Category: politics

Like the Electoral College but Worse

We should expect Trump to announce electoral victory on the night of November 3rd. Or earlier the next day. This will be due to some combination of stronger-than-expected in-person voting results and discrediting mail-in votes due to supposed fraud. By this point, ACB will be seated on the Supreme Court. With Florida in 2000 as precedent, the Democratic leadership would do everything possible to avoid a Supreme Court decision.

Trump may be ahead in some states’ early & in-person vote counts, but with small enough margins that the expected “blue shift” in mail-in votes would swing to Biden. These are your classic swing states. Importantly, some of these states have divided government, with Democratic governors and Republican control of the state legislatures. The 4 divided swing states are Michigan, North Carolina, Pennsylvania, and Wisconsin.

MI’s lower house is at stake in November, and will probably stay Republican. Both of the houses in NC & PA & WI are at stake, and all 6 will probably stay Republican. NC’s Democratic governor Roy Cooper is running for reelection, but seems safe. So we can expect the 4 divided swing states to still be divided before and after the election.

The 4 divided swing states may each submit two conflicting slates of electors, like several states did in 1876 and Hawaii in 1960. At the time, voter fraud and disenfranchisement were again the center of controversy.

There is enough ambiguity & confusion around the Electoral Count Act of 1887 passed after the 1876 drama for the elector slate of the state governor or the slate of the legislature to carry — and also around which federal house accepts the counts. There is an interpretation that would completely exclude conflicting electoral slates. Given that the 4 divided swing states have a total of 61 electors, this could mean both Trump and Biden fail to achieve the electoral majority. In this scenario of no electoral majority, the state delegations in the federal House of Representatives vote for the president. Given the very real pandemic and very fake mail-in vote fraud, maybe a state is confused about its own voting. So, “just” let its representatives vote instead…

The state delegation vote is an extremely undemocratic version of the already-undemocratic electoral college: Each state gets a single vote. Here the state of Delaware is literally as important as California!

State delegations would vote by simple majority of representatives in the House of Representatives. (Not the Senate.) The Democratic party has 22 state delegations, while the Republicans have 26, and 2 delegations are tied. Of the tossup House of Representatives elections, 7 representatives could swing their state’s delegation majority from Republican to Democratic. The Democrats would need a net gain of 4 state delegation majorities to get the majority of 26 of 50 state delegation votes.

In order of increasing margin-of-victory for Trump in 2016, the 7 tossup House seats that would swing a state delegation majority are currently held by Brian Fitzpatrick (PA-01), Fred Upton (MI-06), Scott Perry (PA-10), Justin Amash (MI-03), Ross Spano (FL-15), Don Young (AK-AL), and Greg Gianforte (MT-AL). Here PA and MI are somewhat double-counted, since all else equal, only one of the seats held by Fitzpatrick & Perry would need to flip to flip the state delegation. The same for Upton & Amash in MI.

Justin Amash (MI-03) is retiring, Ross Spano (FL-15) was not re-nominated, and Greg Gianforte (MT-AL) is retiring to run for governor. The other 4 are running again in their districts as incumbents.

In this not-entirely implausible scenario, each of these 7 representatives faces three potential outcomes: a) Their district stays Republican, and they vote for Trump in the state delegation; b) The tossup district flips to a Democratic representative, but the incumbent Republican “goes faithless” and votes for Trump in the delegation anyway; or c) The district flips Democratic, and the representative votes for Biden. Also keep in mind that Justin Amash (MI-03) is a Libertarian Trump critic who left the Republican party.

Pelosi and the Democratic leadership should be focused on these 7 house races, as well as fervently horse-trading to encourage the Democratic flip scenario. Get those seven to commit to following the wishes of their constituency, any mandate from two years ago be damned!

Going Out While Social Distancing

Wanna go to that kaiseki in The Mission? They have a 7 address, so our whole crew will be there.

My ‘rents just moved into the 123 High Street building. Now we can meet at the pub on the corner.

He does not stand a chance of a getting a star in Fam Three. The empty storefront next door is in Fam Five, though.

I expect us to be playing whack-a-mole with this pandemic for a few years, and am worried some indulgences of modern life will never come back. For example, fine dining is damn-near-impossible to do virtually. I have a background in the hospitality industry, and have had the privilege to eat some amazing meals in my life. So this is personal.

