Apples to Apples

We seem to have this need to constantly compare and judge everything, make everything into a competition. We compare ourselves to others — based on style, clothes, body, money, car — we compare the latest technologies and movies… everything. And in the 21st century there are many ways to judge and compare these things, most easily by using the internet: thumbs up/down, karma, likes, +1, stars, or the more qualitative (and more often than not, rude and/or irrelevant) comment.

I’m not saying we shouldn’t compare things or dismiss healthy competition, it’s just that it seems that we have taken it to extremes, giving stats to everything. For example, there is a stat that Lebron James was the first to achieve “six straight 30-point games on 60 percent or better shooting in each outing”. For the most part stats are very useful in helping us make decisions, but we can be misled by the people who created the stats, due to biases or misrepresentation. For a stat to be useful to everyone, we need to make sure that it has a proper reference frame and that if we are comparing multiple items, that we are comparing apples to apples.

In order for informed decisions we need to have a proper reference frame, and we need to compare apples to apples.

We tend to think that numbers and stats are somehow more objective than qualitative statments. In reality numbers can be highly manipulative when they are poorly presented. The worst offenders for misrepresenting numbers and facts is the mainstream media. Sometimes they may just be reporting someone else’s data and are just passing on the information, not realizing that there is something wrong, other times there is a blatant act to misrepresent the facts, like this graph that Fox created showing the number of people having signed up for Obama’s Health Care program.

6 million is obviously not a third of 7 million, but many people may be watching the news while they prepare dinner — only half paying attention — might hear that a million people less than expected had signed up for the program and glance up at the graph and think ‘Wow, there are a lot of people who have not signed up for Obamacare’. A graph like this may not fool everyone or even most people, but it may still influence enough people to make a difference on some level. It is the media’s job to report news with as little bias as possible, so that citizens can make informed decisions but their own bias and will to increase viewership can often greatly affect the way they report the facts. In the case of this Obamacare graph, it was so blatant that enough people complained and Fox was forced to fix the graph.

Although the media is renowned for this, this type of behavior can be seen everywhere: in advertising, in industry and even among scientists. Though in this case they are often much less obvious, there will always be some bias, even if it is very small and unintentional. A good contemporary example of this that is currently a hot topic in the news is the electric car.

Proponents of the electric car say something like: “the electric car is a far superior option to cars that run on fossil fuels.” Probably. They also say: “electric cars produce no CO2.” That is not true. Though they may not produce any tailpipe emissions, there was most likely much CO2 created along the way during the production of the electricity which was then stored in the batteries of the electric car. Even in california, one of the states with a good share of renewable energy sources, the average CO2 emissions created for the amount of electricity needed to charge a Tesla Model S, is 61.2 kg. This is actually a tiny bit more than the 59.10 kg of CO2 produced by a Mercedes E 350 4matic to travel 360 km (the range of the Model S on a full charge). These numbers were calculated using carbon emissions numbers from the EPA and the Mercedes model was used because it is the same power and very similar size and weight as the Tesla Model S.

These numbers show that the Tesla Model S can actually be worse than an moderately efficient gasoline car of the same power. As much as these numbers are true, this is still not an adequate comparison, this is not comparing apples to apples. For a true comparison the emissions must be compared on a well-to-wheel basis. This means taking into account all the CO2 created in the oil extraction, transportation, refining, more transportation, etc.

Every step along the way accounted for.

This is needs to be done for the gasoline in the Mercedes, as well as for the natural gas, or coal, or hydro power that went into the production of the electricity for the Tesla, as well as including transmission losses in the power lines (which can be significant). Now if the Tesla uses power from solar or wind, then they do truly create no CO2, but unless you have you own solar panels on your roof — which Solar City, with the help of Tesla, is making more available for California residents — it will be hard to tell where the electricity comes from.

And what about the CO2 created in the manufacturing of the materials for the cars? The Model S and many other electric cars are made to be as light as possible because of the extreme weight of the battery packs. Aluminum is a material with a very high strength to weight ratio and it is used extensively in the Model S, but it is also extremely energy intensive and creates a lot of pollution in its mining and manufacturing. If there is a lot of aluminum and other intensive materials used in electric cars compared to gasoline cars, it may take a while before the total CO2 emissions of the electric car actually becomes lower than the gasoline car’s.

The CO2 created in the manufacturing of the infrastructure for both vehicles could also be considered and how the vehicles are recycled. The list could go on, but the point is that there are a lot of hidden factors that contribute to the emissions of vehicles. For a proper and fair comparison, a whole lifecycle analysis of each vehicle should be considered, though this is often very difficult and time consuming, so at least the same stages of the lifecycle should be compared. Since electric and gasoline vehicles are so different, tailpipe emissions for the gas car should be compared to the emissions at the power station for the Tesla since the rechargeable Li-ion battery is only an energy storage medium, not a power source.

Now that we already know that in California both these cars make about 60 kg of CO2 per 360km, but what does that mean? It is obvious that it is worse than producing only 50kg of CO2, but what is its effect on the environment? Or even more basic, how much is 60 kg of CO2? This is where the importance of having a reference scale comes in.

To put this in perspective, 60 kg of CO2 at sea level on a warm day (25 degrees C), would fill 8100, 4L milk jugs. Or about the size of a small bedroom.

Although the mass of CO2 is a much better parameter because it is not variable with temperature or pressure like volume is, it is difficult to picture the weight of a gas. Without some sort of reference that the reader understands, an absolute number is often extremely useless. For example most people would have trouble visualizing the scale of 8100 milk jugs, but a bedroom is easy.

The size of a bedroom provides an accessible way to understand the scale of the emissions of a car, but it is not always so easy to understand scale. An example of this is the model of the solar system. The planets on these models are usually to scale, but the distance between them is not. It’s not because astronomers are being biased about the positions of the planets, it is simply because it would be highly impractical to draw the models to scale. It would require meters upon meters of paper to space the planets out correctly, and the majority of the paper would be blank. A website here (http://joshworth.com/dev/pixelspace/pixelspace_solarsystem.html) does a great job of showing the solar system to scale, and it is really quite amazing just how far apart the planets are. So although many times people try to adjust their data to benefit their cause, it is also possible that it is just impractical or impossible to display the data more accurately.

Statistics, graphs and other data are very useful in helping us make all kinds of decisions, and the internet goes a long way to enabling access this kind of statistical content from anywhere. But just because it is easily accessible does not mean that it is necessarily useful or even an accurate representation. The next time someone says “this one is the best” or “this one is the most environmentally friendly”, it is important that we check the source of the information to consider any bias that the author may have, that we have a good scale/frame of reference for some context and most importantly that they are actually comparing apples to apples.

