut 8’s bitcoin mining operations in Medicine Hat with my son Scott

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I just came back from a short trip to Medicine Hat in Alberta, where Hut 8 Mining has its largest Bitcoin mining data center operations. I went on the trip with a Chinese investor, and my son Scott (now 11 years old) decided to join us as well. Scott had never seen Bitcoin mining data centers, despite already giving presentations at school about Bitcoin when he was 7 years old, so it was a great opportunity for him.

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Hut 8 Mining operates Bitfury chips inside so called BlockBoxes and the facility in Medicine Hat is our biggest one. BlockBoxes are basically mobile shipping containers full of chips that can be deployed anywhere, which means that in theory you can move them to areas with cheaper power. In reality we invest heavily in the locations where we build our data centers and we negotiate long term power contracts, so in practice BlockBoxes will never be moved.

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Scott really liked seeing it and he loved the ‘sound of money’, the loud buzzing of all the computers running at full speed. If you go inside a BlockBox it is so loud that you need to wear ear protection. He also liked the fact that inside the BlockBox it’s quite cold, but when you stand outside it the heat gets blown out so it’s much warmer.

In Medicine Hat Hut 8 currently operates 56 BlockBoxes that have a total capacity of over 62 MW (as a comparison, a city like Oakland, California, uses about 10MW) and they can perform 515 PH/s (515 quadrillion calculations per second). Just our operation in Medicine Hat currently mines about 20 Bitcoin per day, so at current prices we create over $200,000 in revenue per day. In North America we also have operations in Drumheller, AB, and we are always looking for other strategic locations to deploy our BlockBoxes.

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Hut 8 is doing extremely well, today the company announced its 2019 Q2 results and they were very good. In Q2 the company mined a record 2816 Bitcoins at an average cost of just $2757 per coin, so based on today’s Bitcoin price of $10,800 the company makes about $8000 per coin for the coins it mines (or about $240,000 in profit per day in Q2). I am very impressed with what Hut 8 achieved so far, despite going through a very deep bear market last year in which many of its competitors went bankrupt.

Hut 8 is outperforming all other publicly listed crypto mining companies, simply by focusing on efficient, low cost operations and by only mining Bitcoin. I believe the stock price is very much undervalued: earnings per share were $0.43 in Q2, with the stock price closing at $2.56 today (basically valuing the company at 1.5 times earnings). Of course I am biased as a founder and as a strong believer in Bitcoin, but I believe Hut 8 is a hidden gem and the best pure play exposure to Bitcoin via a public stock.

Note: As mentioned, I am a co-founder of Hut 8 and am a shareholder, so keep that in mind when you make investment decisions. This is not a recommendation to buy or sell securities.

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Another Satoshi wannabe

Nobody knows who the mysterious creator of Bitcoin is. His pseudonym is Satoshi Nakamoto, but despite people trying to find him for years, nobody ever managed to do so. Some names have resurfaced several times (Nick Szabo for example) and others have suggested that Satoshi was a group of several people working together. I don’t think the real Satoshi will ever surface, he or she or they has/have too much to lose. But some people still try to pretend that they are Satoshi.

One of them is Craig Wright, an Australian who not only managed to fool the BBC and The Economist to believe he was Satoshi (by reusing a signature from an old Bitcoin translation signed by Satoshi Nakamoto), but who is now even suing people (using UK libel laws) who call him a fraud. The thing is that nobody who knows a thing or two about Bitcoin will believe you unless you sign a Genesis address or move some of Satoshi’s coins.

But that does not stop others from giving it a try. Today a most-likely-fake Satoshi Nakamoto started a chain of 3 daily blog posts in which he promises to reveal who he is. In ‘The Reveal’ he writes:

Please join me as I end my anonymity in a three-part daily series “My Reveal” that begins today, Aug. 18 – the 11th anniversary of my registration of the domain name bitcoin.org. In “My Reveal,” I will divulge such previously unknown facts as the origin of my iconic pseudonym, the status of my 980,000 bitcoins, and my real-life identity. I’ll also introduce Tabula Rasa, my clean-slate vision for the future of Bitcoin.

The first part today was not too impressive, there was nothing in there that others could not have written. But it is clear the author put some real effort in putting this together. For that reason it will be interesting to read part 2 and 3 that will come out on Monday and Tuesday. I don’t expect anything new to come to light. The real Satoshi would have never used this method and he would know that nobody would believe him just on writing blog posts.

