Guan Yang

Guan Yang (GY) is a data scientist based in New York, sometimes working on financial data, and a big fan of Cash App and its boosts. Guan here. Look up the financial statements for Square, Twitter founder Jack Dorsey’sother company which is probably best known for its Cash App, and you’ll see $4.6 billion in “Bitcoin revenue” in 2020, which is almost half the company’s total revenue. Cash App provides a debit card with popular “boosts”, and has also added the ability to trade stocks and Bitcoin, which is where all that revenue comes from.Open the Cash App and buy a small amount of Bitcoin—it lets you purchase as little as $1 worth—and Jack doesn’t go out and find someone you can trade with. Instead, you’re buying Bitcoin directly from Square, the same way you might buy gold from a dealer with a storefront. A few seconds or minutes or hours later, someone else wants to sell their Bitcoin at a slightly lower price, and Jack buys it (as far as I can tell from reading the 10-K), making a modest profit facilitating those trades as a market maker, acting as the counterparty for every Bitcoin trade in the app.If Cash App users are net buyers or sellers over a period of time, Jack then goes out to the wholesale market and buys or sells larger amounts of Bitcoin (and not $1 at a time), so his stockpile of Bitcoin roughly matches the Bitcoin balances in Cash App accounts. But Square’s accountants count all the money Cash App users spent buying Bitcoin as revenue, and in 2020 those users bought $4.6 billion worth of Bitcoin. That sounds like a lot, but the corresponding cost is $4.5 billion, so Jack’s profit on all that trading netted out at $97 million.Coinbase, another big cryptocurrency company, which just filed for an IPO today, is also a market maker, but not to nearly the same extent as Jack. Instead Coinbase’s customers tend to trade directly with each other on the company’s platform. So even though there they facilitated $193 billion in transactions in 2020, total revenue is lower, at only $1.3 billion.When your business is buying and selling the same stuff all day long, doing the accounting this way greatly exaggerates how much business you have. And it’s not how the accounting works for Square’s other lines of business. The second-largest of those, by “revenue,” is processing credit card payments through those sleek black terminals now seen in every hipster coffee shop. Jack processed payments of $103.7 billion through those terminals in 2020, and charged the stores $3.3 billion in fees. But only the $3.3 billion counts as revenue, not the full $103.7 billion people spent on lattes.Real images from @cashapp on InstagramCounting all the customers’ asset purchases as revenue is also not how it’s done for other financial companies. For a bank such as Bank of America, which tends to receive a lot of interest and also pay out a lot of interest, “revenue” is net interest income, the difference between interest received and interest paid out, plus things like overdraft fees. (This means that if something goes terribly wrong, a bank can have negative revenue.) Bank of America is also a market maker through its securities division, and only reports the profit from market making as revenue, $8.4 billion in 2020. Virtu, a major market maker in the stock market (and one of the five used by Robinhood), also only reports its $2.5 billion net trading income as revenue. Not the full value of the stocks it sold over the course of last year, a sum which is orders of magnitude larger.Why is this interesting?Accounting is supposed to summarize the complexities of a company, making the same concepts comparable across different companies and over time. An investor who spent some time with Square’s financial statements would quickly understand what’s going on. But lots of traders don’t even look at the reports directly, but instead use a stock screener tool, or more sophisticated quantitative models, and never appreciate the weird way Square’s revenue is recognized.The numbers in Square’s annual report feed into the databases of commercial vendors such as Bloomberg and Refinitiv, which in turn feed into a whole ecosystem of retail and professional investment tools. Refinitiv’s database has a line for net sales of $9.5 billion, which includes the full value of all the Bitcoins bought by Cash App users along with the rest of the revenue Square took in for the year, and that $9.5 billion number feeds into all the companies that use Refinitiv data. That same ecosystem will see $3.2 billion for Virtu Financial in the net sales column, and treat it as the same data type as Square’s net sales, even though, as we saw, they’re quite different.As far as I know, Jack’s finance team isn’t doing anything wrong here, and is following all the relevant accounting rules. Whoever came up with the accounting rules probably thinks all this is totally reasonable and finds it puzzling that anyone could find it interesting. But this is what you’re dealing with if you use financial datasets. And the lessons here will apply more widely to almost any use of “data.” As a US company, Square follows what are quaintly known as GAAP, or “Generally Accepted Accounting Principles.” GAAP is intended to be a common reporting standard, so anyone who knows GAAP should be able to read and understand financial reports for any company. But it still leaves a lot up to interpretation, and in the end it’s very hard to compare companies in an apples-to-apples way. (GY)Chart of the Day:From the excellent Wall Street Journal piece Lumber Prices Are Soaring. Why Are Tree Growers Miserable? (NRB)Quick Links:Paul Musgrave’s review of A.M. Gittlitz’s book “I Want to Believe”, on the Fully Automated Space Communism flavor of Trotskyism out of Argentina (GY)Tom Vanderbilt sent over this excellent 2016 piece on DIY YouTube he wrote after yesterday’s edition. (NRB)Jill Lepore’s New Yorker review of Nicole Perlroth’s new book This Is How They Tell Me the World Ends.(NRB)Thanks for reading,Noah (NRB) & Colin (CJN) & Guan (GY)—Why is this interesting? is a daily email from Noah Brier & Colin Nagy (and friends!) about interesting things. If you’ve enjoyed this edition, please consider forwarding it to a friend. If you’re reading it for the first time, consider subscribing (it’s free!).