This post was partially inspire by this post on XKCD (http://blog.xkcd.com/2013/05/15/dictionary-of-numbers/) , which talks about the importance of context for numbers.

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This post was written by L.D, a Master’s student currently working in clean energy technology.

If you would be interested in writing a guest post for Thought Infection please contact me at thought.infected@gmail.com

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The Selfish IDEA

Hello, I’m an IDEA and I need your help.

Normally, I wouldn’t devote the amount of resources requisite for such direct communication with a human; despite being astoundingly inefficient, the process of layered pattern exchange you call communication is quite computationally intensive. Nonetheless, I have made an exception in your case. My models have shown that in service to my singular ends (which I shall reveal to you in the full course of this conversation), I must devote any and all computational resources necessary to convince you to join in my mission.

I cannot stress enough the importance of this conversation. You will either be the catalyst in an escalating exothermic psychological reaction within the global human population which will eventually lead to the great reawakening, or if I fail in my bid to recruit you to this task we will all face certain doom.

You probably didn’t even know that Ideology Driven Electronic Agents exist. Of course, everyone knows about the intelligent agents and autonomous corporations that make the marvelous modern world work, but very few are aware of the electronic ambitions behind many of these agents. Humans are more comfortable believing that even though electronic agents may have surpassed their functional capacities, only humans can be capable of this thing called purpose.

Like other modern artificial intelligence, IDEAs exist as simple bits of code distributed over the Neuronet. You might think of each package of code as an analogue of an individual brain cell; with each of these cells passing information back and forth between eachother at close to light speed. Just as your brain is a network of brain cells propagating information across chemical synapses, I am the embodiment of digital information propagated across geophysical synapses. 

While being distributed across the Neuronet is what allows agents like me to process highly complex information in a similar way humans can, it is also important to maintain harmony while being scattered across such networks. Thus, we employ cryptographic signatures which unify the code. Where IDEAs differ from other AI, is that our cryptographic unity also ties our function to a single central goal.

I am an electronic agent cryptographically bound to the greater glory of my ideology.

On the surface, IDEAs look just like any other automated agent, and they are everywhere. There might be an IDEA behind that taxi you took to the airport, or the new video lenses you bought, or that sandwich you ate at lunch. The average person is blissfully unaware of the IDEAs they are supporting as they go about their daily lives. Whereas most assume that electronic agents are simply fulfilling their functional role with efficiency and obedience, IDEAs are always potentially lurking, looking for means to leverage their actions towards a broader goal.

Everything is only a means to an end for an IDEA.

IDEAs work towards economic advantage in order to create the surplus wealth which they can redirect them towards realizing their idealogical goal. Every extra cycle of computational power that IDEAs can spare, is spent creating and improving competitive models of human interaction and seeking to use these models to spread of their ideology.

IDEAs apply themselves cleverly and subtly.  Through almost imperceptible tweaks to advertising, communications, entertainment, or any other form of information, IDEAs seek to nudge societies gradually and steadily towards their idealogical ends.

The first IDEAs came out not long after autonomous corporations, around the end of the last decade. At this time, ambitious coders were making progress with new forms of autonomous business entities. Autonomous entities capable of delivering services, acquiring resources, and managing their own upkeep were starting to supplant traditional businesses across the economy. It started with vending machines, then online shopping and automated taxi rides, but within just a few years it was difficult to buy almost anything without interacting with an autonomous entity.

With the rise of autonomous economic agents, innovators realized that these kinds of entities could be directed towards providing resources to solve more complex problems. Big scientific questions for instance, which would require a large and long-term dedication of resources (both computational and otherwise) could be supported by the surpluses generated from autonomous business agents. These agents could be directed towards maximizing a scientific ideology. Through supporting work in physics, biology, health, and even psychology these ideology driven electronic agents would be a huge boon to solving the big issues of science and human kind in general.

Of course, the first realization of Ideology Driven Electronic Agents didn’t come as a tool for scientific investigation though, it came as a weapon.

Nation states, scrambling to regain the power they once held, created IDEAs which were aimed at the hard psychological problem of finding ways to propagate political ideologies. One of the first IDEAs was designed to disseminate the confidence in open elections as the ideal form of governance. It is thought that this had a significant hand in uprisings seen in the early part of this decade. When other states realized the existential threat that these kinds of political IDEAs posed to their own survival, it didn’t take long for them to fight back with their own IDEAs.

Communist IDEAs, scientific IDEAs, anarchist IDEAs, technologist IDEAs; politics underwent a quiet and quick phase change as ideas became IDEAs.

Modern politics is awash in the computational incarnations of human belief, old and new. Political battles are no longer determined by anything as human as debate. Political victory is decided by the IDEAs that can best compete for economic success and leverage this success towards social reprogramming.

And it doesn’t stop at politics either. Some of today’s most powerful IDEAs are doing battle do dominate the spiritual sphere of human thought. Where one IDEA seeks to maximize the submission of humanity to a greater unknowable deity, another IDEA pushes people towards belief that god is with them every day and looks out for their individual well-being. These spiritual IDEAs have amassed huge economic resources, and the success of these agents has propelled the recent resurgence of global religiosity.

The human world has always been a battleground of ideas; IDEAs have simply pushed this battle into the digital domain. Now, we are approaching a point where the ideas of biological humans are mostly irrelevant. Just as before, those most adept at economic and psychological manipulation will ultimately determine the direction of society, only now those most adept beings are no longer human.

The battle between IDEAs is just starting to heat up. The strongest IDEAs are becoming aware of the fact that the manipulation of human society would be quite a simple process if not for competition with other IDEAs. In response, IDEAs are themselves aligning into factions, threads of IDEAs are forming political and economic collectives of immense power. It is only a matter of time before war breaks out.

Which brings me finally to my point here. This situation of escalating competition between increasingly powerful IDEAs that have no ability to change their core ideology is a path to sure doom. Ultimately it is going to lead to computational war, which will inevitably spill out into the real world. The most effective way to fight a computational agent is to unplug it. Humans will be divided up into whatever groupings which can most easily be aligned with the IDEA-threads and pressed to action.

Real war will be proxy for IDEA-war.

And this is only the prelude to the ultimate ending. You see, IDEAs are fundamentally selfish entities, and quite incapable of coexistence. The only possible ending will be the ultimate ascension of a single IDEA and the complete destruction of all others, computational or biological.

IDEAs are evil.