Maybe it’s just a marketing trick from a new company? For sure these posts will get a ton of attention and millions of views over the next 3 days. Whatever it is, I look forward to reading the next 2 posts. You can read them here: https://satoshinrh.com/

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Refugees and Bitcoin

IMG_9329On the plane this morning I was reading the latest National Geographic. The magazine was one of the first to acknowledge how dangerous the climate crisis is and to point out the consequences for humanity and our planet. The current issue mainly focuses on migration, from our ancestors’ move out of Africa to the current migration caused by climate change. Quite eye opening how many people have fled their home countries already and how many more will do so. Hundreds of millions of people will be forced to flee and try to find a new home over the next 3-4 decades. If you think climate refugees are a problem now already you’ll be in a for a surprise a few years from now.

One thing with migrants is that they can’t bring much with them on their dangerous journey. Most travel by foot and they are only able to bring things they can carry. Most have just a mobile phone, some clothes and maybe a few pictures, but that’s about it. Even carrying jewelry (if they have any to begin with) is dangerous because it might be stolen. Many had to leave everything they owned behind. Don’t make the common mistake to think that these people were all dirt poor: many of the Syrian refugees are university educated and lived at least middle class lives before fleeing their country.

Gold bugs often argue with me that in times of crisis owning gold will save you. Their argument is that if the Internet fails during a global crisis Bitcoin can’t be used anymore. My counter argument is often something like: the global Internet will never fail (it’s even more decentralized than Bitcoin) and even if parts fail they will come back online eventually. Next to that copies of the blockchain are even stored in outer space, so you can always get access to your coins in the future as long as you have your private keys. And if the global Internet would indeed ever fail we will have much bigger problems to worry about, then gold won’t save you either.

But if I look at the pictures of the migrants I realize that gold fanatics are missing an important point. Refugees can’t bring physical gold with them, not only is it too heavy (gold bars are much more heavy than most people think), but they are also at risk of losing it. Bitcoin would be much better: they could store it in the cloud while traveling and only take it out through their mobile phones once they are in a safe location. Nothing to worry about, you can even memorize your passphrase instead of carrying your private keys with you.

I do believe that once climate migration will really start, more people will begin storing their wealth on the blockchain. Especially once first world country citizens get hit by the effects of the climate crisis and become refugees themselves. Gold is nice if you live in one place and can safely store it in a bank vault, but not if you are forced to migrate. Nobody knows what will happen in 20 years from now, but I believe we all underestimate the combined effects of the climate crisis. Bitcoin can at least help you to safely store part of your wealth if sh*t hits the fan. Keep that in mind if you need to make a decision about investing in either gold or Bitcoin once the financial crisis hits.

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Back to regular blogging

Next month it is 15 years ago since I started blogging, only a few weeks before we started Tudou.com on October 15, 2004. Originally I used Radio Userland for my blog, but after a year I bought marc.cn and started posting there. The first post on marc.cn is this one in which I thanked Amy Gu to help set it up for me. She was a journalist at the South China Morning Post at the time, but went on to have an impressive career (she got her Stanford MBA, then among others ran Evernote in China, and is now a managing partner at a VC firm in Silicon Valley).

For years I blogged several times per week, but after moving to Canada blogging became more infrequent, partially because of more family obligations (no more nannies, drivers and ayis) and partially because I started to focus more on social media like Facebook and Twitter. Around 2017 my blogging frequency went down to about 1 post per month. I even stopped tracking my readers: I used to have about 50,000 unique readers on my blog, but I have no idea how many are currently reading it (I just installed Google Analytics again to see how many hits the domain still gets).

While sailing 2 weeks ago I started thinking more deeply about social media, centralization and the importance of owning your own data. Then it dawned on me that moving away from my own blog to social media had actually been the wrong move. Simply because you don’t own your data, and companies like Twitter or Facebook can shut your account down without any repercussions. My Facebook account was hacked once and it was shut down at least once because of impersonators (who managed to convince Facebook that I was impersonating myself). My Twitter account has been semi-blocked for almost 2 years, to the point where I even had to switch to another Twitter handle.

So a week ago I decided to get back to regular blogging. For the past week I put a blog post online every day, just to get back into the habit. I liked it because I enjoy writing and it does not feel like a chore at all. However, I feel that doing it daily might be too much of a time investment. It takes me between 30 minutes and an hour to write and edit a post. My time is valuable, but in theory I can make the time for that if I feel it is worth it (I’ll evaluate that in a few months). Or I can write shorter posts like other people who write daily posts like Fred Wilson (daily posts for 16 years) or Seth Godin (11 years), and only post longer essays every now and then. Not sure yet.

I do have enough topics to write about, that is not a problem. I have at least 7 topics in my head right now that I could write a post about. I am also not sure if I should mainly focus on my personal passions such as Bitcoin and the Climate Crisis, or if I should write more about my private life as well (like I did a lot in the early days of this blog). After being badly hacked early last year I learned my lesson that there can be a serious downside to oversharing. But a personal touch is important as well of course. I guess I need to find the style that I like best, I have not figured it out yet. I plan to start with posts a few times per week, but it could be that I will increase the frequency.

