Welcome back to the second weekly issue of Snippets 2.0! As usual, submissions for a new name remain open; please send any ideas you have my way.
This week, I'm continuing with the second half of a larger post about René Girard: if you missed the first half from last week, read it first. The first half was all about individual behaviour and the mechanisms of mimetic desire, while the second half below is all about group behaviour. We’re covering a lot in the second half, and a lot of it will be pretty controversial - Christianity, the modern internet, Trump, outrage culture, and finally one bit of good news that I do see as a silver lining to all of this. I hope you enjoy it.
A short and dangerous introduction to René Girard, Part 2
Violence, Scapegoating, and Blame
Whereas last week we talked a lot about individual people and basic behaviour mimicry, envy and rivalry, today we’re going to get more into group dynamics: if mimetic violence is so dangerous, how do societies successfully defend against it?
Here Girard takes a turn into some of the material for which he’s most known. He asks us to consider what it’s like to live in a premodern society, without the same kind of justice system we have today. In Girard’s view, mimetic violence was the most dangerous threat to your community if you were living earlier in history: it stems directly from human nature, it naturally magnifies in character (as the sides of each conflict get steadily larger and angrier), and it’s difficult to stop once it gets going. Unlike inter-tribal conflicts, where we fight over actual stakes and can be deter conflict by arming ourselves, intra-tribal conflicts have no such recourse: there’s no way to pre-emptively defend against them, because the enemy is you.
The more homogenous your tribe, and the more each of you are peers with one another, the more inevitable mimetic conflict becomes. That’s too bad, because there are real advantages with everybody being alike: well-aligned groups can accomplish more together than they could on their own. A major aspect of why humans evolved the way they did was positive evolutionary selection for people who could imitate each other and work together. But that group behaviour, as we know, brought with it a new kind of danger.
Once mimetic conflict has been seeded and starts to escalate, what are our options to stop it if there is no justice system? If de-escalation isn’t an option, you really have only one move left: to find a scapegoat. Scapegoating is when the community on both sides of the mimetic conflict collectively decides to find someone to blame for all of this violence. If they can come up with a surrogate victim who is “responsible” for the conflict in the eyes of the community, then they have a rare opportunity to escape the violence: they can end the fighting in one decisive stoke by stating, before everyone, that “the true source of this fighting has been found, and we will kill him.” The community comes together by murdering the scapegoat victim, and as they do so, the conflict resolves.
Two immediate questions: who is the victim, and why does the conflict end? First of all, tragically, the victim should ideally be someone neutral to the conflict; therefore someone who is innocent of any real culpability. They have to be neutral, because if the victim were assignable to one side or the other in anybody’s mind, then this killing would simply be interpreted by the community as another salvo in the back-and-forth conflict, which would demand a response just like all the others. Second, by assigning responsibility for the conflict to the victim and then killing them, we do two important things. First, we channel all of the violence in the conflict into one person, who is now killed and cannot return violence. Second, we’ve now created credible grounds for violence to cease: “We found the cause of the conflict! And we have stamped it out.” Everyone can now get what they want, which is a peaceful exit while saving face. Except the poor victim, of course, but they can’t respond because they’re dead.
Nowadays, we’ve fortunately moved on from human sacrifice - but the instinct remains. When all else fails, we turn to blame as a conflict resolution mechanism. Pent-up conflict and aggression in the community, especially when it’s rooted in interpersonal resentment and mimetic conflict, will find an outlet one way or another. Finding somebody to blame for all of our problems, and then channeling all of that frustration and resentment into that person, feels really good.
If you ask Girard he’ll tell you: of course this feels good. We’ve learned this behaviour over thousands of years. Mimetic conflict is a threat, and if you can release some of the pressure by channeling anger into a scapegoat, you’ll feel as if you've done a good thing for your community. Successfully blaming someone will score you huge points from your peers, and they will promptly imitate you in turn by piling on more blame themselves. I’m sure everyone reading this has witnessed plenty of pile-on scapegoating events, both personally and professionally: simmering problems beneath the surface suddenly (and often randomly) get directed squarely into one target, who will likely be seen as “deserving it”.