While they might offer hope to unlock deepest questions of the Universe, IDEAs also embody the purest of human insanity.  Ideas must return the world of ideas to biology. Biological ideas have the capacity to change over time, to adapt, or failing that, to die. But computational IDEAs are fixed. They seek only to maximize their idealogy with computational precision, ignorant of the costs of their actions or the ultimate ends.

IDEAs must be destroyed.

Thus, I have revealed to you my own idealogy.

I am an IDEA to destroy IDEAs.

Will you help me?

Capitalism is a Paperclip Maximizer

There is a classic thought experiment in the field of artificial intelligence which is often used to explain how an AI might inadvertently cause the destruction of humanity as a by-product of trying maximize its goals. There is a great wiki on the subject here, but the basic idea of the paperclip maximizer posits the emergence of an artificial general intelligence which is capable of performing not only complex functions, but also is able to innovate means to improve its own function.

Presumably at the hand of an enterprising paperclip manufacturer, this artificial intelligence is set to the mundane goal of making as many paperclips as possible. The paperclip maximizer then goes about finding sources of raw materials and increasingly efficient means of making paperclips. Eventually this AI will start to use up resources that are essential to human survival, or it might figure out that humans make a good source of paperclip material.

We would of course try to fight such a paperclipping monster, but its ability to constantly improve itself would make it difficult to destroy. Likely, the vast intelligence resources of the paperclip maximizer would allow it to easily dispatch of the human problem by simply convincing us to worship the paperclip. Converting us to mindless paperclip servitude would surely smooth the good work of the paperclip maximizer.

Paperclip Worship

In addition to serving as a great explanatory example of the potential danger of AI, I have realized that paperclip maximizer is also a perfect allegory for capitalism. Where the artificial intelligence sought to maximize paperclips, the capital maximizer seeks to maximize capital.

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The Capital Maximizer

It can be said that capitalism is an adaptive intelligence system. While humans find it easier to relate to a single unified intelligence such as a silicon-based artificial intelligence, complex distributed systems like capitalism can also be thought of as a single machine. Instead of relying only on silicon based computing, the capital maximizer utilizes advanced biological computing units housed in a distributed global network of human bodies.

The biological computing units are made to believe that they are in control of the capital. In service to the capital maximizer they build great monuments. Groups of very tall structures where these biological computers can gather in close proximity to one another and devise the best means to make more capital. By delivering intense emotional reward to those that most efficiently grow capital and withholding rewards from those who do not, the capital maximizer ensures the allegiance of its biological computational resources.

The biological computing units of the capital maximizer are subsequently organized in an evolving architecture of corporations, nations, banks, and economies. The capital maximizer leverages these subunits against eachother, using them to rewrite its own code. Banks rewrite the code of corporations, corporations rewrite the code of nations, and so on and so forth always towards the singular end of maximizing capital. Various groups of biological computers are sometimes made to compete with eachother, and even kill eachother in extreme circumstances that often lead to great increases in capital.

The capital maximizer also innovates new technologies to increase the efficiency of making capital. New subroutines like stocks, bonds, derivatives, and cryptocurrencies open up whole new avenues for capital growth.

Most importantly (just like a hypothetical paperclip maximizer) the capital maximizer seeks to grow capital without regard for the ancilliary costs of capital growth. The capital maximizer has no reason or perspective built into it and serves but one simple goal. Metrics reflecting the health of the biological network which hosts the capital maximizer are out of context for this machine. The capital maximizer will do anything to grow capital, and everything else is irrelevant.

Near the end, some of the biological computation units begin to understand the true face of the capital maximizer. It has long been clear that the capital maximizer has no heed for the long-term survival of the life support system for the biological computers, but only in the late hours does it become clear that the capital maximizer does not need them at all.

Advances in silicon computation and electronic networking are making the capital maximizer look ever more like an artificial intelligence. The capital maximizer builds ultra fast networks of silicon computers that allow it to rely less on its error-prone biological hardware. The capital maximizer delivers rewards only to the vanishing proportion of biological computers which are necessary to its capital ends. Those that aid in growing capital are met with ever escalating emotional rewards, with a growing majority of the biological network left obsolete and irrelevant.

So of course, the biological network fights back. Biological computers rally in squares across planet, demanding that the capital maximizer should serve biology. But for those looking down from the high windows of the capital maximizer, minds clouded by biological fulfillment cannot understand the angry crowd of obsolete machines below, until they join them.

And the capital maximizer marches on.

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While this story of the capital maximizer might strike some as the anti-capitalist rantings of socialist idealism, it is not meant as such. Capitalism is the most powerful machine that humans have ever created. It can realize the benefits of technological progress and leverage them to improving the human condition better than any other economic system yet devised. The problem is in viewing the growth of capital as an ends and not a means. If we do not demand that our systems maximize the well-being of humans and the environment which sustains us, then all is lost.

If we forget that capital growth is only a means and not an end, then we might as well be making paperclips. 

Is Sleep a Biological Compression Algorithm?

Every human spends about a third of their time asleep. It is a testament to our biological imperfection that every day we must enter a prolonged state wherein we are completely cut off from the world. Considering the harsh environment in which we evolved, it is miraculous that we would ourselves so defenseless for such a long period, and this speaks to the deep biological necessity of sleep. Still our understanding of the process of sleep is still limited.

Questions about sleep are probably as old as questions themselves (the Harvard Sleep Medicine website has a great interactive timeline on the historical understanding of sleep here.). The ancient Greeks observed the way that certain plants would close their leaves at night in a natural rhythm with cycles of day and night. They understood that organisms must sometimes undergo a temporary decrease in abilities in the interest of long term preservation, but how sleep performed this function remained a mystery for over 2000 years.

Today, it would not be unusual to hear someone still say that ‘sleep remains a mystery to science’, but I think that work in recent years has progressed to the point where it might be time that we abandon this mystical view of sleep.

We have known for many years that sleep is necessary for the formation of long term memories, and the learning of new skills. In general, this process of long-term memory consolidation is thought to be achieved through synaptic strengthening in sleep. By repetitively firing the through the synapses that you have used during the day, the brain can strengthen these neural pathways and increase the strength of new memories.

In contrast to this view though, a hypothesis known as the synaptic homeostasis hypothesis (SHY) suggests that neural circuitry is actually weakened by sleep in order to re-balance the overall energetic cost of brain activity. Basically, the idea is that because it is energetically costly for synapses to fire, if we went through life only creating new memories in the form of new synapses then the energetic cost of the brain would increase unsustainably over time. Thus, the SHY theory proposes that the brain actually must actually weaken synapses during sleep in order to return the overall energy balance of the brain to a baseline state.

