This was shared to me by a colleague - if you click on the picture you'll go through to the source. It's just a way of getting across the scale of the information which is being produced and analysed every minute. As a planet, as nations, social groups and as individuals, we are all identifiable and, to some extent, predictable. There are lots of big businesses which use this data very well and to whom it is incredibly valuable - but there are hundreds of companies out there with enormous client bases who don't realise the value of the information they've got, to themselves or to the specialists who would love to pay for it. And so there are many more companies trying to persuade them to use and monetise this data. And, behind them, are consultants and service providers and so on. Even the VCs. In Big Data, as in every industry: Big fleas have little fleas, Upon their backs to bite 'em And little fleas have lesser fleas And so on, ad infinitum.

I’m very excited to read about the spike in value of Bitcoins since the Cyprus current account debacle.  It is great news to me that there are enough people out there, in this day of global price transparency and instantaneous transactions, who are dumb enough to build a bubble like this.

The logic seems go like this:

  • Bloody hell, Cyprus have decided to take 60% or so off the value of EUR100,000 current accounts.
  • Our money’s not safe so long as governments are able to take it from us whenever they like.
  • Money’s got nothing to do with any real assets – it’s just an arbitrary means of exchange which gains its credibility only from our willingness to exchange it for things.
  • So let’s transfer our credulity to a different “money” which has been set up independently of any of these nasty government types who are out to get us.

I think that’s right, anyway.  Add in the usual number of speculators, a solid sprinkle of paranoid fantasists, a smidgeon of reasonable Euro-panic, and here you go:

Which is great for those who bought Bitcoins a while ago – they’ve made up to 10 times thier money.  Except they haven’t:

Bitcoin / Dollar Bid / Ask Spread

Bitcoin / Dollar Bid / Ask Spread

What does this mean?  It means that we might think that the current value of a Bitcoin is about $120, but if you wanted to buy 10,000 Bitcoins it would cost you more than $144; and if you wanted to sell them again, you would get about $106.  That’s a loss of over 25%  – about half on buying this monopoly money, and the other half on trying to turn it back into something you can actually spend in  a shop.

So that’s the liquidity issue.  Obviously, less of an issue if you’re moving around less money; and even less so if you don’t want to move your money back into real currency.  And, if everyone really starts using it, this liquidity problem will start to disappear – the bid / ask spread will diminish.  Who knows, you might even be able to find somewhere to spend them.  I’m afraid that you don’t have many options at the moment.

So, what’re Bitcoins for?  They are there to allow us to have a currency which is free of borders and free of government interference.  That is – a store of value which we can trust.  Which brings us to the nub of the matter.  Can you trust Bitcoins more than you can trust dollars?  And that answer to that is: Heck, no.  Can you trust a currency made-up by someone without even a real name, with little use and border-line untranslatable into real-world value, as a store of value?  No.  Can you trust governments to not use their laws to restrict its use?  No.  Can you believe that the algorithms and security behind this digital currency are safer than than the full weight of central banks, the rule of law and centuries of managing a currency on which the stability of a nation or globe relies, as with a real currency?  No.  

Like many ideas which seem bad, I look forward to watching this one develop.  Maybe I’m wrong.  But I think this is, for now, a step too far in the development of our connected globe.  National currencies are just… better at doing what they’re supposed to do.  Avoid Argentina and Zimbabwe, by all means.  But, as a group and for the foreseeable future, I don’t see where they’re going to be overtaken by Bitcoins – in liquidity, in exchangeability, in stability, in plain old usefulness.

So, in the meantime, if you want to invest in something which is completely bloody useless but which will increase in value when fiat currencies seem dubious – go and buy some gold.

PS – You may note that the first chart shows a price of approximately $144 / Bitcoin and the second shows approximately $124.  That’s because the first chart if a few hours older than the second.  In the meantime the most used BItcoin exchange, Mt. Gox, went down under a digital attack.

PPS – As a student of science fiction, I note that corporation-backed currency is a common trope.  IF the corporations take over the world, this is entirely feasible (even if only, like most science fiction, a rehashed version of the past – Scottish bank notes are still issued by individual banks, as they ever were, for instance).  Bitcoin ain’t that, though.

Philip Stephens, columnist for the FT, will be pleased to know that he repeated today what I’ve been pointing out in the pub for months:  

The British government has pledged to reduce net inflows of migrants from an annual 200,000 or so to the “tens of thousands”. It has little control over movements from other EU states. Nor can it determine the numbers of immigrants returning home or of Britons emigrating. That leaves the inward flow of students and workers from non-EU countries as the only figure the government can control.