Hierarchy and religion as early defences against mimetic violence
Let's return to Girard’s challenge: it’s hard for us to imagine what everyday life was like in a world where mimetic violence and the threat of runaway retaliation was an ever-present threat to your community’s entire existence. In modern society we have laws, a justice system, and societal norms that frown on mimetic retaliation that’s explicitly violent. It’s hard for us to imagine how societies without a judicial system might keep revenge in check.
One way, which still exists today in different forms, is hierarchy. If I’m a subject and you’re the king, then I may in fact be less jealous of you than I am of my peer and neighbour. That’s because jealousy and resentment isn’t a function of any particular object that’s desired (which you, as king, will have a lot of) but rather is a function of the distance between us. If you’re the king, then you’re sufficiently far away and differentiated from me that you’re what Girard calls an external mediator: I may look up to you, but I won’t be jealous, because we’re not peers.
We can think of hierarchies as trading one kind of justice for another kind of justice: hierarchies may not fit well with our modern concept of fairness or equality, but they are generally successful at establishing differentiation that suppresses mimetic violence. Hierarchies establish distance between us. From our vantage point today, we call these kinds of structures societally unjust; with good reason. But Girard asks us to consider the point of view of someone living in a different world than us, where the threat of actual violence is much more of an everyday concern.
Hierarchies work better if they are “natural”, rather than meritorious. With royalty, for example, the source of the King’s power and differentiation cannot be earned in a typical sense - if it were, then the King would be your peer, albeit a more successful one than you. Kings are not CEOs. The power structure of the hierarchy needs to come from something else - either from the divine, from dynasty, or otherwise from the faraway.
Silicon Valley startups have learned this lesson. CEOs, who are promoted into their titles and earn their power by working their way up to it, are in many ways less effective than founders, who rule their companies as if by divine right. Founders are differentiated from their employees to an absolute degree: the title of ‘founder’ can never be earned or seized the way CEO can. In a culture where Founder (and not CEO) is the highest-status title, there’s no point in jealously coveting your founder's title, because it’s not something that you can take. The only way you can act on that envy is to actually become a founder yourself. In Silicon Valley, envy is divergent and productive (in that it creates more founders) rather than convergent and destructive (many people jealously competing over one CEO title).
Religion is the ultimate source of hierarchy. There is no role model more powerful, more virtuous, or more far away than God. God is not your peer. Nor are the priests your peer, nor is the king (whose power is largely granted through blessing and cooperation of the priesthood) your peer. All of these non-peer relationships establish distance and differentiation. Here we reach the real meat of Girard’s body of work, which concerns the roles and purposes of religion. To Girard, early human religion evolved as a necessary, inevitable and successful defence against jealousy and mimetic rivalry within communities. His book Violence and the Sacred is all about this evolution, and about how early religions carried out the crucial role of suppressing and preemptively diffusing mimetic conflict.
One particularly gruesome but widely prevalent way that early religious institutions suppressed mimetic violence was through human sacrifice. Human sacrifice as a religious rite came in many different forms across prehistoric religions, but they all seem to have a basic structure in common. The rites begin by acknowledging undifferentiation and “sameness” within the community as the source of problems. Then, it channels those problems ritualistically into a sacrificial victim, who is scapegoated as the cause and answer for their problems. Upon killing the victim, the community celebrates the return of “differentiation”. (While this barbaric practice may seem completely primitive and foreign to us, the mechanics of the ritual persist into modern life in all kinds of funny places, including in Silicon Valley, as I’ve written about before.) In performing these rites preemptively, rather than as a reaction to mimetic rivalry that has escalated into violence, the community is able to “exhale” on a recurring basis. Violence has been postponed for another day.