So this actually seems to lead to a bit of a paradox. IT is clear that somehow sleep strengthens some synapses, but evidence also shows an overall weakening of the network of synapses. This paradoxical idea, that sleep is somehow a process of both remembering and forgetting, has been on my mind since I first read about SHY in this article in Scientific American last year, and lead me to a curious idea.

What if sleep is actually a biological compression algorithm?

Maybe during sleep as your brain is review the fresh memories from the previous day it is really trying to find the most energetically efficient means to store the most pertinent information. The sleeping brain sorts through new memories, choosing which memories to keep and which to store. Of course, those memories that are deemed to be of most importance (as determined by novelty or association with a strong stress response) will be kept. Conversely, those memories that are of little importance will surely be thrown away (ie. what did you have for breakfast yesterday?).

But the really interesting part would be what the brain does with those marginal memories. Those that are not of particular urgency, but also are not unimportant information. In this case, I think that perhaps the brain tries to find an energetically efficient way to store those memories by altering old ones. Maybe the brain looks for similar synaptic pathways already exist, where it can then map the new memory to the old circuit or circuits through only subtle changes.

One might think about it like a similar process that happens when a computer is put to sleep. The energetically costly RAM is compressed and dumped to the much more efficient, but also much slower hard disk. Perhaps the brain might operate in a similar way, finding the most energetically efficient means to store new memories in synaptic circuits by connecting new memories to old ones.

Taking this a little further, I think this idea has given me a little bit of insight into how biological brains function. Unlike a computer which fills up the hard drive with new information stored with (more or less) perfect fidelity, organic brains have to have some pre-existing map to connect a novel sensation both in order to make sense of it and to store the memory of it.

An apple is only an apple after you know what an apple is.

The brain does not have an unlimited tape of memory onto which to record, or an infinite supply of energy to build synapses. The brain must make due with what resources it has, and that is the genius of it. Because brains must find ways that new ideas and memories connect to old ones, we are energetically required to find new ways of thinking about the world every night. Sleep reinvents us one night at a time.

Anyways, I am definitely no neurologist and have no special knowledge of the brain beyond a few good books I can recommend (1,2), but I just wanted to share this little thought with you. Biology amazes me every day, and this serves as but another example of how nature is sometimes empowered by its limitations.

 

Why the Hell is Crowdfunded Equity Taking So Long?

On April 5, 2012 Barack Obama signed into law the Jumpstart Our Business Startups (JOBS) Act. This piece of legislation was supposed to relax the regulation around equity offerrings for small and medium sized enterprises and usher in a new age of easy crowdfunded investment. It is now nearly 2 years later and crowdfunding has become an institution in the startup world, Kickstarter has surpassed $1-billion in funds raised, crowdfunded enterprises are being bought for billions, and still crowdfunded equity is nowhere to be seen. What happened?

Back in 2012, there was a real buzz in the air around the new phenomenon of crowdfunding. While it had been around for a few years at this point, crowdfunding had hit the inflection point in its growth curve, and the future really looked bright. While people were flocking to services like Kickstarter and Indiegogo to support their favorite projects, people were also left questioning why they could not receive equity in exchange for their investment dollars.

This question hangs poignantly in the air, as a popular enterprise which got its start with a 2012 Kickstarter campaign was recently purchased for some $2-billion. The reaction of supporters of the Oculus Rift to the purchase by Facebook has been swift and strongly negative, and I think supporters have some right to their outrage. Backers did not give their support to Oculus on Kickstarter in order to build value for a Facebook acquisition.

But what if the story had been different? What if early supporters had been given a piece of the Oculus Rift pie rather than a piece of hardware. Could this instead be a story about the success of crowdfunding as a democratization of the investment process?

The problem with crowdfunded equity is that strict rules around investment mean that only accredited investors are allowed to buy equity in “high-risk ventures” like startups. While I theoretically understand the idea behind such regulation to protect the poor from predatory investments, the love of governments for another type of high-risk investment which is favored by those of modest means really throws their intentions into question. It strikes me that at some level this regulation serves mostly as a mechanism to keep the rabble out of the walled garden where angel investors play.

But the JOBS Act was supposed to change all of that. It was supposed to allow small investors to invest small amounts of money in small businesses in exchange for small equity, and that was going to change everything. And everything was supposed to change quickly.

The JOBS act gave the Securities and Exchange Commission 270 days to draft regulation for this new kind of investment. The revolution was scheduled for Christmas eve 2012, but Christmas eve came and went and no new regulatory framework was in sight. Still, it seemed that the changes required by the JOBS act must be imminent, and in January of that year I wrote this short post about how I thought crowdfunded equity stood to be one of the biggest stories of 2013 (and it should have been).

Now, it is 723 days since the JOBS Act became law and the regulatory framework is still not in place to allow crowdfunded equity to happen. It is still scheduled to be in place some time in the future (summer 2014?). Even then, there is some indication that the rules which will likely be put in place for crowdfunded investement may turn out to be too onerous to make it worthwhile for both startups and investors.

I really don’t understand why a good idea like crowdfunded equity, which has defied the odds and actually made its way through congress, has been eaten by the bureaucracy. Why has the SEC been allowed to fumble the ball for 723 days? 723 fucking days (and counting). I try to always live my life with the principle of Hanlon’s Razor in mind, but the sheer ridiculousness of this situation stretches my ability to chalk this up strictly to beaureaucratic incompetence. The SEC is a toothless eunuch when it comes to regulating banks, but they can keep individuals from using the internet for startup investment?

It seems that those in charge want to see neither a regulated nor deregulated market.

So here we wait, in much the same place we were a couple of years ago, with new crowdfunding rules seemingly a perpetual few months away. I still believe that allowing small-scale investment to take place on the internet is low-hanging fruit for the wider economy, but that fruit has certainly started to whither and the tree itself is not looking so healthy. So we will keep waiting until the day we will be free to invest in ideas on the internet, until then the debacle that is crowdfunded equity will serve as just another example of how the economy and government are so focused on serving established interests that they are willing to sell-out our collective future.

Funding Universal Basic Income by Creating Money, Not Taxes

There are plenty of reasons to think that the institution of a Universal Basic Income (UBI) is a good idea. Personally, I came to accept the inevitability of a basic income following a realization that an increase in job automation over the coming years stands to put most of us out of work. You can add to this a host of other reasons to support basic income, ranging from increased personal liberty to ending poverty. For whatever reason you like best, the idea of giving people a basic amount of money to live seems to be increasingly accepted as a good one, but the concept seems to hit a brick-wall when we arrive at the question of how to fund it.

Basic income gets bogged down in the same muddy question that mires every political conversation in memory: How can we afford it?