What does this tell us?  It means that Cameron has no, or very little, control over whether he will succeed in meeting his pledge because net immigration will depend more on things he can’t control than things he can.  You can’t make a big difference to a big number by trying to change a small part of it.  This will be interesting come the next election, especially after the Bulgarians and Romanians have their say on the figures.  

But what it also means is that the UK’s policy on limiting the ability of students to graduate and find jobs, and of non-EU foreigners to contribute to the UK’s businesses, is misplaced and ineffective.  And I don’t have to apologise to the many, many qualified, motivated and intelligent people just for enduring the expense and turmoil of the ridiculous and inefficient UK Border Agency and its policies; but also for the fact that this is all in pointless and in vain and in direct contradiction of the government’s stated policy of encouraging high value immigration and inward investment.  

The question of what defines an “entrepreneur” is a tired one.  There are thousands of self-described entrepreneurs around.  All of them would give you a definition which includes themselves but as few other people as possible – is it a state of mind, a sign of your intentions, a badge of one or many successes in starting businesses?  I’m not that bothered, to be honest.

However, there is a quality which distinguishes many potential high-growth businesses and, by extension, their founders.  I was surprised to be reminded about it by Donald Sull, writing on the excellent Ghoshal Blog, where the London Business School entrepreneurship and management faculty share their thoughts.

He writes:

“.. existing strategy theory is egocentric — its starting point is the individual firm that exists to create, capture and sustain economic value. The firm focuses on opportunities that it can seize by leveraging its strategic power. The allocentric orientation, by contrast, takes a broader perspective and incorporates the various partners in the network as the unit of analysis … An allocentric view allows executives to recognise and, more importantly, seize a whole range of opportunities that could only be pursued by a network rather than an individual firm, no matter how powerful.”

Don is not talking about entrepreneurship; he is not talking about startup businesses.  But he does draw a distinction between classic business strategy – what have I got and how can I leverage it to gain a competitive advantage? – and a broader approach which identifies problems first and then uses resources which aren’t necessarily immediately available – or may belong to someone else – to solve it.  

One thing we know about new businesses, especially the very new businesses with which we work, is that they don’t have the resources to go into the market and make money on their own.  But they have identified a way that a market can be changed and money made; and then they go out to find the help they need to do that – through their own network, through the angel network; from VCs, from more experienced partners, advisors and executives, from FIG.

I don’t want to overplay the similarities between Don’s concept of “allocentrism” and entrepreneurship.  Nor do I want to claim to have defined entrepreneurship – or even successful entrepreneurship.  But one reason startups can provide such great financial and personal returns to their founders is that they are not limited by traditional strategy and thus to using their available resources as best they can.  The startups I work with identify a need and then go out and find the resources to meet it – from wherever, or whomever, they can.

I recently bemoaned the lack of growth in the UK startup market.  Nothing’s happened since to change my views – in fact, one irritating industry bottom-feeder informed me that “seed EIS appears to be currently over shadowed by investment in renewable energy”.  That’s what happens when investments are treated purely as tax products rather than as genuine investment opportunities with a tax benefit.

Look at the EIS film industry or, indeed, the EIS clean energy industry – both ways of wrapping targeted government incentives inside other tax incentives until the actual point of the investment disappears.  Fancy investing in a crap film with a cracking government rebate or an inefficient, expensive pseudo-green 2MW power plant with a guaranteed government purchaser at a guaranteed price?  And then wrap it up in an EIS wrapper so you get a slice off your income tax and even more limited downside as well?   I don’t blame you – and the risky growth business the EIS was set up for can go and starve.

Well, that’s life.  The fact is that, for better or worse, there’s a lot of rubbish out there which, by abusing the right tax structure, will make the right investor with the right tax bills money.  So, if we want the new businesses on which this and every (non-oil-based) economy relies to grow, we need to make sure that it makes even more sense for investors to provide them with the necessary finance and time and advice.

That’s where the team at Find Invest Grow, with whom I work at NMVC, come in.  Find Invest Grow has been assisting and raising money for new businesses for the last four years and I’m not aware of anyone who has the same ground-level view of the seed capital industry.  They’ve produced what they call the FIG Manifesto – a wishlist of steps they think will help the UK build a thriving and welcoming startup scene which will filter up throughout the whole economy.  (And don’t let the guys at Tech City persuade you we’re there already, because we’re not.)

Here it is.  Give it a read – they, and I, would love to hear what you think.

The FIG Manifesto

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