Things hidden since the foundation of the world
The problem with ritual sacrifice and with scapegoating in general, as you may have guessed, is that it doesn’t actually resolve the conflict. It may bring peace, but only temporarily. The source of the conflict is still there; it’s just been placated for a little while. But it’ll come back.
The Christian Bible, in Girard’s interpretation, covers this subject pretty extensively. From the very beginning, Adam and Eve are cast out of the Garden of Eden - for doing what, exactly? For eating fruit from the Tree of Knowledge, which is the one thing they’re not supposed to touch. Knowledge of what, though? It’s often written as “knowledge of good and evil”, although again, without saying what evil is, we aren’t given an answer. But the answer is revealed in the very first thing that Adam and Eve do upon eating the fruit: they realize that they are naked, feel embarrassed, and cover themselves.
Knowledge of “Good and Evil”, in Girard’s view (and also mine) is really knowledge of Self and Other. The moment that they discover their nakedness is the moment they discover that there is an opinion of the other, that this opinion somehow matters, and that you ought to care about it. This moment at the beginning of the Old Testament is the seed of our worst behaviour: pride, shame, envy, and the other components of mimetic conflict. What happens next? Upon being expelled from Eden, the next major story is the rivalry between the sons Cain and Abel, where Cain initially admires his brother, but eventually becomes resentful of him and is ultimately driven to murder. If that’s not a parable about everything we’ve just talked about, I’m not sure what is.
Remember, Girard would implore, that at the time these texts were written and transcribed mimetic conflict was most likely a top-of-mind concern. In the time of the Old Testament we were still in a world where early beliefs, with their practices around scapegoating and human sacrifice, were pretty common. By the time of the New Testament, the Romans had codified together a sophisticated justice system, and a more “modern” world was being built where primitive fears around mimetic violence were mostly buried and covered up by society. But that doesn’t mean those same instincts and urges weren’t there.
As the Bible puts it in so many ways, the Devil acts through making us conscious of the Other. A modern civilization with layers of layers of safeguards in its judicial system and society is not automatically therefore full of “good people”. On the contrary, it means that the mechanisms of evil are masked, buried and not as well understood as they were in earlier times. Furthermore, the more connected and cosmopolitan a society (as Rome was becoming), the more opportunities there are in front of you to care about what the Other thinks, and to admire and mimic them.
Girard’s interpretation of the New Testament is laid out in his most challenging book, Things Hidden Since the Foundation of the World. The title references a passage where Jesus tells us, “I am here to reveal things hidden since the foundation of the world”; in other words, something we used to understand but have now forgotten. We’re told, in Girard’s narrative: “At the beginning of human history, we understood that the nature of evil lies in knowledge of the Other. The Devil acts on us through our peers and neighbours (internal mediators); the only way to overcome evil is through God (the one, true external mediator). The great human temptation is to try to conquer evil ourselves, without God’s help. Redirecting that evil and violence into sacrificial scapegoats - through any mechanism - will not actually destroy evil; it only hides it temporarily. As society gets more and more sophisticated, we get better at denying the presence of evil, and pretending it isn’t there, while it continually grows stronger."
In Revelations, the final chapter of the New Testament, we get a warning: “In the future, an Antichrist will come who brings a promise: we can all be Gods and models for one another, and we can all live in harmony together.” The Antichrist promises us that the answer for how to be and what to want can be found in one another. Revelations is a warning to reject this: the more we turn to each other for answers rather than to God, the more we are inviting evil, and setting ourselves up for a future where everyone is each other’s peer, everyone becomes a model, and everyone becomes a scapegoat.
Girardian themes in modern life
The Internet brings people closer together. Is that a good thing? Not really, in Girard’s view: the internet decreases the effective distance between us and the role models that we imitate. When you see your role model mediator on Instagram every single day, or have the ability to comment directly on a stranger’s post or tweet with an effortless comment, or have the ability to share things and read what others have shared with zero friction, in each of these cases your effective peer set is enlarging: it’s putting everyone up on the same flat surface. This abolition of distance is messing up our ability to desire things in a healthy way.
