Discernable Difference

How much do you need to improve so that the improvement can be felt? 10%, 100%, 1000% - It depends!

This blog will meander before it arrives at its point. Please play along.

When you see an image on a computer, it is produced by lighting up individual dots on the screen with a colour corresponding to its position. We call these dots pixels.

In the image above, the first image is 14 pixels per inch (PPI) or about 14 dots in every inch. We call this resolution.

If you consider the fourth and the fifth image, there is a 100% improvement in the number of pixels from 112 PPI to 224 PPI, but the improvement is hard to discern. While the resolution has improved 100%, it does not make a huge impact on the user. But if you were to compare the 28 PPI image with the 112 PPI image there is a 400% improvement and the improvement is hard to ignore.

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Because the world we live in is so financially driven, we tend to assume that 20% upside is incredible. 20% return is insanely hard to achieve. We are wrong when we start to apply the same metric to try and measure all other things.

My offering is 20% better than what is already available in the market. Customers should just line up at my door to get what I have to offer!

We forget that for the person looking in from the outside; what you are offering is barely an improvement. Not to mention, if they already use something, there is a switching cost that they would have to bear on top of whatever your offering costs. So even if your cost is at parity with your competitor, you are probably more expensive.

I don’t know if you have to be 100% better or 1000% better; it just needs to be discernible.

From the image above, one thing is obvious. The lower the quality of competition around you, the easier it is to be discernably better with little effort. The difference between the first and second image is 100% and it is very apparent. The starting point is a very poor quality image. The same 100% is not good enough as the quality improves as in the last 2 images. It will take a lot more than 100%.

If you are starting a business or a creative project ask yourself or even just working at an organisation, ask yourself, am I offering better resolution? Is it discernible?


If you use Gmail and find this mail in any other folder apart from primary, please drag it and drop it in the primary inbox. It apparently makes a difference to the Gmail gods. Many people feel I just made them register and I am not sending them any emails!

I have started a space on Quora as well for those who wish to ask questions pertaining to the things that I write, you can visit the same here.

Also, follow me on Twitter @viveksrn to know when the newsletter drops.

What we think, we become ~ Buddha

You can follow my podcasts here.

Taxing the Rich | Learning by Proxy

Incredibly rich technology companies are going to have to start paying their dues

Learning by Proxy is a weekly newsletter that covers things happening around the world, along with some context that helps you understand it better.
This is the 64rd edition of the newsletter.

The rich companies, especially in tech have been getting away with paying little to nothing in taxes for several years now. Those days are numbered. The rise of democrats in the US has ensured that their days of getting away with murder are over.

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Escaping Tax Corporate Style

Some of the largest companies in the world pay some of the lowest taxes in the world as well. How is this even possible? You may ask.

Enter Patents.

Say I am a company that is incorporated in India which has a tax rate of 30%. Now, I create a bunch of products that involve several patents within them. I create another company in Ireland. Ireland wants technology companies to move there. They are also looking to create R&D jobs so they are willing to provide a 100% waiver on income derived through patents.

I create a company in Ireland. Sell all my patents to that company and then charge a licensing fee to the Indian company.

Because the licensing fee can be arbitrary, I charge 50% of the product cost as licensing fee to the Indian company.

After making and selling a ton of product, the Indian company ends up barely breaking even. But the Irish entity is loaded with cash. Since this income was a result of R&D, also read patents, I have a 100% per cent waiver of taxes on this income.

So although all of the business activity is actually taking place in India, all of the money is being moved to another tax residency and almost no tax accrues on it.

This is one of the variants of how tax avoidance takes place, there are, of course, several other ways to do this.

G7 or the Group of 7 countries, represent about 50% of the global GDP. This in turn means that they have a huge amount of influence on other countries and have the capability to hurt a lot of smaller economies with their sanction.

Finance leaders from the Group of 7 countries agreed to back a new global minimum tax rate of at least 15 percent that companies would have to pay regardless of where they locate their headquarters.