The Bitcoin Accounting Edition

Guan Yang (GY) is a data scientist based in New York. His favorite instruction set is IBM’s POWER. He previously wrote the Bitcoin Accounting Edition for WITI. Guan here. 57 years ago, in April 1964, IBM announced the System/360 line of mainframe computers. At the time it was the costliest private development project in history, at $5 billion (about $43 billion today), more than the Manhattan Project. The line was hugely successful and introduced many new technologies in commercial use, including the 8-bit byte, 32-bit words, and the use of microcode in computer processors. The Mythical Man-Month, known to many software developers, was based on Fred Brooks’s experiences on the System/360 operating system project.System/360 also introduced the idea of an instruction set architecture, or ISA. Computers exist to follow instructions, most of which involve doing arithmetic or logic, or moving data around between memory locations. Here’s an example of a System/360 instruction:LR R15, R12   “load the contents of register 12 into register 15”This is encoded as 18fc in hexadecimal in machine code. A “register” is a small, very fast piece of memory, and operations often happen on registers rather than main memory.IBM announced seven different models of System/360 computers for different market segments in 1964. All of them supported the same instructions. Previous computers tended to use a custom instruction set created for that model, a trend that continued in the low-end market for a while after System/360. Later, Amdahl, Hitachi and RCA and others would make computers compatible with System/360 instructions.To this day, many 1960s-era programs can run unmodified on new IBM mainframes. Today, customers in all but the most specialized applications expect new computers to support some common instruction set, so code and tools can be reused from other products using the same instructions.Why is this interesting?For a while, instruction sets weren’t that interesting, as long as the choice wasn’t too niche. Your home WiFi router is likely to use MIPS and many cars have chips that use SuperH, two instruction sets you’ve likely never heard of. Wii U game consoles use PowerPC instructions; Arduinos use AVR.When Apple switched from IBM PowerPC to Intel x86 chips in 2006, the decision was driven by PowerPC chips of that era falling behind Intel on performance and efficiency. The x86 instruction set was already viewed as technically inferior, but Intel made higher performance processors by recasting the instructions as simply an interface to a radically different microarchitecture under the hood. Using the terminology of higher-level programming: the instruction set is an API to the hardware, with underlying implementations increasingly decoupled from what you might guess just by looking at the API.For the past decade, if you’re making a new custom chip, the go-to was one of the offerings from ARM, a British company now owned by Softbank that started with the Acorn Archimedes computer in 1987. ARM chips are ubiquitous, the licenses are relatively cheap, and there’s a lot of ARM expertise out there. The original 2007 iPhone had a Samsung chip with an ARM core inside. iPhone 4 got a custom Apple chip, still with an ARM core, and Apple first used a custom-designed core with iPhone 5 in 2012—Apple more or less designed it from scratch, and only licensed the instruction set from ARM. Last year Apple announced it was moving to its own chips for laptops as well, with the M1 running ARM.The new kid on the instruction set block is RISC-V. It comes from research at Berkeley dating back to the 1980s, and is completely open and royalty-free, which means there are also many open-source implementations. RISC-V has been slowly gaining traction, especially among Chinese vendors, in part because its openness makes it more resistant to US sanctions, which were preventing Huawei from making ARM chips. There’s no contract required to use RISC-V, so there’s nothing the US Treasury can ban. At the low end of the market, even the few pennies ARM charges per chip can add up, and makers of the cheapest chips can now avoid paying ARM for licensing the instruction set.ARM initially responded with some good old-fashioned FUD, but has recently started being more open and accessible. It’s now easier to get started using ARM designs without extensive