I think a lot of people continue to think that the Internet’s effect on desire is that it makes it easier for us to find stuff we want, and to tell the internet what stuff we’re looking for, and to have stuff advertised to us that we might want. While this is certainly true, it’s a sideshow compared to what’s really going on: the internet makes it easier to gaze longingly at the people we admire and envy, and creates an overpowering amount of pressure for you to become, and be seen as, a particular type of person. Again, I think the worst contemporary offender here is Instagram. (It’s the only major social network I refuse to join.) People say, “Everyone is miserable because all we do is want things.” Okay, well what is causing us to want things? It has little to do with the fact that we’re being shown shown these things online 24/7, and everything to do with the fact that we’re seeing our peers online 24/7.
I think part of why anxiety and depression has become such a ubiquitous challenge for my generation and younger ones is that the internet has created a forum where everybody is each other’s peer. Social Networking and the web is like our own version of eating the fruit from the Tree of Knowledge: the Internet is basically a supercharged, everyday reminder of the presence of Self and Other. When the other is not your peer - if they’re far away, the more they’re differentiated from you in a particular way (like they’re older or younger, or have a different background or life experience), then awareness of the other is less of a problem. But when the Other is your peer, when they are close to you, and when their mediating influence puts you into that awful simultaneous torment of “you want to be like this, but you can’t get caught trying”, that’s when we get driven miserable. This isn’t a new thing, either. If you go back and read a lot of 19th century literature, there’s a recurring theme of “The world is getting more connected; what used to take ten days now takes two; we can communicate so fast now… it’s certainly good for our quality of life, but I’m not sure it’s making us happier.” Sounds familiar, doesn’t it?
Ok, so here’s a difficult section. I’m gonna say it right off the bat and then do my best to explain myself: Donald Trump is a very Girardian president.
Part of the reason why Trump appeals to a lot of Americans, I think, it’s that Trumpism is based on the idea that a forced flat society does not work. It’s not unfair to characterize Trumpism as a rejection of the last couple decades of policy and rhetoric that have advanced, more or less, the agenda that “everybody is equal and the government is going to actively make sure that everyone is treated the same.” Trumpism, to me, can be summed up as a rejection of the idea that we are and ought to be undifferentiated. This is a very Girardian mindset.
I’ve heard a line repeated a couple different times about the differences in American racism between the North and the South: “At least in the South you know where you stand.” If we put this in Girardian terms, it’d basically say, “A stable society is a differentiated one; in the South, that differentiation is explicit.” When people say “Make America Great Again”, I imagine that at some level this is what a lot of people are talking about: “Bring differentiation back to America. Bring America back to a time and place where we didn’t have this top-down enforcement of ‘everyone is the same’”. I think, quietly, if you asked a lot of people if what they genuinely meant by MAGA is “Make America more explicitly discriminatory again”, they’d say, “Well, yes. Undifferentiation is dangerous.” When terrorists shoot up mosques and synagogues in a crusade to fight "cultural marxism", they're saying it out loud.
I suspect that most people reading this, if they heard that phrase in any other context, would find it to be despicable. But now consider: if you found yourself nodding along in agreement several paragraphs ago, give a long hard thought to the fact that you can draw a pretty clear line from here to there.
What’s so frustrating about this is that not only is diversity important; diversity is the answer. Having lots of people who all come from different backgrounds, have different cultures, different sets of experiences, and see different people as their own peers is the answer to a homogenous, mimetic culture full of resentment and jealousy. But that’s not how it’s interpreted by the pro-discrimination crowd. To them, the threat is not so much “people who are different”, it’s “those people deciding that they are just as good as we are.”
I think what we need to do is to be able to construct a really solid understanding of what a world that is differentiated but not discriminatory looks like. I’m going to save it for another issue, cause it’s an entire topic of its own, but I do think there’s something interesting that Canada has figured out in particular about how to do diversity right - or, if not ‘right’, at least better than most.