The agreement would also impose an additional tax on some of the largest multinational companies, potentially forcing technology giants like Amazon, Facebook and Google as well as other big global businesses to pay taxes to countries based on where their goods or services are sold, regardless of whether they have a physical presence in that nation.

Source: New York Times

Setting this floor rate for taxation makes it harder for some of the companies to change their tax residence to another country and escape taxes.

You may say, but no American company based itself out of Germany to save tax! Yes, but...

Ireland’s permissiveness has made it the biggest tax haven in the world for footloose companies, according to the economist Gabriel Zucman. Of the $616 billion in corporate profits shifted to tax havens in 2015, Zucman and his colleagues found, Ireland accounted for $106 billion.

Many manufacturers, such as Pfizer, exploit Ireland’s tax regime, but the firms that do so most prominently are in the tech sector. In 2020, for instance, Microsoft’s Irish subsidiary made $315 billion in profits, but this money was reallocated to a company resident in Bermuda, so no corporate tax had to be paid on it. Using the same clause—called the “double Irish” arrangement—Google moved $75 billion in profits out of Ireland in 2019. (The “double Irish” arrangement ended last year, under EU pressure, but other incentives work in similar ways.)

[...]

The two pillars of the G7 tax plan are designed to recover some of this avoided tax. One measure permits a country to tax any large multinational that makes profits off its residents; the company can’t claim that its profits are actually accruing to a subsidiary in another country. The second measure ensures that even if, say, a British company books its profits in Ireland and pays a 12.5% corporate tax rate there, the UK can still levy the remaining 2.5% to bring the firm’s effective tax rate to the agreed-upon 15%. With these pillars, the OECD estimates, countries can raise at least $50-80 billion a year in tax revenues.

Source: Quartz

So while the one part makes tax residency in another country irrelevant. The other part is the ability to tax the company up to 15% so long as they are generating their income from the people of said country.

While this reduces tax avoidance, it also kills two birds with one stone.

One of the greatest gripes in the EU-US relationship has been the tax avoidance of the American tech giants who have been moving their monies around the world and avoiding paying taxes in the EU. This has resulted in a complete breakdown of trust and more and more piecemeal actions that can end up breaking the internet.

Creating different laws in different countries for the internet makes it difficult to adhere to those laws for the companies. This, in fact, is also counter-productive because a company like Google which has infinite resources can potentially adhere to differing laws, the smaller startups will most certainly find it harder to scale their businesses across boundaries.

This agreement addresses that gripe.

To prevent individual countries from imposing dozens of digital taxes around the world, the agreement reached Saturday would apply a new tax to large businesses with a profit margin of at least 10 percent. The finance ministers agreed that the tax would be applied to at least 20 percent of profit exceeding that 10 percent margin “for the largest and most profitable multinational enterprises.”

[...]

“This agreement will make it possible to tax the digital giants, and for the first time to implement a minimum corporate tax rate to crack down on tax dumping,” he said on Saturday. “As talks continue, France will aim for the highest possible minimum tax rate to put an end to the race to the bottom in certain countries.”

[...]

Despite the breakthrough, completing such a sweeping agreement will not be easy and the threat of a trade war remains if countries keep their digital services taxes in place. The Biden administration said this month that it was prepared to move forward with tariffs on about $2.1 billion worth of goods from Austria, Britain, India, Italy, Spain and Turkey in retaliation for their digital taxes. However, it is keeping them on hold while the tax negotiations unfold.

Source: New York Times

Let the intimidations begin!

LIBOR No More

More than anything else, banks tend to lend a lot to one another. Depositors keep their money with banks so that they can move it at a moment's notice. In order to be able to make the transaction happen banks are required to maintain certain minimum liquidity. This also means that they have money that they cannot really use - just in case someone chooses to withdraw.

If you had a customer who is willing to buy something for 20 rupees while you can buy the same thing for 10 rupees, you would probably borrow the money, buy it and make the difference. Even after paying the interest, you should have something left to spare. Banks borrow when they see an opportunity, have the money but cannot really use it.