Now by fine dining, I mean the by-definition pretentious, wasteful, and amazing conversation between diner and chef via the medium of tiny bites on giant white plates. A prix fixe or à la carte menu enjoyed with wine & company over a few luxurious hours. Including the dreaded communal table thing too, I guess. But how are we going to eat at fancy restaurants while we continue to socially distance? And how are restaurant employees going to get back to making a (modest) living? Take-out fried chicken & cocktails from a Michelin star place desperate for cash flow just ain’t financially sustainable. Crenn is doing fancy comfort food like it’s October of 2001, but how is she going to pay rent in Russian Hill on $55 per head?

Lately a lot of my research is connecting a company’s stock price with the digital exhaust left when we interact with the world. A challenging part of the job is controlling for the bias in a cohort of people. When is a group actually representative of a population, or actually random? So while I am nothing close to a computational epidemiologist, and while every machine learning & data scientist is pretending to be a virus expert this week, I have one idea that might help with fine dining while we are in social isolation.

Take a Number for Going Out

Imagine getting your driver’s license or passport checked at the entrance of a restaurant, where they confirm one simple fact: What is the last, right-most, least-significant digit of your mailing address? (Ignore fractions.) This digit is your membership in an slightly-different, in-real-life family — in which of ten virtual neighborhoods do you arbitrarily belong? And importantly, does your number match the last digit of the restaurant’s address? If the two IRL Fam numbers do not match, the restaurant would be mandated to refuse service. That’s it. Think through some implications of this simple restriction:

Maintains Social Isolation

When you go out to eat according to IRL Fam number, you are only ever physically near a fraction of the people in the world. And importantly, these people are always a semi-random subset of the same fraction of the population. The only people who are eating at the restaurant tonight are those who have the same number, those who are in the same IRL Fam. You might even get to know each other.

This is different from just going to local restaurants in the your zipcode, where a rando might jump a cab from across town for the restaurant’s particular charm. (This is especially relevant for experimental or avant garde places that have never relied on walk-ins.) The IRL Fam system is also fundamentally different from going to a different, random restaurant every weekend, because in this case you would still be exposed to a random set of people. And this is very different from restricting the number of people in a particular restaurant, simultaneously. A recent study from Cornell showed how even very small classes still would leave the student community highly connected. This would also thrash most restaurant’s finances.

What’s an address in 2020?

We could theoretically assign a random number, or use your mobile phone number, or even (shudder) use a Social Security number. However, there are additional benefits to using a physical, mailing address for layering our virtual spatial separation atop the existing physical world. Using your mailing address defaults a specific set of people into breaking your social distancing rules: Your roommates, family members, and those in your apartment building. Assuming you still like your kids & spouses after shelter-in-place eases, these are exactly the people you usually want to go out with. And these are the people from whom you are de facto not social distancing from, anyway! You share the same space, breath the same air, push the same elevators buttons, and so on.

What about the service?

This might require that restaurant employees only work full-time, and only at a single establishment. Would employees also need to have a matching IRL Fam? I think that would be too extreme, but goes in the right direction. Maybe we finally abandon the bullshit labor arbitrage of the gig economy, and pass a law establishing full-time de facto employment (i.e. benefits) for anyone who is works 40 hours a week for the same legal entity. San Francisco is already doing this with Uber drivers.

When’s your birthday?

This is no more a violation of privacy than when nightclub security checks the ID of your date who is looking particularly baby-faced tonight… Let’s mandate zero record-keeping or data retention on the IDs themselves, once the IRL Fam number is confirmed. I suppose patrons would need to have an ID with a mailing address on hand, which is a admittedly a bit classist.

Do they have valet parking?

Here is a significant downside. If you are not allowed in 90% of the restaurants in town, you are more likely to drive further to find an interesting one in your IRL Fam.

Is this all a game?

Given the prevalence of mostly-empty nightclubs with long lines, there is a chance the artificial exclusivity of the IRL Fam system would be fun and dramatic. An apartment with an address matching The New Hotness restaurant would be more desirable. And ironically, this exclusivity would be arbitrary and therefore, relatively fair!

Scaling & the Resurgence

This system could start in a traditionally-quirky place like San Francisco, and expand to restaurants & clubs & bars in other cities. And when the next pandemic (resurgence?) inevitably pops up, when the next shelter-in-place mandate occurs, contact tracing via IRL Fam number would be easier.

Dumpster Language

NLP analysis done on a dataset of about 8,000 transcripts of Dumpster (as in “Trump’s a Dumpster-fire”) back to 2007. Unfortunately there are no trends that obviously jump out. He has probably been keeping to book more closely than generally expected, at least in these prepared interviews.

Here are three early transcripts: “xx00133” from Showbiz Tonight (CNN in 2006), “xx00598” from Your World with Neil Cavuto (Fox in 2009), and “xx00911” from Nightline (ABC in 2009):

How has the implied grade-level and complexity of Dumpster’s speaking changed over time?