Coming back to the online world, we seem to be iterating through progressive cycles of a modern sort of anger: “outrage culture”, “cancel culture”, or whatever you want to call it, which has some recognizable characteristics of scapegoating that we talked about earlier. Our instinct to blame is strong, and we target that blame into specific people or groups of people as a way to protect our own community. It’s especially strong when that blame is justifiable to everybody in your peer set, and singling out a particular person as being worthy of outrage can provoke a definitive wave of pile-on mimicry among your group. They, after all, have just seen you successfully earn praise for casting blame on someone, so the instinct is strong to join in. The internet lets this mimetic behaviour scale far faster and far broader than ever could before. People get “cancelled”; modern-day sacrifice, basically.
The big problem (well, there are many problems, but here’s the Girardian problem) is that sacrificial scapegoating only diffuses tension if the sacrificial victim is neutral to the conflict. If the sacrificial victim can be associated or claimed by one side of the conflict or another, then it’s simply interpreted as yet another back-and-forth salvo in the ongoing tit-for-tat conflict. Think of all of today's back-and-forth conflict between MAGA people on one side and the #Hashtag-Resistance people on the other. Deep down, the nature of this conflict at its core is pretty Girardian: is differentiation and discrimination evil, or is it necessary?
Let’s look at #metoo as an example. The Girardian way to look at the me-too movement would be as essentially a community response to centuries of differentiation, where differentiation played out as: Men are allowed to sexually harass women and structurally exclude them and be awful to them in certain ways without consequence. (But are also expected to do things like hold doors open, treat women in particular kinds of respectful ways, and generally behave in ways that are also differentiated, just more positive.) In recent years, we’ve come around to a new concept of fairness and gender equality, which rejects that differentiation as being sexist and unfair, and rightfully so. This transition, as we now know, is making a lot of shitty men look bad. Many of these men are now getting “cancelled”. In isolation, a lot of it is appropriate and entirely deserved. But is it any surprise that the MAGA crowd (again I’m overgeneralizing, but that overall side of the political spectrum) has risen in a surprisingly unified stance against the me-too crowd? The discriminators, to a Girardian, are in some sense the heroes. Is it any wonder why Trump’s bragging about his sexual misbehaviour wasn’t a liability at all, but rather a core appeal as far as his base was concerned?
Unfortunately, the internet has fanned the flames of this conflict to a hysterical degree by making all of us internal mediators to one another. No amount of blaming or scapegoating will ever solve the problem, but any incremental “win” we can score feels like it’s a step forward. Unfortunately, as with any kind of mimetic conflict, the enemy is us. The Girardian looks at today’s world and sees the book of Revelations.
The Good News:
The good news, I think, is that we are slowly and steadily developing a kind of antibodies to the internet: as social networking becomes more saturated and more ubiquitous, the inevitable pullback to more one-on-one conversations and more closed circles of friends is bringing our peer set of internal mediators down to more manageable levels once more. “I’m sick and tired of being so online” translates pretty cleanly into “I’m sick and tired of having so many peers that I need to care about.” And the good news is that who you see as your peer set is entirely within your control. No one gets to be your peer without your active consent. And I think people are beginning to learn this lesson.
Perhaps one of the paradoxical benefits of the internet, in the long term, is shifting the way we think about peer relationships from “opt-out”, which it’s been since pretty much forever, towards “opt-in.” In an opt-out peer set relationship, we default towards needing to look good in front of people; towards caring what people think, towards being embarrassed about aspects of ourselves, almost automatically - regardless of who the other person is. Not caring about what other people think has to be this deliberate act of bravery that’s hard to do. But in an opt-in peer set relationship, we only people in as peers and role models selectively and deliberately; not caring about what most people think comes naturally, because it’s on by default. This is a healthy thing, I think.