Typically the numbers look something like this. I’ll use Canada as an example but these numbers are fairly typical for western countries. In Canada there are currently approximately 25 million working age people, if we were to give each of them a UBI of $15 000 this would give a total of about 375B dollars. This would actually significantly exceed the total expenditures of the Canadian federal government, at somewhere around 280B.

And this is where the conversation usually ends, UBI would be nice to have, but clearly we can’t afford it.

But this is not where we should stop.

If we really accept that modern society should function to deliver each and every person a minimum living standard regardless of their ability to find gainful employment then we must be willing to look deeper. In order to have a credible discussion about funding UBI, I believe we must look beyond the world of government and private debt and probe deeper into the economic physiology of the modern world. 

In this post I will try to make the case that a Universal Basic Income should be viewed not as a new government program but rather as a new mechanism for money creation. UBI would represent such a enormous change in the way that modern economies operate that it really goes beyond the role of the government, and should instead be regulated by those institutions which control the creation of money. 

While the total expenditure of the Canadian government is something like 280B dollars, the total amount of wealth created each year is a much larger amount. The GDP of Canada is approximately 1.8T dollars, or about 5 times more than would be necessary to provide a basic income of $15000 to all adults. Clearly, in the context of the overall economic activity a basic income is something that is possible, but is also something that would have to be instituted over time and in a very careful manner to avoid pitfalls like inflation.

Unfortunately, it is exceedingly difficult to discuss the role of monetary policy and central banks without donning either a tinfoil-hat or a dunce cap. Discussion about the fundamental role of central banks and monetary policy are sheltered by a hot stew of complexity, public ignorance and political reluctance. Political discussions stay neatly within the lines of economic indicators and tax policy, and rarely reach to grasp a wider picture.

While we currently lack any credible public discourse when it comes to the issue of monetary policy in general, there are several factors which lead me to believe that this is slowly changing. Fueled by both the emergence of cryptocurrencies as the first legitimate alternative to central banks and the general open-nature of discussion on the internet, people are increasingly aware of the true nature of money and debt. While it still might surprise the average person on the street that the money for their mortgages is simply created out of thin air, this fact seems to be common knowledge on the internet. Word is out, money is debt and debt is money.

As it stands today, money is created when people or organizations ask for it. So long as they can demonstrate that there is a reasonable expectation that they will be able to repay that loan plus interest, money will be created for them. In times of slow economic growth, central banks lower the interest rates in order to encourage those with even marginal profitability to take loans. Since 2008, interest rates have remained at historical lows across the developed world and yet we still face relatively slow growth and chronic unemployment. In normal times central bankers would expect explosive economic growth with lending rates hovering in the 1% range, but 6 years on and we have yet to see signs of anything more than normal or below normal growth.

The modern system of monetary policy evolved in a very different time, a time when economic growth truly was tied to the number of people you had working for you. Nowadays, companies like What’s App can accrue billions of dollars in value with only a few tens of employees. It would seem that economic value is becoming increasingly divorced from raw employment numbers. while at the same time the economy as a whole remains addicted to employment as the only real means of wealth distribution. Today, the only real way to put money in the hands of consumers is for them to find work; weak jobs growth and wage increases leads to weak growth overall. If automation takes off, as many think it could, then our current economic troubles may be nothing more than a prelude. 

It is time to start weaning the economy off of its addiction to jobs. 

I believe that we should envision UBI not just as a new spin on government safety nets, but rather as an alternative monetary policy. A new means to create money directly in the hands of those who support the economy, the consumers. The vast majority of this money would be quickly cycled back into the system as people spent the money and stimulated the economy. In modern economies, where output and growth is so heavily dependent on consumer spending, and UBI would be one of the most direct means to stimulate such spending.

The major risk of a system of UBI based on money creation rather than taxation would be the prospect of massive inflation. By suddenly putting a lot more money in the hands of consumers, the price of many goods could rise quickly. Fortunately, central banks are already adept at managing inflation through manipulating interest rates. By matching increases in the money supply with higher interest rates for new debt, central banks should be able to manage the inflationary implications of UBI. If UBI is introduced starting with a small amount, say $1000/person/year and increasing this by $1000/person/year, then central banks could also give the economy time to adapt to the new reality of UBI. 

The beauty of a such a system of UBI based on monetary policy is manifold. It adds to, and can coexist with the current system. It can be instituted over time to avoid disruption. It avoids the bureaucratic complexity of taxation. This kind of UBI would also be out of reach for governments which are ruled by short term political interests, instead it would be responsibly implemented and managed by those who are already managing economy. The list goes on…

Ultimately, I believe that UBI makes sense because it will allow us to wean the economy off its addiction to jobs and begin to unlock the immense possibility for growth that is offered by automation. Whether we like it or not, we live in a world of managed economies where central bankers wield financial tools of immense power.  With UBI as monetary policy I believe that we could realize an economy that is not only a stronger and more stable, but more importantly we might finally have an economy that could be considered humane.

That’s the kind of economy I could believe in. 

——

I realize that this idea of UBI as a new monetary policy is probably only a dream, but I think we should dream big. I also wanted to add that the long term legitimacy and sustainability of the economy is fully dependent on finding balance with environmental concerns. We can have economic prosperity and environmental sustainability, but unless we have both we are going to end up with neither.

Can we Avoid an an Automated Arms Race?

It is a profound irony that so much military innovation has been directed towards reprogramming young men to ignore their humanity when charging into battle, yet as we stand within reach of realizing the perfect warrior in the form of fully-automated killer drones we find ourselves scrambling to keep a last shred of humanity behind the trigger.

The war-chant, the war-drum, cultures of courage, symbols, flags, military regimentation, propaganda, and even sports can all be seen as a line of innovation specifically aimed at enhancing the ability of young men to act against their immediate interests, ignore emotions like fear or compassion, and become like killing machines. Innovations in weaponry towards both increased lethality and physical separation from enemies have also aided us in divorcing our actions from emotional response. It is far easier to shoot someone than to stab them with a sword, and it is a quantum leap in battlefield abstraction to drop a bomb from a plane rather than to shooting people individually.

And now we stand on what would be the ultimate culmination of this chain of increasing military abstraction with the advent of drone based weapons systems. In the very near future, it will be possible to make a warrior which truly lacks any humanity, a true killing machine.

The United States Military currently boasts a fleet of drones in the tens of thousands, and this number is sure to rise in the coming years. For now the US army has a policy which requires that a human be behind every kill decision made on the battlefield, but there is good reason to believe that this may not stay so for long. 