The instrument of choice is a product called the Interest Rate Swap which is essentially a contract, where the borrowing bank pays a fixed rate but has to return the money based on a floating rate usually pegged against the LIBOR.

Source: Wikipedia

The LIBOR is used as a benchmark. The LIBOR is essentially a rate published by the British Bankers' Association. This figure is based on the rates submitted by the member banks (223 of them), rates at which they claim to be able to borrow from the open market. The average the middle 50% ignoring the rest and publish a rate which is the rate at which the floating interest is fixed.

Now, if a bank raised money at 4% because LIBOR at the time was 3.9% they are expecting to lose about 0.1% on the deal. So long as the activity they carried out with that money netted them more than 0.1%, they stand to profit. But if the LIBOR was to shoot up or crash, one of the two sides would have to take the hit depending on what happens.

Although there are 223 members, the larger banks can collude to fix LIBOR at a certain rate. This is to make the markets think that they have the ability to borrow at much lower interest rates than they are actually able to. This was part of the problem that contributed to the 2008 crash.

Source: New York Times

This fixing hid the degree to which the banks were in trouble which eventually became apparent as their liquidity started to erode which ultimately led to the financial crisis.

And therefore, Libor is going to be abandoned. Or is it?

The US would love to see LIBOR gone as soon as possible. They want to replace it with another benchmark that is harder to manipulate. Treasury Secretary Janet Yellen has been insisting on giving up LIBOR by the end of 2021. But,

Rather than dwindling as regulators have urged, loans tied to Libor grew to around $223 trillion early this year compared with $199 trillion at the end of 2016, according to a March report from the Alternative Reference Rates Committee, a financial industry group made up of major banks, insurers and asset managers alongside the Federal Reserve Bank of New York.

The increase is one sign lenders have yet to fully embrace the Fed’s preferred replacement: the Secured Overnight Financing Rate, or SOFR. While large banks and mortgage lenders like Fannie Mae have started actively using the benchmark, some large U.S. corporations and other borrowers held off, seeking a benchmark that could fix rates over longer time spans.

Source: WSJ

What is this replacement by the way?

Secured Overnight Financing Rate (SOFR) is a secured interbankovernight interest rate and reference rate established as an alternative to LIBOR, which is published in a number of currencies and underpins financial contracts all over the world. Because LIBOR is derived from banks' daily quotes of borrowing costs, banks were able to manipulate the rates through lying in the surveys. Deeming it prone to manipulation, UK regulators decided to discontinue LIBOR.

As of 2021, SOFR is seen as the likely successor of LIBOR in the US. SOFR uses actual costs of transactions in the overnight repo market, calculated by the New York Federal Reserve. With US government bonds serving as collateral in the borrowing, SOFR is calculated differently from LIBOR and is considered a less risky rate. The less risky nature of SOFR may result in lower borrowing costs for companies.

Unlike the forward-looking LIBOR (which can be calculated for 3, 6 or 12 months into the future), SOFR is calculated based on past transactions, which limits the rate's predictive value on future interest rates. In addition, SOFR is overnight, whereas LIBOR can have longer tenors.

Source: Wikipedia

For Britain, this is another blow. Brexit ensured that they fell out of favour. It has had a material impact on the assets sitting in London, with many banks choosing to move their assets to mainland Europe. LIBOR was one of the last vestiges of Imperial power. This will make London a little less important.

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Superbug

I came across a headline that read - "Scientists Used CRISPR to Engineer a New ‘Superbug’ That’s Invincible to All Viruses".

My only thought, why do we have to do this to ourselves?

A team at the University of Cambridge recently did just that. In a technological tour de force, they used CRISPR to replace over 18,000 codons with synthetic amino acids that don’t exist anywhere in the natural world. The result is a bacteria that’s virtually resistant to all viral infections—because it lacks the normal protein “door handles” that viruses need to infect the cell.

But that’s just the beginning of engineering life’s superpowers. Until now, scientists have only been able to slip one designer amino acid into a living organism. The new work opens the door to hacking multiple existing codons at once, copyediting at least three synthetic amino acids at the same time. And when it’s 3 out of 20, that’s enough to fundamentally rewrite life as it exists on Earth.