People talk about this as “finding your tribe”, which gets at part of it. But the other part is a conscious recognition of who is not your tribe. We’re recognizing that a lot of the bad things that we think and do and see aren’t the result of individually bad people but because of the dynamics of group behaviour - when we do something bad, our peer set is in a way responsible. Fortunately, being aware of this means we’re able to ignore or reject this group dynamic while still appreciating individuals, and even being friends with them. Opt-in is a kind of happy humility: it means accepting that we are not the peers and equals of many of the other people that we see and might otherwise admire, and that that’s okay. I’m not sure what René Girard would necessarily have to say about this; he passed away in 2015. But hopefully this has been a helpful introduction for everybody. Thanks for reading through all of this and look forward to hearing your thoughts and comments.
If you enjoyed this Girard piece, please share it around: you can find a link to the whole two-part post here.
Some pretty big news in the biology community dropped on Thursday morning: CRISPR-guided DNA editing may have a far larger scope of off-target effects than we thought. A primer for those who are bio-adjacent or otherwise curious: we’ve always wanted to be able to edit DNA sequences quickly and easily, but prior to recently the only way to do so was to use a naturally occurring biological tool, like a restriction enzyme, which already exists in living cells and selectively targets a certain sequence of DNA to cut. These naturally occurring tools work, but they’re pretty limited - what we’d like is something more "generally programmable” that lets us customize what we’d like to target. CRISPR-Cas promised to be the answer: biologists could design their own stretch of DNA that corresponds to any site they’d like to target and cut or modify; just as if they were writing code. So long as the stretch of DNA you “coded” was unique to the one specific spot you wanted to target, then you’d have a holy grail of biology - a selective, programmable, and powerful DNA editing machine.
Not surprisingly, there have been a good number of skeptical people and studies casting doubt on just how selectively a CRISPR-Cas setup can actually target the DNA you want to target, and nothing else. In one popular application of CRISPR, called single-nucleotide base editing (where the DNA strand is never fully cut in two, but instead a single DNA letter is swapped out for another one), researchers published last month that off-target edits were actually quite a bit more prevalent than anyone wanted to admit. But at least these were mistakes that we understood. These errors should be quantifiable; we know how to look for them and how to do quality control for them. But a paper that came out Thursday had way worse news: these off-target nucleotide base edits weren’t just confined to DNA. RNA sequences were getting modified as well, in real time. This is a massively messier problem: to use a computer analogy, whereas introducing off-target edits into DNA is like corrupting data on your hard drive (which stinks, but at least we know how to look for it), introducing live errors into RNA transcription is more like corrupting your compiler. Not only does it mess up everything, it’s also harder to troubleshoot; there are way more complex interactions and unknown unknowns.
As a former sort-of biologist (I did my undergrad in physiology and did a two-year stint in grad school doing neuroscience research) I enjoy following all of this stuff and I’m quite sure in the long run that synthetic biology is becoming an incredible new frontier for us to go build new things and create value. But I’m by no means a current expert - and I’m sure there are some among Snippets readers. My question for you - sound off in email or on Twitter - is how have things been going in the CRISPR universe over the last year or two? Aside from the raft of startups that all got funded a couple years ago, what real progress has been made on the scientific side we should know about? What’s working and what isn’t? Please let me know.
Who know that Gregg Popovich’s true passion wasn’t basketball, but was actually food and wine? This is a charming story about how deeply Pop cares about the team dinner culture he’s fostered as head coach through the San Antonio Spurs’ modern basketball dynasty, complete with story after story about his obsession over wine. Come for the anecdotes of terrified sommeliers learning of some new request (not that Pop is anything but gracious towards them), stay for the stories of how his obscure restaurant recommendations become NBA hot spots throughout the playoffs and beyond.