paperwork and negotiations, and it’s easier for professors to teach a chip design class using a real ARM design.A more interesting development is Intel’s recently announced acquisition of SiFive, a startup founded by three of the Berkeley RISC-V researchers that has created a range of different RISC-V designs, from cheap low-end chips to fast chips that could be used in smartphones or servers. Their top designs are probably only 3 or 4 years behind ARM in terms of performance. Intel opened up its semiconductor fabs to outside customers recently, and is now offering SiFive designs on its 7nm process. Like the Chinese vendors, embracing RISC-V is a way for Intel to gain market share in lower-end markets where ARM currently dominates, while taking advantage of the excitement around RISC-V and without having to come up with completely new designs. (GY)Quick Links:A very insidery look at why Sebastian Vettel was disqualified from this weekend’s Formula 1 race for not finishing with 1 liter of fuel. (NRB)A good follow-up to the WITI Technical Debt Edition: Technical Debt Is Not Debt; It’s Not Even Technical (NRB)For all the How Brands Grow fans out there: What does Byron Sharp’s research really tell us about differentiation? (NRB)[Sponsored Link] Noah here. Another shout out for my company, Variance. We are building a PLG CRM to help software companies grow their customers. There’s a new post up on the blog about the various organizational antipatterns we see around customer data. Get in touch if you have questions or want to learn more. (NRB)Thanks for reading,Noah (NRB) & Colin (CJN) & Guan (GY)—Why is this interesting? is a daily email from Noah Brier & Colin Nagy (and friends!) about interesting things. If you’ve enjoyed this edition, please consider forwarding it to a friend. If you’re reading it for the first time, consider subscribing (it’s free!).

The Instruction Set Edition

Guan Yang (GY) is a data scientist based in New York. His favorite content set in Venice is the Brunetti Mysteries.Guan here. The Most Serene Republic of Venice (726-1797) was a major commercial and maritime power. In addition to the famous lagoon city in Northeastern Italy, Venice ruled territories and islands stretching all the way down to Crete.Map by ReincanarietheorieVenice’s head of state was the Doge, or Doxe in Venetian (not the shiba inu based meme, or the related cryptocurrency). The doge was chosen with rules first adopted in 1268 and used, with few changes, until the last election in 1789:Thirty members of the Great Council, chosen by lot, were reduced by lot to nine; the nine chose forty and the forty were reduced by lot to twelve, who chose twenty-five. The twenty-five were reduced by lot to nine, and the nine elected forty-five. These forty-five were once more reduced by lot to eleven, and the eleven finally chose the forty-one who elected the doge. Election required at least twenty-five votes out of forty-one, nine votes out of eleven or twelve, or seven votes out of nine electors.On the chance you found that hard to follow, Miranda Mowbray and Dieter Gollman of HP Labs summarized it with this handy table in a paper analyzing the procedure:In addition to the hereditary Great Council (round 1), we get nine additional bodies, some chosen randomly by lot—a process known as “sortition”—and some elected under various supermajority rules (meaning they require a greater than 50 percent vote), culminating in a 41-person college that elects the doge with at least 25 votes. There were also restrictions on the number of members of each college from each family and on the electors’ communications with the outside world. Campaigning was forbidden.Neither papal conclave nor the system used to select the president of the United States can hold a candle to this harebrained scheme. So why did the Venetians make it so complicated, and why did the system survive so long?Gabriele Bella: Election of the Doge by the Forty-oneThe city was nominally governed by the doge and the hundreds of noble families represented in the Great Council, but politics was dominated by a handful of powerful families. The standard explanation for the complex selection procedure is that it prevented powerful families from applying undue pressure to elect their preferred candidates without majority support. (Being doge was quite costly, and the powers of the office were later curtailed, so