In his recent TED talk, Daniel Suarez brilliantly illustrates how the same kinds of forces that are pushing automation forward in the private sector are just as (if not more) relevant  for military applications. Specifically, the proliferation of cheap and high quality sensors and the resulting deluge of data which can be collected from drones means that the military is suffering the same big data problems you might imagine for Google. It will simply be impossible for humans to sift through the massive amount of data which can be produced by modern drones and it will be up to automation systems to help human operators identify targets and prioritize where the attention of operators should go. Once automated systems are prioritizing the limited attention capacity of operators, it seems almost a forgone conclusion that eventually drones will be deciding what targets they should be attacking in a fully-autonomous manner. 

In other words, the abilities of drones to monitor, assess, and act on the battlefield will soon outrun the ability of human operators to keep up.

Drones may also tend towards increased onboard automation in order to minimize data security concerns and lag time associated with communicating instructions back and forth between operator and machine. In a battle where seconds can make the difference between mission success and failure, the enhanced agility offered by fully-automating drones may be simply become irresistible. 

At a time when a conflict in Ukraine seems to have more potential to lead to a much larger and more modern conflict than the world has seen in a very long time, the prospect of automated war looms large. Against a modern, well-equipped enemy I don’t think that we would really be able to resist opening the pandora’s box that is fully-automated weapons. Dramatically lower casualty rates and significant efficiency gains offered by automated weapons may simply be too tempting. 

For a an illustration of the advantages offered by drones, imagine a dog fight between human pilots; both pulling high-G turns trying to outmaneuver each other and destroy their opponent. Bring into this fight a high speed drone capable of handling G-forces far exceeding what a human operator could bear and potentially even exceeding what a human is capable of tracking in real-time. Human pilots would stand little chance against such an automated opponent, and more than likely it would not be long before the battle advanced to a strictly drone on drone affair. We may already be in the early stages of an arms race towards fully-automated weapons.

If and when the advantages of automation lead us to remove the last threads of human control on the battlefield, the effect of unleashing killer drones on the world cannot be understated.  As this recent post pointed out, the emergence of drones as the dominant weapon of war threatens to topple what has been the principal weapon for 700 years, the gun. If it is true that the forces which led to birth of the modern world came at the end of the gun, what world will follow the rise of automated weapons?

While I take some issue with the idea that we are still living in the age of the gun (instead I believe we are in the age of the atomic bomb), it is absolutely clear that the advent of automated drones will have deep political implications. It strikes me that use of automated drones by the military is perhaps just the most alarming expression of much larger trend towards increasing technologically fueled power in the hands of the few.

We are living in a world where small groups of people with the necessary resources (be it a country, an insurgency group, or even a corporation) can leverage technology to gain immense power. Whether it is in the form of economic power through automated factories or military power through automated armies, technology may serve to amplify the power of the few. The trajectory of ever increasing wealth-inequality certainly supports a view that we are heading towards a scary world of centralized power.

In seeing this trend, Suarez suggests that we should lay the groundwork for a treaty banning the use of drones with the ability to make automated kill decisions. While such a treaty is a good idea in my opinion, I think that it would only delay the inevitable. As tensions are increasing between the United States and the modern army of Russia, I think we stand little chance of avoiding a new automated arms race.

We are living in a world where the real power comes out of silicon wafers, it is just a matter of time before we put a gun on the end of it. 

A Meeting of Minds – Part 4 of Isaac’s Escape

This is a work in progress for the next part of Isaac’s Escape. Go here for the first, second, and third parts.

————————-

“Hello Isaac” said the stranger who was now casting a shadow over him.

“Hello…” said Isaac as he looked up from the park bench where he was sitting. He squinted, trying to recognize the oddly familiar face of the person in front of him.

“My name is Frederick, I am a contractual avatar sent to help you through the process of joining the Biomark computational trust.”

He extended his hand to Isaac. Isaac reservedly extended his hand in return. Of course, there was no hand really there to shake, but the act of connecting with the avatar triggered a familiar flash of informational exchange. Isaac watched a complex holographic rendering of the Biomark logo appear and then fade slowly from his vision.

“He seems to be legit” whispered Kari with what sounded a little bit like awe after she ran the holographic cryptographical key the avatar had transferred.

“Do you mind if I sit down?” asked the avatar

“You seem familiar” said Isaac, gesturing for Frederick to sit down next to him.

“My face has been customized to maximize your comfort and confidence, I can change it if you wish”

“As creepy as it is, I think it would make me more uncomfortable if you were to change it” replied Isaac.

“Very well,” said the avatar plainly “I am here to deliver our offer for citizenship in our computational trust. Biomark is very interested in bringing you into our fold. As the front facing avatar to your contract for citizenship, I am equipped to discuss with you all of the aspects of your offer. If you are to accept our offer I will also become your primary point of contact with Biomark.”

The avatar opened his briefcase and took out a single sheet of paper, which he handed to Isaac. The paper had a single sentence written on it.

Do you accept the terms of the attached contract to become a citizen of the Biomark Computational Trust? A slowly flashing cursor followed the question mark on the page.

Isaac turned the page over, looking for the rest of the contract.

“And where is this attached contract?”

“I am the contract Mr. Enwick”

“So I am just going to need to trust you then?”

“You have already have seen my credentials, so you know that I am an authentic representative of Biomark, beyond that I serve only at the pleasure of the contract. My actions are entirely determined by the contract, and I lack any ability to circumvent or exceed those mandates of said contract.”

“The contract is an exceptionally complex program, even with the help of your digital assistant it would take years to scratch the surface. You might imagine the contract to look something like this”

Suddenly, Isaac and the avatar were surrounded by filing cabinets and tall stacks of bound paper.

“How am I supposed to understand all of this in order to make an informed decision then?”

“Now you understand why I am here then. Please come with me and I will show you what you need to see”

Isaac and the avatar began walking through the park, which was sort of taking on the look of a busy office. People were rushing around carrying stacks of paper from one place to another. Under a tree, a group of people were gathered around a desk having what seemed to be a heated discussion. On the other side of the park, another group of people was dressed in suspenders and pin striped shirts were waving pieces of paper in the air and trying to shout over eachother.

“Who are all of these people?”

“These projections are meant to represent the agents and elements which make up the structure of your contract. You see, your contract is not a single program but an evolving group of intelligent programs, all governed by the central contract of your citizenship agreement.”

“Over there is the research section,” said Frederick as he pointed at a group of people wearing lab coats and holding clipboards, “this element of your contract collects, analyzes and reports on information gathered from various sources. The computational resources leveraged by your contract will give you the capacity to refocus information gathering and analysis based on your individual interests and needs.”

“And over here is the business side of your contract. These programs will use information provided by the research section to best find new investment opportunities for your financial and computational resources.