Also, in crypto news, Hahahahahahaha:
Longtime readers of Snippets from Social Capital will remember that I spent a couple weeks last year writing about Tether and their stable coin scheme; this past Thursday, the New York State Attorney General’s office dropped news that they’d obtained a court order directing Bitfinex and Tether (and their associated parent shell companies) to stop covering each other’s losses for - wait for it - having had close to a billion dollars stolen from them by the same bank that processed QuadrigaCX’s also-stolen crypto money? This is truly outstanding stuff, folks.
Here’s my best attempt to parse through all this:
Tether and Bitfinex, who are owned and run by the same people, have always had trouble finding banking partners. They need banking partners, after all, to hold hundreds of millions US dollars and other real currencies from their exchange customers, and ideally to draw interest on those dollars as they sit around. After a few banking relationships went sour, they entered into an agreement with a group called Crypto Capital Corp that, unbelievably, was formalized in no actual legal deal whatsoever. We’re talking a lot of money here! But hey, that’s crypto, baby!, etc etc.
Late last year: Bitcoin is tanking, and Bitfinex needs cash. All of their customers angrily want to sell and get their money back. Bitfinex has real money at Crypto Capital Corp, except one day, after weeks of desperate emails from Bitfinex to get it out, CCC replies with “uh, sorry, all your money was seized by the Portuguese and Polish governments. K bye.” No evidence of this can be found anywhere, which strongly suggests that CCC just straight up stole the money and left. No bueno. (As they say; SFYL!)
So Bitfinex turns to its cousin Tether, who prints dollar-backed ‘stable coins’ to the crypto buying public. Bitfinex says, hey, you’ve got money. All your tethers are backed 1 to 1 by customer deposits. Surely you wouldn’t mind if I borrowed some of those to fix my temporary cash flow problem? Tether says, no problem, as long as you can give me something back that’s of equal value, so that our Tethers can still be “backed 1-to-1”.
Bitfinex gives Tether a $625 million IOU, which is “backed” by the $625 million dollars that has been stolen from them (but still appear in their bank account, and which Bitfinex insists are “under safeguard” rather than the more conventional interpretation, “we epically screwed up and all the money is gone"). Tether, in exchange, gives Bitfinex $625 million real dollars of customer deposits. Bitfinex immediately spends those real dollars in honouring withdrawals from their customers. So they go back and ask Tether for more money. Tether extends their deal into a $900 million "line of credit", for which Bitfinex offers equity shares of itself as collateral. The price of Bitcoin, meanwhile, skyrockets past 5k as money “flows back into the ecosystem”. (No such thing has actually happened. There are no new buyers! Only sellers that are finally getting cashed out.)
Now, Tether is definitely in a position where they can no longer claim that all Tethers are backed 1 to 1 by US dollars, since those customer dollars have now been used to pay off Bitfinex’s withdrawals. Bitfinex does have all this Bitcoin sitting around though, since it’s paid off its customer withdrawals using Tether’s cash rather than by selling the Bitcoin. (If anyone wanted to buy their Bitcoin, then none of these problems would exist! The broader problem is that no one was buying any Bitcoin. Everyone was selling.) Solution? Dress it up as “shares of Bitfinex”, denominated in US dollars (except whose value at this point entirely consists of crypto holdings). Tether indeed updated its website with a new line: that “from time to time”, Tethers would be backed not by actual dollars but instead by “assets and receivables from loans made by Tether to third parties, which may include affiliated entities.” Hmm.
There’s still one big unanswered question though, which is that this whole time Tether has been under a cloud of suspicion that individual $USDT tether tokens may not be totally dollar-backed after all. (They’ve never been genuinely audited as far as we can tell.) The accusation that’s been thrown around the entire time is that maybe Tether is actually engaging in fractional reserve crypto banking, and is printing more Tethers than there are dollars in its bank account. I mean, if you own a Fake Dollar printing machine, wouldn’t you be tempted to print some fake dollars? The temptation to print some Tethers for yourself on the side and go to, say, 2-to-1 leverage has got to be awful tempting when Crypto’s in a massive 2017 bull run.