How has his information content changed over time (empirical bag-of-words entropy)?

If I assume the distant past is the benchmark for Dumpster authorship, does the recent speaker seems like the same person? (This is function word distribution.)

Happy Birthday, Hipsteraunt

Last month was the two year anniversary of the website Hipsteraunt, which I built with my friend Lance Arthur. He did the design, I did the random menu generation. It is a quirky bit of AI and NLP under-the-hood, so a user gets menus featuring free-range suspended chicken feet, truffled shisito pepper with achiote, and marshmallow crudo, at a place with an ampersand in its name. The inspiration had been a particular dinner out in San Francisco, at an immensely overrated restaurant. But it could have been Brooklyn or the West Loop. I am a quant & machine learning researcher by happy vocation, but also a chef by training. (Le Cordon Bleu with honors, thank you.) So the term “foodie” has always struck me as what privileged folks call themselves when they like to eat fancy food, but would not be caught dead hanging out with a line cook.

Hipsteraunt remains a tender satire of a certain sort of fetishized dining out. It was meant to be an acerbic call to check-your-privilege, together with a reminder that nothing in food is new. No combination of ingredients or flavors has not been tried a thousand times before. Even offal and the Asian flavors everyone loves to exoticize. (Awkward…) We lived through the fusion cuisine of the 1980s, remember? In hindsight, it might have cut a bit too close to the bone. The site garnered plenty of attention, but less heady pokes like the fake Guy Fieri menu and the brilliant Jacques le Merde have been far more successful. An annoying bug with making menu URLs permanent snagged things up the first couple weeks, too. Nonetheless on Hipsteraunt’s second birthday, I celebrate by raising an artisanal cocktail (a lemongrass aviation, perhaps) and toasting the addition of a few new ingredients: Keep an eye out for those trendy signifiers of faux-edgy cuisine we all love, like burrata and purslane, za’atar and togarashi. Goodbye ginger, goodbye almond milk. But it looks like bacon is still there.

 

Philanthropy Picks

The great Dinah Sanders does an annual blog post with her election picks, which is incredibly useful for navigating California’s referendum system. In this vein, here is a list of the philanthropies and charities where we donated this December 31st:

In previous years some of our favorites were Electronic Frontier Foundation (EFF), Planned Parenthood, and the American Civil Liberties Union (ACLU).

Employee Founding

Am I a cofounder or an employee?

There is prestige to having been a cofounder of a startup, someone who was there from the beginning taking the lifestyle risk in return for the possibility of striking gold and changing the world. Now with that breathless sentence out of the way, how do you know if you are a founder or an employee? To me there are four key questions to answer:

  • Is the startup funded externally, from an outside entity like a venture or seed fund? This would be someone without huge sunk costs choosing to hand over money, in exchange debt or equity and upside in the startup’s future.
  • Is the startup selling to businesses (“enterprise”), and does the venture have a paying client-or-two outside of the Silicon Valley scene? Consulting for your buddy’s startup does not count.
  • Is the startup selling to consumers, and have consumers written checks or swiped their credit cards for actual money? Tons of freemium traction does not count.
  • Are you working part-time on something else simultaneously? If you spend every Tuesday and Thursday working as a barista to pay the bills, you are not full-time.

If the answer to any of the three is “yes,” then you are probably an employee and not a founder or cofounder, de facto or otherwise.

Separated by the Same Language

Some snarky, some important advice about America and England.

About ten years ago, I moved from Chicago to London for grad school. I intended to spend a few years in the United Kingdom, but my best laid plans saw me there for about five years. This is a much longer span of time than the typical study abroad or a backpacker’s tour. This summer I returned to England for an extended visit and observation. Time has clarified some non-intuitive quirks I didn’t know I had learned while living here. So a list for future expats, tourists and the curious:

  • London dominates English culture, far more than New York or Los Angeles dominates American. It is the largest city in the European Union, sprawling bigger than Paris or Rome, and probably the most diverse. On the ground, London fashion leads New York and Los Angeles by a few years. Yes, even New York City. Really.
  • The most bureaucratic aspect of a very bureaucratic country is consumer banking. Everything about English checking accounts, ATMs and credits cards is mind-boggleingly difficult, inefficient and wasteful. Things are still mostly done on paper, with proofs of residence, reference letters and other signs of class being the necessity. Plan to spend literally ten times the amount of effort screwing around with English banks as you would in America.
  • The opposite is true of The Internet. When it comes to healthy competition among mobile phone providers and ISPs, England is incredibly high-tech. This is probably because England is geographically small and wealthy. So pay-as-you-go plans with dumb phones are convenient and dirt cheap, and getting fiber optic broadband to your flat is trivial.
  • The English are far more sensitive to class than Americans, especially around verbal accents. People in England can be extremely wealthy but still “low class,” and vice-versa. Differentiating wealth from class is probably the most alien aspect of English culture, for Americans. My favorite breakfast place in Bristol has a reputation for being posh (a.k.a. high class), but is actually less expensive than most supposedly bohemian hipsteraunts in the city. The English are more likely to “unlearn” a low-class accent, and Americans mistakenly think splashing a lot of cash guarantees privilege.
  • Restaurant servers in England rely less on tips for their income, which makes the service either atrocious, or more honest — depending on your politics. American-style tipping is becoming more common in England, but still the exception. Go with 10% atop the bill if you had good service, otherwise keep the change. You always have the right to dispute any gratuity automatically included in a bill. Do not tip if you pick up a round of drinks at the bar.
  • Speaking of which, English drinkers take turns buying full rounds of drinks for the group. This is good etiquette, and something Americans should take up. The English will notice if you never happen to run for a round, and you will get a bad reputation. Americans think of themselves as heavy drinkers, but we are actually more teetotaling than the English.
  • “In America a hundred years is a long time, and in England a hundred miles is a long way.” Because English culture is so old and the country so densely populated, there is a lot of diversity even between neighboring towns. Driving a couple hours for a visit is nothing to an American, but can baffle an English person.
  • Most English do a good job of differentiating American politics from the American people, even if we do elect those goofballs in DC. Politically speaking, our country is seen as an isolationist and violent bully. But culturally, everyone loves our hip hop and big-budget movies.
  • The English are as likely to think of themselves as European as not, so membership in the EU is a constant point of political tension here. The English are a bridge between the New and Old Worlds. The snarky newspaper headline is “Fog in the English Channel: Europe Cut-off!”
  • Being invited into an English home for a meal, tea or supper is a big deal, more so than in America. Take it as flattery and bring a bottle of wine.
  • The English can hate their (elected) government, but still love their country. This is one surprising upside of still having a monarch. Americans who hate their elected leaders are more likely to be seen as “unpatriotic.”
  • Taxes in the UK are actually not that much higher than in the US, despite what American politicians imply. My nominal tax rate as an evil banker in London was only a few percent more than it was working in Chicago. The English love to hate on the National Health Service (NHS), but it does a decent job of providing widely-accessible health care. There is a parallel private health care system for the wealthy, which is much more American in style. Most English see health care as a civil right like suffrage, unlike Americans who usually see health care as an expense.
  • That said, the English are not necessarily more healthy than Americans, but they are definitely thinner. You can usually spot the American tourist by their weight and the fact that they do not smoke.
  • The geography is confusing but easy to memorize. Britain or Great Britain is the large island off the coast of Europe. It contains the countries of England, Wales and Scotland. So the Scottish are British, but definitely not English! However the United Kingdom includes Northern Ireland, which is not (Great-) British. Sometimes the UK is represented as a whole (i.e. at The Olympics), while at other times the individual countries in the UK matter (i.e. soccer). The UK flag (the Union Jack) is an overlay of the English, Scottish and old Irish flags. The English flag is about St. George the dragon slayer, and looks like a red cross on white.
  • The English are a pretty secular people. They are not necessarily atheists, but religion is just not that big of a deal.
  • Beer is the only inexpensive thing in England. Well, maybe eggs and milk in the grocery store also. The best and most traditional beer is the hand-pulled sort you find at a pub. Start with these bitters, and then try the bright, alcohol-heavy and bubbly lagers. Timothy Taylor’s Landlord is a fine example. (Most Americans only ever drink lager or the occasional stout like Guinness.) Yes English beer is served warmer than American, but the English weather is cooler too. Cocktails in England usually mean carefully measured 25ml shots, leading an English friend to flatter America as the “land of the free-pour.”
  • The best fish & chips is not found in pubs, but in dedicated shops called chippies. To find a chippy, look for counter service, paper-wrapped fries and a small menu. Good fish & chips -fish has a tasty, crispy batter around surprisingly delicate fish. Greasy fish inside is not good fish & chips -fish. Examples are the Fryer’s Delight on Theobald’s Road in Bloomsbury in London, and Fish Lovers on Whiteladies Road [sic] in Bristol.
  • The solution to late-night, drunk munchies in England is your Middle Eastern kebab shop. Mayonnaise-heavy garlic sauce on your chips is a must, especially after a few pints.
  • Talk is of “the pub” as if there is only one, but this is just a quirk of language. There is not a place called The Pub, or ever just one pub in an area. You just say “meet me at the pub.” Similarly, English folks will refer to “my local [pub].”
  • The weather in England is grey and wet, but actually very mild. This is because of the North Sea jet stream, even though the island is on latitude with Scandinavia. Despite the Dickens novels, snow is rare here. And compared with America, there are very few bugs and insects. There have been people living in every part of England “forever,” so there is very little actual wilderness even though the countryside is green and pretty. The high latitude also means very dark winters, and long summer days. There is nothing like leaving the pub at nine o’clock in August while there is still plenty of sunshine.
  • Americans are terrible with European and British geography, but the English are just as bad with ours. When I mention my hometown of Chicago to many English, they presume it is near the East Coast because of movies with skyscrapers and organized crime. Explaining that Chicago is a seventeen hour drive from New York City usually stuns the table… Two friends from Barcelona and the Black Forest in Germany actually grew up closer to each other than my wife and I, from Manhattan and Chicagoland.
  • Traditional businesses in England have flaky and frustrating hours, especially as an American used to working from nine to five, and running errands outside of this window. While I lived in England, pubs were granted more flexible hours (2005) and smoking was banned (2007). So thankfully pubs are no longer required to close early and go lock-in.

