DACs vs. Firms (Are DACs useless?)

[bitbro]

Prediction markets will always be inefficient because the markets don't will never have the continuous "flow" of a traditional market place.  Bts x will have "flow", giving it the advantage  in the information consensus market space


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Literally shat my pants upon reading that meme.

I'll come back and elaborate later.

Touché




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[santaclause102]

Here is another proposition:
 
Transparency for companies can (only) be enhanced if the respective company does ALL it's value transfer (receiving and spending) using crypto currency. A charity for example receives all it's money via a crypto currency which let's people see how much money the received. If they spend it all via a the same crypto currency then it is all traceable. If they have to exchange it to fiat and spend it then it is not tracable anymore.

What do you think? How else could a company enhance transparency (if the company is not a DAC itself)?

[toast]

Prediction markets will always be inefficient because the markets don't will never have the continuous "flow" of a traditional market place.  Bts x will have "flow", giving it the advantage  in the information consensus market space


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[bitbro]

Prediction markets will always be inefficient because the markets will never have the continuous "flow" of a traditional market place.  Bts x will have "flow", giving it the advantage  in the information consensus market space


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[santaclause102]

I read the OP and vastly agree with it. But where does it contradict with one of the DACs developed based on the Bitshares toolkit (lottery, me, music, dns, insurance)? With Bitshares Music I see your point. Not with the rest.

What do you mean by

'real estate' storage

?

We'll see if that market cap lasts. I'm betting it won't.

As you refered to BTS X. This falls into the same category as Bitcoin: value transfer. At least one side of it. Based on your assessment the market cap should not fall (in case it works).   

[Empirical1]

Shareholders almost never have the inside information.
http://en.wikipedia.org/wiki/Agency_cost

 

[donkeypong]

Right. I didn't mean to imply that BitsharesX could be replicated for $5. In fact I'm nearly suggesting the reverse: that what you guys are doing is very, very, hard. So hard that I predict that like-minded entrepreneurs will actually decide that they don't want to try it anymore (except perhaps for the challenge, or for the public good), and will instead do the traditional thing, and set up shop and sell their labor.

You do understand this is open source software, don't you? Now that the basic code is nearly complete, anyone can build their own DAC relatively easily; they will not be deterred by some great cost. I recently took a train ride up a mountainside in Alaska. It took a huge team of men many months and lots of black powder to blow apart the mountainside, at the cost of many lives. But today, I can buy a ticket and ride to the top comfortably in less than an hour. With the open source software toolkit that Invictus has created, anyone will be able to make their own DACs pretty easily. Does the price of my train ticket factor in how hard it was to blast that track out of the mountain? Does the simplicity with which anyone will be able to create a DAC factor in the difficulty and delays in getting the basic code built? Factor in that initial groundwork if your formulas and theories so demand, but don't be surprised if they don't quantify the relatively light burden remaining for anyone wishing to jump off from this platform.

The experienced software professionals I know (and I"m not saying that they are infallible) don't believe you. Instead, they believe in something called software rot, whereby the environment changes too quickly for the inputs of the software to remain relevant. Even though the mapping from inputs to outputs improves constantly, the benefit of performing that mapping at all falls quickly and unexpectedly.

This is why I wrote, in the OP (over a month ago): """Software development/maintenance requires a great deal of highly-skilled work, and then the software "rots" as it gradually becomes obsolete."""

All right, fair enough. I'm glad you've considered that point. And for the record, I did read your full article; it brought back fond memories of grad school! At the end of the day, I think the fact that these businesses are DACs will matter a lot more to the back end people (developers, boosters, investors), but less to the retail audience. The businesses still will need to present a retail product/service that meets a demand. Bitshares X is special in this way because there's nothing else like it. The Lotto and gambling type DACs can succeed by taking less of peoples' money, providing more fun for the price. Bitshares Music could be quite revolutionary--a whole new paradigm in that industry.

I do think these businesses need to compete with others on the same playing field and the fact that they are DACs in structure may or may not give them much competitive advantage in the marketplace. Then again, if DACs come with their own fan base, and if this increases, then there may be some portion of a ready-made friendly market for products/services. These folks may transfer over their buying power here (whether it's music, insurance, registering DNS websites, etc.). The DACs require much marketing beyond this, but perhaps that key constituency gives them an early leg up in a phase when many new businesses struggle. We shall see.

[AsymmetricInformation]

In general, this has been a fun and interesting conversation.

I think it would be more fun and more interesting if everyone would be certain to re-read the original post (which was here: http://forum.truthcoin.info/index.php/topic,90.msg195.html) for answers to their questions before posting. Failing to do so gives me the impression that talking to you is a waste of time. For those just stopping by to read, my guess is that they are either confused/frustrated by the breakdown in argument-structure/fluency, or they may fall under the impression that this community is made up of individuals who are too lazy to do 800 words of background reading on their entire business model.