Source: Singularity Hub

They went in there and changed EVERY SINGLE codon in the DNA that was not performing a specific function.

Why do something whose consequence you are not aware of?

On the other end, global warming is releasing microbes that we have not had to face for many millennia.

A microscopic animal has come back to life after slumbering in the Arctic permafrost for 24,000 years.

Bdelloid rotifers typically live in watery environments and have an incredible ability to survive. Russian scientists found the creatures in a core of frozen soil extracted from the Siberian permafrost using a drilling rig.

"Our report is the hardest proof as of today that multicellular animals could withstand tens of thousands of years in cryptobiosis, the state of almost completely arrested metabolism," said Stas Malavin, a researcher at the Soil Cryology Laboratory at the Pushchino Scientific Center for Biological Research in Russia.

Source: CNN

Maybe they are too primitive and are unable to take on human immunity or not even interested in getting into humans. But given how eco-systems work, micro-organisms reproduce fast and also spread across eco-systems quickly. It is only a matter of time we discover if they are good for us or bad.

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Also

I love Pen Pencil Draw

Slow-motion gymnastics!


Before you go, I wanted to suggest checking out JoeWrote, a newsletter focusing on the intersections of politics, culture, and entertainment. I've been reading it lately, and really enjoy it. I suggest their latest piece "Self Checked Out," which looks at how economic democracy can solve the destabilization of automation.

Tumbleweed Words is a literary newsletter of contemporary prose and poetry Read Here

I have started a space on Quora as well for those who wish to ask questions pertaining to the things that I write, you can visit the same here.

Also, follow me on Twitter @viveksrn to know when the newsletter drops.

What we think, we become ~ Buddha

You can follow my podcasts here.

Taxing the Rich | Podcast

Incredibly rich technology companies are going to have to start paying their dues

  
0:00
-18:52

This is the Learning by Proxy podcast for Edition 64. If you do not enjoy reading long-form, get the gist of it in about 10 minutes (or that was the hope). 

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This time in the podcast - 

Technology companies are going to start paying taxes

LIBOR is counting down its days

We are creating new Superbugs! 

You can find the whole blog at this link.


Before you go, I wanted to suggest checking out JoeWrote, a newsletter focusing on the intersections of politics, culture, and entertainment. I've been reading it lately, and really enjoy it. I suggest their latest piece "Self Checked Out," which looks at how economic democracy can solve the destabilization of automation.

Tumbleweed Words is a literary newsletter of contemporary prose and poetry Read Here

I have started a space on Quora as well for those who wish to ask questions pertaining to the things that I write, you can visit the same here.

Also, follow me on Twitter @viveksrn to know when the newsletter drops.

What we think, we become ~ Buddha

You can follow my podcasts here.

Originally published on https://blog.viveksrinivasan.com

Accessibility - A Podcast with Thomas Logan

Almost all of us use accessibility features without even being aware of it! What is it? How does it aid users? Thomas Logan from Equal Entry speaks with me.

  
0:00
-22:43

Accessibility is one of those features that are important to many people but unless you use it regularly, you often do not care about it. Did you know closed caption which almost all of us use which watching TV today something that was originally designed as an accessibility feature? 

In this episode, I speak with Thomas Logan, the founder of Equal Entry, a firm focused on consulting for accessibility. He lives in Japan but caters to a large US customer base in the area of designing for accessibility. I learnt a lot about accessibility as well as the process that they follow to include accessibility in various product.

As a startup, if you are thinking about accessibility and would like to have a word, you can follow him or get in touch with him on LinkedIn and Twitter.


Also, follow me on Twitter @viveksrn to know when the future podcast drops.

What we think, we become ~ Buddha

You can follow my podcasts here.

Originally published on https://blog.viveksrinivasan.com

Crypto Policy | Learning by Proxy

Money has been the fiefdom of governments for a long time. If that changes, many countries stand to suffer.