What is a Promise Worth?

How do you prevent hyperinflation without destroying the economy? The answer ain’t Bitcoin.

A virtual currency like Bitcoin uses a decentralized proof-of-work ledger (the block chain) to solve the the double-spending problem. “Satoshi Nakamoto” deserve serious accolades for this clever architecture, but Bitcoin has a few serious problems. The first is its lack of security. The infrastructure around the currency is shoddy and fragile. The website where 80% of Bitcoin trading currently occurs is called the Magic: The Gathering Online Exchange (a.k.a. Mt.Gox). Recently Mt.Gox has crashed and been cracked, and does not support easy shorting. More importantly, the Bitcoin system may never mature without a central authority spending a lot of (traditional) money to build-out the infrastructure, with negligible or negative financial return-on-investment. Without a social program, in other words.

Even if Bitcoins did have the infrastructure and liquidity of a traditional currency like U.S. dollars or Japanese yen, there is another more fundamental problem with Bitcoin becoming the money of the future. Bitcoins are intrinsically deflationary.

The future will always be in one of two states: Either Bitcoin miners are running up against the limits of Moore’s Law, and are unable to profitably mine new Bitcoins. Or some bullshit singularity has occurred, giving us all access to infinite computational power. In this state, we would run up against the Bitcoin architecture’s hard-coded monetary supply cap of twenty-one million Bitcoins.

If human desire is infinite, then people will always want more money for goods and services. (All else equal, of course!) So we have an intrinsically fixed supply of a fungible good along with increasing demand. Therefore a Bitcoin is guaranteed to increase in value over time. Any fraction of a Bitcoin is guaranteed to increase in value over time. This may sound good if you happen to have a lot of BTC (Bitcoin) in your wallet. However at a macroeconomic level deflation is catastrophic, which I will explain.

A Hamburger on Tuesday
Would you trade something today that is certain to be worth more tomorrow? What about if the “something” is a currency, a good that has no intrinsic value other than it being money? (You cannot heat your house with the digital dollars in your checking account. Gotta pay the utility company first.) In an emergency you might spend your deflating currency, but in general you should hold onto your BTC as long as possible. And since there is uncertainty about the degree to which Bitcoin will deflate, the market will not instantly price BTC correctly. The BTC price of goods and services will not instantly adjust to match the level of computational power available to miners.

Some Bitcoin proponents think we can instantly discount the BTC price of all goods and services to sync-up with systematic BTC deflation, but this would need a seriously high-tech payment infrastructure. Square and Stripe are trying, but does anyone seriously believe the prices of all goods and services can be discounted in real-time by a macroeconomic indicator? We can’t even ditch the wasteful dollar bill!