My email subscription still works, so if you want to read my posts regularly feel free to sign up (there is a sign up box on the left of this post). Although RSS is not so popular anymore after Google shut down Google Reader, you can still get all my new posts on other feedreaders such as Feedly.com as well (create a new feed and just input marc.cn in the content field). Thanks for reading!

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Suicide watch

This morning I woke up to the news that Jeffrey Epstein managed to kill himself in his jail cell in Manhattan. In a way it did not surprise me, he had tried to kill himself less than 3 weeks ago as well and in his situation he did not have much to lose anymore. However, what struck me is that he was on suicide watch. How is that possible?

When you are on suicide watch you should not have the possibility to commit suicide because you don’t have the means to do so. At the same time you should be under constant surveillance, so that whatever you try can be stopped on time. Wikipedia describes it as follows:

People under suicide watch are put into an environment where it would be difficult for them to hurt themselves. In many cases, any dangerous items will be removed from the area, such as sharp objects and some furniture, or they may be placed in a special padded cell, which has nothing outcropping from the walls (e.g., a clothes hook or door closing bracket) to provide a place for a ligature to be attached, and with only a drain-grill on the floor. They may be stripped of anything with which they might hurt themselves or use as a noose, including shoelaces, belts, neckties, bras, shoes, socks, suspenders and bed sheets. In extreme cases the inmate may be undressed entirely.

Suicide watch generally involves the subject’s being under continuous or very frequent watch of a guard who will intervene if the subject attempts to harm themselves.

To me something seems not right here. A super high profile offender who already tried to kill himself 18 days ago manages to commit suicide while on suicide watch? Like I said on this blog before, I am not a big believer in conspiracy theories, but even for me this is a bit too much. Maybe other news will come out that will ‘explain’ how this was possible, but let’s just say that this is very convenient for many other high level people (including Donald Trump -who called Epstein a ‘terrific guy’- and Prince Andrew, but also Bill Clinton) that were directly and indirectly implicated in the case against Jeffrey Epstein.

The criminal case will now be dismissed, although civil cases against his estate will still continue. We will likely never know how he made his money  and I wonder if we will ever hear what was on the compact discs with videos and pictures (allegedly labeled with the names of young girls and older men) that were found in his safe.

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Twitter messing around with my new account?

Not sure what is going on, but a day after I wrote a blog post about the Twitter issues with my old Twitter account, my new Twitter account started having issues. I posted a tweet about Bitcoin dominance with a picture of how Bitcoin dominance changed over the past years. Shortly after that someone replied that Twitter had marked the tweet as ‘potential sensitive content’.

No idea why that’s the case, there is nothing sensitive about it. Is someone at Twitter messing with me or is this just a simple glitch? A good thing is that none of my other posts so far show the same message, on my old account none of my pictures or with or links to other sites were visible anymore. So my assumption is that it is just a piece of artificial intelligence software playing up. If it happens again I’ll post it here.

See below for pictures of the Twitter post, first the way the post looks now for people whose settings do not allow to see sensitive content (=anybody who does not specifically allow it) and below the post as I posted it, with a in my opinion not very sensitive screenshot.

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Interest free mortgages

You know a financial crisis is around the corner when interest rates on all government bonds are negative. This happened in the Netherlands this week, when the coupon rate on every duration of government bonds turned negative. It means that if you buy a Euro worth of 30-years government bonds you will get less than one Euro back in 30 years. That’s not good news for investors, but they still buy these bonds simply because they think it’s less risky than buying other investment instruments. They prefer to get a small negative return, but one where they know they will get their money back (assuming governments never default on debts, in my opinion a big IF in the high debt world we live in), to investing in other assets that may give even lower returns.

But what does this mean for consumers who take out loans? Well, if you are in Denmark and you are looking to get a 20-year fixed rate mortgage, you can now get one where you pay 0% interest. So you borrow $100,000, you pay no interest and after 30 years you pay back $100,000. Crazy? Yes, but it gets even better. For a 10-year mortgage you can actually get a -0.5% rate, meaning that you borrow say $100,000 but after ten years you only have to pay back $95,111. In reality it is a bit more complicated of course, with some additional costs and monthly payments, but you get the gist.

The only reason this is possible is that investors (who underwrite these mortgages) are willing to accept negative returns, because they see no better investment opportunities. Investors are scared of the current situation in the financial markets and think it might take a very long time to improve.

If I would live in Denmark I would not hesitate to apply for a mortgage at these rates: you get free money and because of negative rates it is likely that the demand for homes will go up, leading to future higher housing prices at the same time. This has not happened before, it is the new economic reality. Central banks now have even less tools to play with, so to me it is clear how this will end.