Learning by Proxy is a weekly newsletter that covers things happening around the world, along with some context that helps you understand it better.
This is the 63rd edition of the newsletter.

The story of money is one that has been poorly presented and even poorly understood. A few months ago, I had written a blog that was filled with the same garbage that is the popular theory of money.

Man needs stuff —> Barter —> Money

Because of this improper understanding, we are walking down a path where history will repeat itself.

Crypto Policy

Debt came before money.

The story we are told is that the farmer who produced rice or wheat exchanged those goods for shoes or something else that he required. There is one issue - there is no historical record to prove this ever happened. People living in small groups borrowed and remained in debt to one another till such time that the person from whom they borrowed required something.

In fact, debt became money. In ancient Sumer, debts were recorded on tablets, and the tablets were broken in two. The holder of the creditor side of the tablet was owed money. Often these tablet exchanged hands as a form of currency. In Ireland, they would practice the same with hazelwood sticks that were broken into two halves. The creditor held onto one side which was called the stock and hence the term stockholder and the debtor held on to the other part called the stub.

Money, the way we know it today, developed around armies. If you were giving something to a soldier and he refused to return the favour, what were you planning to do? Threaten?

Also, soldiers were constantly on the move and therefore it became essential that you settled the debt then and there.

Kings needed money to go to war and they ran up a lot of debt. At the fag end of the 17th century, the need for such a debt forced King William III to take a loan from a group of wealthy merchants who housed the debt in an institution that was granted the power to issue currency under his name. He took a loan of 1.2 Million pounds and the currency equivalent to that loan went into distribution. Not very much unlike the counter halves of the tablet, the currency provided assurance that the king would repay the loan.

We know of that institution today as the Bank of England. That loan was never repaid. The entire financial system of England depends on that loan never being paid back.

Barter does not rear its head until the middle ages, because you needed to be well versed with the concept of money and price in order to engage in any kind of barter. Barter is not possible without the discovery of equivalence of value.

The history of money is convoluted. It has appeared and faded several times; often in the face of public reprisal against the debt that is created. From ancient Sumer to Mesopotamia, Rome, Greece, and the Arabs; all have seen their currencies rise, fall and disappear. No other country has seen this play out more than China, which has the longest unbroken history.

So it comes as no surprise then that

After barring the use and trading of cryptocurrency, Beijing has indicated that it will turn next to cryptocurrency mining.

China’s vice-premier Liu He last Friday said the government would clamp down on bitcoin mining and trading to achieve financial stability but stopped short of revealing specific policies. This week, Inner Mongolia, an autonomous region in northern China, issued draft guidelines on its plans to ban crypto mining, offering the first details about how authorities intend to execute this latest stage of the crypto crackdown.

Source: Quartz

A currency that the state does not have any power over can reduce the state to having no power at all. This has happened a few dozen times across the world over the last 7000 years.

Also, with the Climate starting to heat up; China is beginning to realise that Bitcoin mining is just outsourcing pollution to another country while Elon Musk goes around publishing foolish memes and playing with the price.

China banned the trading of cryptocurrencies in 2017, but so far the “mining” of the assets, a process whereby people use enormous power-hungry computers to solve algorithmic puzzles and in return get rewarded with the virtual currencies, has been tolerated. As of April last year, around 65% of the global average monthly bitcoin mining capacity, or hashrate, was based in China due to its cheap electricity, according to the Cambridge Bitcoin Electricity Consumption Index, an online tool developed by the British university.

Source: Quartz

In the meantime, Indian which has left crypto-currencies in the legal grey area and has constantly punished or pushed back on those who are seeking to trade in it is looking at building legislation for it. This week the RBI notified that none of its communications was to be construed as banning crypto-currencies.

India's opposition to crypto has more to do with money laundering and terrorism finance than control over the currency.

A formal board comprising eminent jurists, technical specialists and fintech compliance specialists is being set up to oversee the implementation of this Self-Regulatory Code, IAMAI-BACC said in a statement

The self-regulatory code, which is already in place, includes voluntary compliance with anti-money laundering, combating against financing of terrorism, and know your customer regulations, and other company and taxation law

Source: Inc42

And then at the other end of the spectrum, a poor country makes a poorer decision!