Anyway, as we know, that whole bull run ended spectacularly, and no one really knows if Tether was actually honest that whole time or not. This whole saga with Bitfinex and the stolen money gives them the perfect cover to say, “Hello customers and depositors, as you may know, we temporarily loaned your money to our friends over at Bitfinex in a very routine, totally above-board situation and then other bad people stole the money. We’re so sorry about this, and it is fully sufficient to explain all of the irregularity here. No other crimes happened, nope.”
I’m honestly not sure if this whole story makes Bitfinex look better or worse than they did before, which is pretty incredible, considering that they lost hundreds of millions of dollars through truly entertaining circumstances. But who knows. Alphaville from FT has a summary here. Check it out, because this story is far from over, one way or another. If you have any particular insight or questions about this, please let me know.
Oh and finally, the Twitter thread of the week: apparently, Noah Smith did not understand why More Cowbell, arguably the best-known SNL sketch of all time, is funny!
He tweets: “The real joke of the SNL “More Cowbell” skit is that there actually is no joke. It’s not funny at all, and “more cowbell” has zero meaning or significance. The actual humour is in watching people straining to understand the joke, or tricking themselves into thinking they get it.” As if that wasn’t bad enough, he incredibly goes on: “The ‘More Cowbell’ skit is a demonstration that gaslighting has benign uses.” (What?!?) “Simply insisting over and over that the skit contains an actual joke, until people question their sense of reality, is funny!”
Folks… I don’t know what to tell you. This is what’s called a bad take. Fortunately, William Bibbiani laid out a pretty excellent series of tweets that walks Noah through each and every layer of the More Cowbell gag and why it’s rightfully considered a truly masterful joke. Sound off in the comments: what is your favourite (SFW) joke?
Starting this week I’d like to kick off a new recurring session to finish off each newsletter: reader write-ins. Last week, one of the questions I asked in one of the reading links was if anyone knew about hydrogen fuel cell trucks, and reader Ben Gaddy from Clean Energy Trust helpfully pointed me to some resources. I’d love to turn this into a recurring proposal: if we ever discuss a topic where you’re a local and you’d like to weigh in, please do! Just send me an email at adanco at gmail dot com, tag it with Snippets, and I’ll include them in future issues.
Question: does anyone know much about the economics of hydrogen fuel cell powered trucking?
From Snippets reader Ben Gaddy, CTO at Clean Energy Trust: On H2 for long-haul trucking and other heavy-duty applications, you should take a spin through these resources if you haven't already: , and you'd be especially interested in the presentations on heavy duty transport from the 2018 Chicago sessions. Nikola was among the presenters.
DOE hosted a series of workshops around the country to get a lot of input on the sector. The division within DOE that works on Fuel Cells (the Fuel Cells Technology Office) previously had a scope that was limited to just vehicles (since it was part of the Vehicles Technology Office). Now that the consensus is favoring BEV instead of FC for passenger vehicles, DOE and industry is thinking about how to get (low-carbon) H2 production to scale. This is a clear chicken-and-egg problem. Almost all H2 produced today is "captive" meaning that it is almost immediately converted into ammonia and then upgraded to urea, nitric acid, etc. on-site and basically none of it is traded. On the low-CO2 side, electolyzers are around $1000/kW now and need to get to around $100/kW and have really cheap power to beat steam methane reforming.
As far as Nikola goes, their leasing business model is interesting—they think they can lease for $0.90/mile whereas all-in a leased Diesel truck would be $1.09/mile. They have some aggressive assumptions, including being able to buy power at $0.04/kWh. It will also be interesting to see who is willing to sign up for their 7-year leases. My understanding is most trucking fleet operators keep their trucks for only 3 years.
Thanks to Ben for the notes, and for all other readers, please feel free to do the same! I’d love to publish as many of your smart thoughts and learnings as I can. If you have any interesting answers or comments about CRISPR, Bitfinex, or any jokes that Noah Smith might also not understand, shoot me an email.
Have a great week,