The Bitcoin bulls also emphasize a currency’s dual role as a means of transaction and a store-of-value, but intrinsic deflation trashes both roles simultaneously. As a means of transaction, deflation makes allocating capital (money) across projects and activities difficult, and again, requires that perfect payment infrastructure. Since systematic deflation destroys every asset’s value and discourages economic activity, deflationary currencies do badly as stores-of-value. Less economic activity means GDP contraction and decreased livelihood. Yes, despite what Professor von Nimby may have spewed in your Postmodern Marxist Studies class, GDP is a very strong indicator for overall human happiness. Perpetual economic contraction makes your savings account irrelevant. You might have a zillion super-valuable BTC in your digital wallet, but you have nothing to spend them on. In other words, if you think (hyper-) inflation is bad, deflation is even worse…

Passing Notes
Let us go back to a few of the original Bitcoin goals. Bitcoin proponents want an efficient, liquid currency immune from the distortion caused by a government or central bank’s monetary policy. This is reasonable since inflationary monetary policy has a sad history of trashing peoples’ savings accounts, in places like the Weimar Republic or more recently in Argentina. So how can we build the decentralized, non-deflationary currency of the future?

Notes are an ancient monetary concept desperate for rethinking in the Internet age. At its most basic level, a note is a promise to exchange money, goods or services at some point in the future. However a note is not quite a futures contract, because the promise need not ever be exercised. And a note is not really an options contract, because a note need not ever expire. The most obvious form of a note is what a U.S. dollar bill used to represent when we were on the gold standard. It was a promise that the holder of the note (dollar bill) could exchange the note for a dollar’s worth of physical gold at any time. Notes are a lot easier to store and deal with than gold, and so they make a lot of sense for getting work done efficiently. We could also talk about the fungibility of notes, but that is less important at this point. And notes are definitely easier to move around than loaves of bread, head of cattle, barrels of oil, or other physical stuff with intrinsic value.

A hoard of notes would also be a decent store-of-value in your savings account, as long as the writer of the notes remains solvent and trusted. For example, a million dollars worth of U.S. gold-convertible notes is a great retirement nest-egg, since most normal people expect the U.S. government to honor its promises for a long time.

When the entity writing the note is trusted by just about everyone — expected to honor its contract — then the writer can declare the notes to be unconvertible, all at once. The notes become fiat currency, currency that is not explicitly backed by anything but the trust that the note writer will not issue too many notes and inflate away peoples’ savings.

Why does most global economic activity happen using a handful of fiat currencies, like the U.S. dollar or Euro? Nations have traditionally supported their (fiat) currencies through policy and war, because before the Internet trust did not scale. Imagine a small town. Mel and Stannis are neighbors in this town. Mel trusts Stannis to honor his promises, and accepts a note from Stannis in return for mowing Stannis’s lawn for the next year. Stannis’s note he writes for Mel says something like “Stannis promises to give the bearer of this note 100 loaves of bread, anytime.” Mel’s landlord Dave also trusts Stannis, and so he has no problem taking Mel’s note as rent. Stannis has essentially printed his own money that is a lot more convenient that baking 100 loaves of bread. Now in the next town over, no one really knows Stannis. Therefore Dave will have a hard time making use of Stannis’s note when he visits there to spend time with his grandparents. Dave and Mel trust Stannis, but the people living in the next town over do not.

In this parochial example, trust has not scaled across the network of transactions and relationships. The money Stannis created, the note he wrote, is not all that useful to Mel. Instead she could insist on being compensated by a note from an entity more trusted the world over, say the First Bank of Lannister which has a branch in both towns. Mel, Stannis, Dave and his grandparents all probably trust the First Bank of Lannister to pay its debts.

If Dave wants to spend Mel’s note written by Stannis in the next town over, he can ask a third party to guarantee or sign-off on the note. This can be done by exchanging Stannis’s promise for a promise by the First Bank of Lannister, which is more trusted throughout the realm. The First Bank of Lannister would be compensated for extending its trust by taking a cut of the promise from Stannis.

So before he leaves on his trip, Dave takes his rent check (note) from Mel into the First Bank of Lannister. They write a new note saying “The First Bank of Lannister promises to give the bearer of this note 95 loaves of bread, anytime” and gives this note to Dave in exchange for the note written by Stannis. The bank has decided to take responsibility for chasing down Stannis if he turns out to reneg on his promise, and in return they are compensated with the value of five loaves of bread. Here the Bank of Lannister has also issued its own currency, but more as a middle-man than someone doing economic activity like Mel’s lawnmowing or Dave’s landlording.

This middle-man role is very important but also difficult to scale across a physical economy. Eventually someone refuses to trust the First Bank of Lannister, and then the chain of economic activity halts. This is why the world’s global economy has consolidated onto a few currencies, for reasons of both efficiency and trust.

The Internets
In the age of the Internet and pervasive social networks like Facebook and Linkedin, everyone is connected in a global network. This is the famous degrees -of- Kevin Bacon or Erdös Number concept. Any two people are connected by just a few steps along the network. Most of Stannis’s friends on Facebook would be willing to accept a note or promise from Stannis, and the same holds true for Dave, Mel and the First Bank of Lannister’s social networks. Since the whole of humanity is probably connected in a trust network, software can automatically write those middle-man notes along the chain of connections. Therefore any two people can automatically find a chain of trust for spending money.