El Salvador became the first country in the world to adopt bitcoin as legal tender after Congress on Wednesday approved President Nayib Bukele’s proposal to embrace the cryptocurrency, a move that delighted the currency’s supporters.

Source: Reuters

Imagine having your income fluctuate based on what Elon Musk tweets! 🤦🏽‍♂️

Rage Machine

Barack Obama rose to the presidency because of the way he utilised social media and spread his message. Then Donald Trump used the same technique to deliver the same result. He pushed his luck too far on January 6th 2021.

He was banned.

Last month, Donald Trump started a site very imaginatively named "From the desk of Donald J. Trump". 25 days later the site was shut down.

Former president and former “king of social media” Donald Trump decided this week to shut down his month-old blog, due to abysmal readership. According to an analysis by The Washington Post, Twitter and Facebook engagements with the blog, From the Desk of Donald J. Trump, plummeted from a first-day peak of a modest 159,000 interactions to fewer than 30,000 on the second day, and haven’t exceeded 15,000 interactions on any day since. Trump is reported to have decided to shut down the blog because he believes that the low readership has made him look small and irrelevant.

Source: Wired

Even if you are the former President who has been spewing lies to no end, driving engagement to your own blog is work. Also, you need to offer something of substance to keep people coming back over and over.

The fact is, this further proves what a rage machine social media can be and how critical the algorithms are in amplifying one message over the other.

Even the people who were willing to run over the Capitol on his word were not visiting his blog every day.

By monopolising our attention and then making the choice to show one message over the other, social media today wields incredible power that is not subject to any legislation. Two people sitting in California should not have the power to cause regime changes across the world.

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Some Weather Update

Reims is a place that one passes if they are going from Paris to Southern Belgium. The city is underwater. Storms have flooded the city. Video

Parts of California that got roasted crisp last year due to the forest fires are now facing some of the worst droughts in centuries.

Source: Guardian

Boston, a city known for the number of feet of snow that falls, is facing a heatwave. Temperatures are expected to reach the mid-30 degrees.

Mayor Kim Janey has declared a heat emergency in the City of Boston beginning Sunday and lasting through Tuesday with temperatures expected to be in the mid-90s for several days.

“It will be the first time this year that we’ve seen heat and humidity like this for an extended period of time. We are opening our cooling centers so all residents have an option to come inside and cool off in air conditioning,” Janey said. “I’m urging everyone to take precautions and find ways to stay cool over the next few days. Please watch out for each other. If you see someone out in the heat who appears in distress and needs help, call 911 immediately.”

Source: NBC

Delhi summers have been interrupted by rain which has been welcome and both the coasts in India have been subjected to one cyclone a piece.

And

Russia and Canada are struggling with heat!

It’s only May, and temperatures near the Arctic Circle in northwestern Russia are approaching 90 degrees. In Moscow, temperatures have shattered records on consecutive days.

It has also been unusually warm in central Canada, where raging wildfires in Manitoba are sending plumes of smoke across retreating ice in Lake Winnipeg.

Summer has yet to begin in the northern hemisphere, but temperatures in high latitudes are already alarmingly warm, portending another brutally hot season while signaling more climate troubles.

Source: Washington Post

The "developed countries" have escaped the worst effects of climate change till now because most of them have been in the northernmost latitudes and therefore immune to the amount of heat as well as the consequent weather activity that the heat unleashes. Those days are finished.

What this will affect is agriculture. Growing crops that the farmers are used to, will become more and more difficult. People will migrate. From California to further north. I want to see what kind of border wall Canada plans to build in 20 years!

Also

Degrees of Uncertainty - Climate Change

Now, they can not only dub but they can make the lips say what they want!!

We will, we will...


Tumbleweed Words is a literary newsletter of contemporary prose and poetry Read Here

Also, follow me on Twitter @viveksrn to know when the newsletter drops.

What we think, we become ~ Buddha

You can follow my podcasts here.

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