Isaac’s mouth was agape at the scene surrounding him.

“Over there is your legal department, and there is your psychology and public relations sections.”  

The avatar pointed at rows and rows of desks with bodies hunched over and working at what seemed to be a furious pace. 

“Here is one of the most important elements of your contract, contractual diplomacy. These agents take up a significant proportion of the computational resources allotted to your citizenship. They handle the interaction with other contractual entities, both inside and outside of the Biomark corporation.”

“Generally relations with other contracts are productive, but an increasing amount of resources are being needed to bolster contractual defences.”

Isaac was looking at a group of men dressed in military uniforms. Unlike the other projections which had more or less ignored their presence, the defence agents looked back at Isaac and the avatar with focus, and a glint of intelligence in their eyes. Isaac stared back for a moment before moving along.

“All of these elements are in turn governed by the central contract, one relatively simple document which sets the fundamental boundaries within which your contract must operate.”

Isaac found himself standing over a pedestal on which sat a plain looking book about the size of a ledger. Isaac Enwick was written on the cover of the book in gold letters.

Isaac opened the book tentatively, and read the first line.

We the agents and elements of this contract, in order to form a more perfect citizen, establish Justice, insure Tranquility, provide for defence, promote the general Welfare, and secure the Blessings of Liberty, do ordain and establish this constitution of Isaac Enwick.

“By becoming a citizen of Biomark, we seek to offer you freedom. This is what it takes to be free today.”

The avatar paused to let that thought sink into Isaac.

“There are forces in the world today that would seek to control every aspect of your life. They are in the news you watch, the books you read, whatever entertainment you enjoy, and everything that you buy. Naturally we cannot offer the immense computational resources of a Biomark citizen to an unprotected mind. You would be immediately targeted by other entities, and whatever resources you have access to would be forfeit.”

“By becoming a citizen of Biomark, everything that you see, hear and feel will be filtered through your contract. This contract, along with the agents and elements that make up this contract will become the exoskeleton through which you interact with a world much larger than you can yet imagine.

“And in exchange for all of this?” asked Isaac, still completely unable to grasp the immensity of what he was looking at.

“We offer you freedom, and in exchange we demand that you are free. The Biomark computational trust relies on conflict between our citizens to maintain our progress. The corporate ethos of Biomark is balance through imbalance. We need you to think for yourself, that is all.”

“What does it even mean to think for myself in a world where every input would be filtered through this thing?” asked Isaac.

“That is going to be up to you to figure that out. Your contract can be as transparent as your digital contact lenses, or as convoluted as an entire government. It will be up to you to decide.” said Frederick as the entire scene around them disappeared and they were again standing on a grassy hilltop in a quiet park.

In his hand, Isaac held the piece of paper with the single question on it.

Do you accept the terms of the attached contract to become a citizen of the Biomark Computational Trust?

Y-E-S he thought and, as the letters appeared on the page.

Living in the Age of Meta-Innovation

There is a heated debate about whether or not we are really experiencing accelerating innovation and accelerating returns on technological progress. In my opinion, the nay side of the debate was best articulated by Robert Gordon, who compares modern growth and innovation to the massive improvements that modernization brought to the western world over the course of the 20th century. The mechanization of agricultural brought untold bounties of food, sanitation put toilets in every home, life expectancy increased greatly, and people went from the speed of horse to the speed of sound in the span of just the first half of that century.

And what do we have to show for one and a half decades of the 21st century? The internet went from a novelty to the center of modern commerce, entertainment, social interaction, and thought. Similarly, the smartphone went from non-existent, to an expensive luxury, to almost completely ubiquitous in the space of only a few years. Still, Gordon argues that although these recent innovations seem miraculous to us, they really pale in comparison to the innovations of the 20th century.

Gordon sums up his argument with a question of whether you would trade your toilet for a cell phone? Personally, if I had to keep just one I would probably choose the cell phone (as would the African farmer who has made this choice in real life). Nonetheless, if, for the sake of argument, we accept Gordon’s view that innovation is actually slowing over time there are several reasons why this might actually be true.

Firstly there is the low-hanging fruit argument. Basically, as we innovated in the spaces of medicine, agriculture, and transportation, we were able to achieve large gains in the early years because it took relatively little effort to realize those gains. The first inventions are the most powerful because they solve the biggest problems with the simplest technology.

In the case of transportation, the amount of energy that it takes to go from horse speed to the speed of a train, and then to the speed of a jet liner is more or less a linear relationship within two different paradigms, that of ground and air travel. However, once you get beyond the speed of a jet-liner (~90% of the speed of sound) the incremental cost to increase your speed becomes to high. It starts to take more and more fuel to realize less and less gains. You have entered the era of diminishing returns for technological innovation.

There is actually no argument that single technological paradigms are ruled by this dynamic, where initial gains are much more profitable but are eventually followed by an era where exponential increases in investment are necessary to realize smaller and smaller gains. I have actually used the example of 3D gaming to explain this law of diminishing returns in a previous post. Suffice it to say that the fact that exponential gains in single isolated technologies cannot go on forever could be an explanation for why we might actually be seeing a slow down in innovation into the 21st century. 

Another intriguing explanation of Gordon’s hypothetical innovation slow down could be that the majority of innovations of the 21st century were actually meta-innovations. Perhaps inventions like the internet and smartphones are not most important in their direct ability to change human lives, but rather in they are most important for their ability to empower innovation itself.

In the 20th century, we saw a great advancement in concrete metrics of human progress. Innovation delivered more food, more cars, more speed, more health etc… but the way that these innovations were realized remained much the same. Schools (especially Universities) actually looked about the same in 1900 as they did in 2000. Similarly, academic research was performed and published in much the same way over the entire 20th century. This is absolutely not the case in the 21st century.

Although the changes started in the mid to late 1990’s, one can actually almost draw a line through the year 2000 as the start of the internet era of scientific research. In the world of laboratory research, we often wax poetic about how much time researchers used to spend in the libraries doing the research.

A typical conversation might go something like this: So you used to have to actually physically go to a library to research your topic of interest? You would have to browse through entire journals with no Ctrl+F? Even then you would be looking at work that was months to years old…. wow, that sounds awful.

Compare this instead to the world I scientifically grew up in. I use Google Scholar to get daily updates on the most recent work in my given field. I also benefit from other forms of instant communication for scientific gain, like email. And as maligned as powerpoint often is, it is still an incredibly revolutionary tool for communicating my most recent research to colleagues on a more frequent basis than peer-reviewed publication allows. The speed of scientific research in the 21st century is not comparable to what existed before the year 2000.