Back to our example, but in the age of the Internet. Mel, Dave and Stannis all trust each other, since they are Linkedin contacts. Peter reneged on a note a few months ago, so no one really trusts Peter except Stannis. Everyone unfriended Peter but Stannis, so Peter has a very isolated social network. This time around we do not need to care about geography and small towns, since everyone is connected via the Internet and social networks. Let’s say Peter wants to buy an old iPad from Dave, and Dave thinks the iPad is worth about a hundred loaves of bread. Peter could try to write a note promising a hundred loaves of bread, but Dave would not accept this note since he does not trust Peter. Now for the cool part.

Peter goes to a notes exchange website (NoteEx), and asks for a hundred-loaf note that Dave will trust. The website knows that Stannis trusts Peter, and that Dave trusts Stannis. (See the triangle?) Through the website, Stannis writes Peter a note for one hundred loaves of bread that Peter gives to Dave in exchange for the iPad. Dave has a note he trusts in exchange for his good, at the price he wanted. Similarly Stannis receives a note written by Peter, whom he trusts. This note might be for 105 loaves of bread, giving Stannis a little cut in exchange for trusting the dodgy Peter. This five loaf interest, cut or edge is Stannis’s compensation as a middle-man.

This can all be done automatically by the NoteEx server with a list of middle-men volunteers. People volunteer to be middle-men up to a maximum amount of exposure or risk (i.e. one thousand loaves of bread total). Or middle-men could even offer to guarantee up to two degrees of Kevin Bacon away, for a much higher cut. After a bunch of people volunteer to be middle-men in the NoteEx process, all economic activity could be subsumed, with social networks ensuring that you only ever receive payment (promises) from people you trust. A NoteEx transaction could have more than one middle-man, up to the six degrees of Kevin Bacon maximum that we assume connects all people.

Ironically, the good or service underlying the notes is not all that important, since notes are very rarely redeemed. In the same way that powerful governments can support fiat currencies backed by nothing, fiat notes backed by loaves of bread will not actually turn everyone into a baker. Usually notes are exchanged with their value being the trusted promise, but not necessarily the realization. Heavy stuff here.

Decentralized Bakery
The NoteEx website would be built atop an open and standard protocol, and competing notes exchanges could borrow from the Bitcoin architecture to be decentralized (i.e. the shared ledger). More importantly, there would be a natural level of inflation in the system as the cuts or interest that middle-men demand increase the total value of all promises across the economy. And of course, notes are an excellent store-of-value because who would you trust more to support you in an emergency or retirement than your tightest friends & family?

So! We have a theoretical monetary system free from government interference, and one that encourages economic activity through modest and natural inflation.

What is There to Eat Around Here?

Or, why clams are bourgeois — the presence of clams on menus is indicative of a place where people spend a lot of their money on housing. This is how I found out.

We have all played the proportional rent affordability game. How much of my income should I spend on where I live? One rule of thumb is “a third,” so if you take home $2,400 per month you aim to spend about $800 on rent or a mortgage payment. Some play the hypothetical budgeting version of the game. We might pay more of our income for housing if it means being able to live in a particularly desirable area.

Expensive Housing
Here is a map of income normalized by housing expense, for a bunch of Bay Area neighborhoods. This information is from our Altos Research active market real estate data. More technically, each dot on the map represents the ratio of a zipcode’s household income to the weighted average of single family home list prices and multi-family home list prices. I used median numbers, to minimize the impact of foreclosures or extremely wealthy households. Single and multi-family home prices were weighted by listing inventory, so urban condos matter as much as those McMansions in the ‘burbs. The green dots are areas where proportionally more income is spent on housing, and blue dots are the opposite.

Bay Area Housing Proportional Housing Expense

The data shows that people living in the city of San Francisco spend a much larger proportion of their income on housing than Oaklanders or those in San Jose. If we assume that the real estate market is somewhat efficient, then those who choose to live in certain neighborhoods forgo savings and disposable income. Why is it that housing expenses for living in San Francisco are so much higher than San Jose, even when we control for income disparity?

The Real Estate Menu
Like a proper hack economist, I am going to gloss over the obvious driving factors of proportionally expensive housing, such as poor labor mobility, lack of job opportunities, and a history of minority disenfranchisement. I am a chef by training — culinary arts degree from CHIC, the Le Cordon Bleu school in Chicago — and remain fascinated by the hospitality industry. So instead of diving into big social problems, I focused on something flippant and easy to measure: Where people go out to eat, across areas with different levels of proportional housing expense.