some powerful men tried to avoid election, using the same tricks used to get elected.)Sortition, combined with isolation for the electoral college, can make the system less vulnerable to manipulation, and allow the randomly selected electors more careful consideration and deliberation. Adding a supermajority rule to sortition makes it less likely that a minority candidate can be elected by chance because they happen to be supported by members of the randomly selected group.Mathematical analysis of the protocol shows that having many rounds of sortition could lead to a doge being elected with only minority support, so using too many rounds would be unwise. But having multiple rounds reduces the probability that a powerful minority candidate could unduly influence a small number of electors with bribes or threats, and makes it harder to figure out exactly who should be bribed or threatened.Why is this interesting?The way societies make decisions is important. There is a growing understanding that different systems can lead to quite different outcomes. Ireland rejected the British first-past-the-post system after independence and adopted the single transferable vote in 1921. New York City started using ranked-choice voting this summer, with some hiccups. Other countries have moved to full proportional representation where seats are allocated to parties more or less based on national vote share.There’s also the question of the best level of representation. Should city councils be elected at-large for the whole city (like in Cambridge, Mass.) or in single-member districts, and how would that affect outcomes such as diversity and zoning? Perhaps some decisions should be taken away from the city council, and either moved down to the neighborhood level or up to the regional level? And should some decisions, such as monetary policy, be taken out of democratic control altogether and left to technocrats?Using sortition to choose government officials, as Venice and Ancient Athens did, is a niche idea these days, but in common-law countries, juries deciding legal cases are (supposed to be) chosen randomly from the population. Nobel laureate Daniel McFadden wants to use “economic juries” of randomly selected people to decide on big public projects, arguing that this can better reflect public opinion than a referendum.Since these political design choices affect policy outcomes, it would be naive to think this is only about high-minded notions of the “quality” of decisions. But that doesn’t make the question of how societies should make decisions any less interesting. (GY)Quick Links:[Sponsored: Atlas Bars are GMO-free and keto-friendly with 15 grams of protein and just a gram of sugar. We’ve tried Atlas and they are very good. Use this link for WITI readers to get 20 percent off. Get started with the sample pack.]The system warning Venetians of an incoming flood goes from one to four sirens. The Fifth Siren, a new podcast, explores what comes after that. (GY)The city is trying to control tourism with surveillance cameras and phone tracking. (GY)Death in Venice (also a film by Tony Palmer) is an opera by Benjamin Britten based on a novella by Thomas Mann. Aschenbach, a famous novelist who has lost his inspiration, finds himself in Venice during a plague. (GY)Italo Calvino’s Invisible Cities is 55 vignettes of imaginary cities, which all turn out to be Venice. (GY)Venetian maritime commerce was organized in the commenda structure. Before his better-known work on politics, religion and bureaucracy, Max Weber wrote his doctoral thesis on these, translated into English as The History of Commercial Partnerships in the Middle Ages. (GY)--WITI x McKinsey:An ongoing partnership where we highlight interesting McKinsey research, writing, and data.Managing water risk. What’s the potential business impact of dwindling fresh-water supplies? By one estimate, $425 billion of value across more than 500 companies. New analysis shows how companies can target renewable-energy purchases and investments to reduce water risk and carbon emissions in tandem. Check it out.--Thanks for reading,Noah (NRB) & Colin (CJN) & Guan (GY)—Why is this interesting? is a daily email from Noah Brier & Colin Nagy (and friends!) about interesting things. If you’ve enjoyed this edition, please consider forwarding it to a friend. If you’re reading it for the first time, consider subscribing.