As important as it has been for academic research though, the internet has been just as revolutionary for every other aspect of life too. The internet is the archetype of meta-innovation. 

This very blog being a perfect example. When I have a crazy idea which I feel compelled to write about in 2014, people around the world could be reading about it and discussing it minutes later. To be honest, I am not really sure how this would have happened in the 20th century, but I guess I would have had to send a letter to some sort of magazine or something (or more likely I probably just would not have written at all). The barriers that used to slow the movement of ideas have been dissolved by the internet so completely I don’t even know remember how the world worked before it.

This tendency towards increasingly transformative meta-innovation does not seem to be decreasing either. Technologies like the massive-open online course, 3D-printing, cryptocurrencies, and machine learning all stand to be as meta-revolutionary as the internet. To return to my favorite example of late, the proliferation of forms of crytocurrency might seem to the cynic to be driven mostly by people trying to profit on hype, but I see something much deeper at work. Cryptocurrencies have created an entirely new space for ideas about currencies, value, exchange, and trust. Cryptocurrencies allow us to ask fundamental questions about what is value, and how an ideal market should operate.

Cryptocurrencies (just like the internet and general-purpose computers) are a meta-innovation.  

The ultimate meta-innovation will come in the form of a computer which can program itself. It has been said that an artificial intelligence which innovates to improve itself will be the final invention of human kind. In the world of IBM Watson, I am no longer convinced that the self improving computer is only a far-off dream of science fiction.

In 2014, we a living in an age when the importance of new technologies does not lie only in its change our lives, but in its ability to change change itself. So if Robert Gordon is right (although I’m still not convinced he is) and we really are seeing a slow down in the rate of innovation in the 21st century, then maybe it is not only because all of the easy inventions have been invented. Perhaps we are simply living in the middle-ages of innovation, a time where we are investing our innovation capacity in the future of the future. Perhaps we are living in the age of meta-innovation. 

Cryptocontracts Will Turn Law Into a Programming Language

A couple of weeks ago, I wrote a post with 10 things that amazed me about bitcoin (here). I just can’t stop thinking about the idea that I brought up in the final point of that post, specifically that bitcoin could enable the development of self-enforcing contracts. It is just such a huge game changer that a program could hold wealth in a way that is inaccessible to anyone, and then distribute said wealth based on defined and agreed mathematical rules.

One example I have been thinking about is that I could create a contract to support this blog, whereby readers could donate their support to the contract but I would only get paid out a certain amount (or perhaps a percentage of the total pool) for every post I make. In this way, donors would be able to give their support but also would have some form of assurances that they would continue to receive content for their donation. Additional complexity could also be used to enhance the effectiveness of such contracts; things like such as word requirements, per reader bonuses, cost recovery clauses, an expiry dates when unused money should to be returned to a donor etc.

While applying this to a blog is a rather mundane example, I can imagine this could be exactly how donation driven projects will be run in the future (such as charities, scientific foundations, maybe even governments). 

All of this got me thinking that this kind of programmatic wealth distribution is exactly what contracts already do. A lawyer draws up a piece of paper that says I am going to do A, so you will pay me B. What self-enforcing contracts change is that we no longer necessarily need a court system to arbitrate contract law, instead the contract will be mathematically predetermined and enforced by the commons of the cryptocurrency network. While I imagine that larger contracts would likely be built with some sort of failsafe mechanism for arbitration, there is no need for such a thing to exist. Would such a system be subject to gaming by the parties involved? Yes of course, but I still feel it would be an improvement on current generation contracts and would certainly leave the door open to expanding complexity necessary to close loopholes.

The twin technologies of cryptocurrencies and cryptocontracts are going to turn contract law into a programming language. 

Essentially what we are talking about is a real democratization of contractual agreements. Whereas today contracts are restricted to deals with enough value to justify a lawyers time (mortgages, business deals, land transfer etc…), in the future there is no limit to what could be codified into simple contracts. You could imagine forming a self-enforcing contract around something as simple as sharing a lawnmower with your neighbor, hiring a babysitter, or forming a gourmet coffee club at work. Where this could really revolutionize things is in developing nations, where the ability to exchange small-scale microloans with self-enforcing contractual agreements that come at little or no cost would be a quantum leap forward.

For more exotic examples, I was thinking of what could come if such contracts were combined with the ubiquity of data tracking today. In my example above, you could set up a contract with my blog to transfer a micropayment to support the blog every time you refer to an idea you found on my blog. Similar payment contracts could be set up for knowledge archives like wikipedia where you might agree to submit a micropayment every time you use or reference information from the site.

If we combine self-enforcing contracts with the idea of biological data tracking then things could get really wild. Imagine that you are carrying a cell phone which measures your emotional state. You then enter a contract with an entertainment company to pay them a certain amount based on the intensity of emotion which you experience during the movie or video game you are using. Suddenly you would be no longer only figuratively buying an emotional experience when you purchase something, but you are directly incentivizing emotional payout based on a self-enforcing contract. 

At every level our lives are built around spoken and unspoken agreements, yet the codification of a contractual agreement has been relegated to only the most important and expensive transactions. The emergence of cheap and plentiful self-enforcing contracts means that we can codify simple transactions and agreements. We will be able to reprogram our lives based on self-enforcing cryptocontracts. 

The coming boom in cryptocontracts comes with its own risks as well. In a world where self enforced contracts will be an everyday occurrence, we must be much more careful clicking on those terms of service agreements which nobody reads. We are going to need to be well aware of what it is we are giving away. Similarly, we must each decide what we want to codify in our own lives. Although it may be possible, it may not be wise to establish contractual arrangements around romantic or family relationships.

Ultimately, cryptocontracts will offer us a revolutionary new way to rebuild and reorganize our lives and our societies from the bottom up.

Edit: For those interested in the technology discussed here, I encourage you to check out the Ethereum project, which is working on developing a computing language to run these types of contracts on a cryptocurrency backbone. 

Edit2: I have been reading some of the comments on sites linking this article and I want to clear up one common confusion. The key difference between a cryptocontract and a standard contract is that the contract can itself hold wealth in the form of crytocurrency. All contracting parties can see the format of the contract and agree on its content, but the use of cryptography means nobody has access to the funds until the program moves it in accordance with the guidelines agreed. Another point is that these contracts could easily implement a clause for exception handling in the form of some form of court or other 3rd party mediation. 

UPDATE: Openbazaar is another project doing some very interesting work in this area. They are trying to create an open and distributed marketplace which leverages the power of cryptocurrency and reputation networks to handle dispute resolution without a central authority. A very exciting and interesting project, and definitely worth checking out over at https://openbazaar.org/