I analyzed the menus of a random selection of 5,400 sit-down and so-called “fast casual” restaurants across the United States. This menu population is hopefully large and diverse enough to represent dining out in general, though it is obviously biased toward those restaurants with the money and gumption to post their menus online. However there is not a disproportionate number of national chain restaurants, since even the most common restaurant, T.G.I. Friday’s, is only about 2.5% of the population:

Restaurant Histogram

Menu Words
The next step in my analysis was counting the common words and phrases across the menus. Here are the top fifty:

1. sauce, 2. chicken, 3. cheese, 4. salad, 5. grilled, 6. served, 7. fresh, 8. tomato, 9. shrimp, 10. roasted, 11. served-with, 12. garlic, 13. cream, 14. red, 15. fried, 16. onions, 17. tomatoes, 18. beef, 19. rice, 20. onion, 21. bacon, 22. topped, 23. mushrooms, 24. topped-with, 25. steak, 26. vinaigrette, 27. spinach, 28. lettuce, 29. pork, 30. green, 31. potatoes, 32. spicy, 33. white, 34. salmon, 35. in-a, 36. soup, 37. peppers, 38. mozzarella, 39. lemon, 40. sweet, 41. with-a, 42. menu, 43. beans, 44. dressing, 45. fries, 46. tuna, 47. black, 48. greens, 49. chocolate, 50. basil

Pervasive ingredients like “chicken” turn up, as do common preparation and plating terms like “sauce” and “topped-with”. Perhaps my next project will be looking at how this list changes over time. For example, words like “fried” were taboo in the 90’s, but more common during this post-9/11 renaissance of honest comfort food. Now-a-days chicken can be “fried” again, not necessarily “crispy” or “crunchy”.

A Tasty Model
Next I trained a statistical model using the menu words and phrases as independent variables. My dependent variable was the proportional housing expense in the restaurant’s zipcode. The model was not meant to be predictive per se, but instead to identify the characteristics of restaurant menus in more desirable areas. The model covers over five thousand restaurants, so menu idiosyncrasy and anecdote should average out. The algorithm used was our bespoke version of least-angle regression with the lasso modification. It trains well on even hundreds of independent variables, and highlights which are most informative. In this case, which of our many menu words and phrases are correlated with proportional housing expense?

Why Clams are Bourgeois

The twenty menu words and phrases most correlated with low proportional housing expense (the bluer dots) areas:

1. tortilla, 2. cream-sauce, 3. red-onion, 4. thai, 5. your-choice, 6. jumbo, 7. crisp, 8. sauce-and, 9. salads, 10. oz, 11. italian, 12. crusted, 13. stuffed, 14. marinara, 15. broccoli, 16. egg, 17. scallops, 18. roast, 19. lemon, 20. bean

Several of these words of phrases are associated with ethnic cuisines (i.e. “thai” and “tortilla”), and others emphasize portion size (i.e. “jumbo” and “oz” for ounce). Restaurants in high proportional housing expense areas (greener dots) tend to include the following words and phrases on their menus:

1. clams, 2. con, 3. organic, 4. mango, 5. tofu, 6. spices, 7. eggplant, 8. tomato-sauce, 9. cooked, 10. artichoke, 11. eggs, 12. toast, 13. roll, 14. day, 15. french-fries, 16. duck, 17. seasonal, 18. oil, 19. steamed, 20. lunch, 21. chips, 22. salsa, 23. baby, 24. arugula, 25. red, 26. braised, 27. grilled, 28. chocolate, 29. avocado, 30. dressing

These words reflect healthier or more expensive food preparation (i.e. “grilled” or “steamed”), as well as more exotic ingredients (i.e. “mango” and “clams”). Also, seasonal and organic menus are associated with low proportional housing expense. The word “con” turns up as a counter-example for Latin American cuisine, as in “con huevos” or “chili con queso”.

Food Crystal Ball
This sort of model for restaurant menus could also be used for forecasting, to statistically predict the sort of food that will be more successful in a particular neighborhood. This predictive power would be bolstered by the fact that the population of menus has a survivorship bias, because failed or struggling restaurants are less likely to post their menus online.

This confirms my suspicion that housing expense is counter-intuitive when it comes to dining out. People who spend more of their income on housing in order to live in a desirable location have less disposable income, but these are the people who pay more for exotic ingredients and more expensive food preparation. Maybe these folks can’t afford to eat in their own neighborhood?