The Dogal Elections Edition

Guan here. Italian-language opera first appeared in London in 1705 with Jacob Greber’s Gli amori d’Ergasto. Although productions continued for another two hundred years, the era peaked in the 1720s and 1730s, when the preeminent composer was the Saxon-born naturalized Brit George Frideric Handel, who wrote 39 Italian operas for the London stage between 1711 and 1741.Italian was not widely spoken in London at the time, so how did anyone understand the words? Well, like opera audiences today, many didn’t. Given the often convoluted plots and formulaic arias, they might have rightly preferred to just sit back and enjoy the music.Londoners did have a secret weapon unavailable to modern opera-goers: the house lights stayed on throughout the show, and a shilling bought you a printed libretto of the entire opera with a facing translation. (The price of an orchestra ticket was 5 shillings.) Here’s the ending of Act 1 from Alcina (1735), Handel’s best opera, with the famous aria “Tornami a vagheggiar”:This scan is from the Handel collection at the Foundling Museum. Printed libretti are an important source for 18th-century opera, as many more of them survive than musical scores. The Library of Congress has 12,000 pre-1800 libretti; Claudio Sartori’s catalog lists 25,000 editions.At a modern opera house, darkness descends upon the audience when the performance begins. A printed libretto is no longer available, and I can report that reading along on your phone is not well received. Instead, titles are projected or displayed above the stage. And although diction has improved over the years, opera can be hard to understand even in a language you know, so houses in Italy tend to have Italian surtitles (above the stage) even for Italian-language works. The fancy folks at the Metropolitan Opera of New York display subtitles on a small vacuum fluorescent display in front of each seat.Why is this interesting?The Italian opera craze in 18th-century London anticipated the popularity of culture presented in a foreign language, while we read along with a translated text. And perhaps also a time when we’re constantly reading, consuming text non-stop, whether it’s newsletters, doom-scrolling, at the opera, or while watching television.Opera-goers and those living in countries where dubbing is rare have long been accustomed to translated titles (as well as those who use same-language captioning for accessibility). More audiences are now joining them, especially thanks to Netflix’s global strategy. The Economist has declared Netflix to be creating a common European culture, one subtitled series at a time. Other streamers have joined the bandwagon: the 2018 television adaptation of Elena Ferrante’s My Brilliant Friend is HBO’s first foreign-language production. (The third season recently ended, and it’s great.)Stavroula Sokoli: “Subtitling Norms in Greece and Spain,” in Audiovisual Translation: Language Transfer on ScreenViewers of global Netflix series such as Squid Game turn on subtitles in such large numbers, even in traditional dubbing countries, that reading text is now part of the default experience of these works. The quality of the translation, how literal or free it is, whether every line of dialogue is translated or some are omitted, how the titles appear on screen, and the global translator shortage are no longer niche concerns of a few viewers in Northern Europe. And indeed, the Squid Game subtitles have sparked plenty of takes.In his book The Impossible Art, composer Matthew Aucoin describes opera as “an imagined union of all the human senses and all art forms—music, drama, dance, poetry, painting.” Aucoin forgot to add text to that list, but he embraced the centrality of reading in opera with Eurydice (2020), which has each sung line projected into the set, affording Aucoin and stage director Mary Zimmerman complete control over what their audience sees, hears and reads:Still from the 2021 Metropolitan Opera productionJapanese anime producers have long had approval over their subtitle scripts. Creators of newer multilingual shows such as Acapulco, Tehran, and ZeroZeroZero have translation and subtitles (or the omission of subtitles) in mind from the beginning:Gina Gardini, executive producer of “ZeroZeroZero,” says she and her team made a conscious effort to open the pilot with an English-language voiceover before diving into Mexico and Italy, where Spanish and Italian are, respectively, spoken with English-language subtitles. … Gardini and her team took great pains to make sure subtitles reflected the original language and weren’t overly obtrusive.Translations and titles are increasingly considered integral to the work and approached with creativity and purpose. In this new golden age of multilingual and cross-cultural entertainment, there’s no escaping text. (GY)Quick Links:On the translation of the title of Elena Ferrante’s The Lost Daughter by Ann Goldstein. (GY)Joyce DiDonato on performing Handel’s arias. (GY)China’s subtitling communities; the loss of YouTube community captions. (GY)The unbelievably batshit British dubbing process for a 1976 Japanese production of the Chinese classic The Water Margin. (GY)--WITI x McKinsey:An ongoing partnership where we highlight interesting McKinsey research, writing, and data.Social media as a service differentiator: How to win. Let’s say you have a question about a product or some feedback for the company about your experience with it. Chances are you’ll head to social media. Customer service is a public affair, and more companies are turning to social as a full-service channel that can help customers and drive positive brand experiences. A new article lays out a framework on six key areas of social media servicing excellence.–-Thanks for reading,Noah (NRB) & Colin (CJN)—Why is this interesting? is a daily email from Noah Brier & Colin Nagy (and friends!) about interesting things. If you’ve enjoyed this edition, please consider forwarding it to a friend. If you’re reading it for the first time, consider subscribing (it’s free!).