[AsymmetricInformation]

Right. I didn't mean to imply that BitsharesX could be replicated for $5. In fact I'm nearly suggesting the reverse: that what you guys are doing is very, very, hard. So hard that I predict that like-minded entrepreneurs will actually decide that they don't want to try it anymore (except perhaps for the challenge, or for the public good), and will instead do the traditional thing, and set up shop and sell their labor.

You do understand this is open source software, don't you? Now that the basic code is nearly complete, anyone can build their own DAC relatively easily; they will not be deterred by some great cost. I recently took a train ride up a mountainside in Alaska. It took a huge team of men many months and lots of black powder to blow apart the mountainside, at the cost of many lives. But today, I can buy a ticket and ride to the top comfortably in less than an hour. With the open source software toolkit that Invictus has created, anyone will be able to make their own DACs pretty easily. Does the price of my train ticket factor in how hard it was to blast that track out of the mountain? Does the simplicity with which anyone will be able to create a DAC factor in the difficulty and delays in getting the basic code built? Factor in that initial groundwork if your formulas and theories so demand, but don't be surprised if they don't quantify the relatively light burden remaining for anyone wishing to jump off from this platform.

The experienced software professionals I know (and I"m not saying that they are infallible) don't believe you. Instead, they believe in something called software rot, whereby the environment changes too quickly for the inputs of the software to remain relevant. Even though the mapping from inputs to outputs improves constantly, the benefit of performing that mapping at all falls quickly and unexpectedly.

This is why I wrote, in the OP (over a month ago): """Software development/maintenance requires a great deal of highly-skilled work, and then the software "rots" as it gradually becomes obsolete."""

[AsymmetricInformation]

Everything unrelated to value-storage will be outsourced to firms. This leaves only a few niches (Bitcoin, Truthcoin, possibly .p2p domain 'real estate' storage).

My mountain climbing friend asked me to keep an eye if you ever gonna come with explanation why and how truthcoin will be so valuable. Seems like a good time to ask.
Care to elaborate?

‘Why/how is truthcoin one of the only few niches worth developing for?

If what I wrote in the original post, or repeated in later posts, hasn't convinced you or your friend, you'll probably never be convinced. We should both just move on with our lives.

[AsymmetricInformation]

The point is that shareholders do NOT choose a company with lesser accounting transparency. Those companies are forced to borrow at the high rates charged to actually-doomed companies, but occasionally there is a good egg in there (a still-breathing company which could not prove it would still be breathing a year from now). Investors receive a reward disproportionate to the risk they assumed, so they actually win. Its the managers that lose, not the owners.

So the majority of companies would be 'actually-doomed' companies that could exist a while longer thanks to lower borrowing rates for example, but ultimately fail.

& you're/theory is saying that outside shareholders benefit from this because without that they would have failed sooner or perhaps not got a shot to get out of the hole. However as you say - the majority are 'actually-doomed' which means shareholders within the company & people close to them would have this inside information and be able to sell as 'doomsday' becomes inevitable. This would leave the outside shareholders at a disadvantage, they would only learn of problems at a much lower price and in extreme cases experience a complete loss in the case of some bankruptcies.

Does the theory take that sort of idea into account and still find it is in outside shareholders interest over all? 

Shareholders almost never have the inside information.
http://en.wikipedia.org/wiki/Agency_cost

I'm not quite sure about your response. The AI would predict that a DAC's managers / agents, would benefit from accounting transparency, but not necessarily the shareholders/owners/principals, who might actually suffer as a result of losing the option to gain a superior risk-adjusted return.

But it doesn't really matter, because "accounting transparency" is probably only important for value-storage, as I've been saying. You could look at the accounting statements of GE, Walmart, but of course you don't (the benefits are small and not worth your effort). Increasing the detail (checking every transaction) would just make things more confusing. Fully transparent accounting might prevent accounting fraud, but why bother? Writing code that is 1] secure and 2] flexible enough to allow a manager to delegate/approve every expense is going to be nearly impossible. As I've been saying, just start your own business. You'll know where your own money is! The intra-brain transaction costs are low.

However, for a bank or escrow, you would want to know where the money was. You'd know exactly what to expect, and checking it would be simple enough to be worth your time.

[Empirical1]

The point is that shareholders do NOT choose a company with lesser accounting transparency. Those companies are forced to borrow at the high rates charged to actually-doomed companies, but occasionally there is a good egg in there (a still-breathing company which could not prove it would still be breathing a year from now). Investors receive a reward disproportionate to the risk they assumed, so they actually win. Its the managers that lose, not the owners.

So the majority of companies would be 'actually-doomed' companies that could exist a while longer thanks to lower borrowing rates for example, but ultimately fail.

& you're/theory is saying that outside shareholders benefit from this because without that they would have failed sooner or perhaps not got a shot to get out of the hole. However as you say - the majority are 'actually-doomed' which means shareholders within the company & people close to them would have this inside information and be able to sell as 'doomsday' becomes inevitable. This would leave the outside shareholders at a disadvantage, they would only learn of problems at a much lower price and in extreme cases experience a complete loss in the case of some bankruptcies.

Does the theory take that sort of idea into account and still find it is in outside shareholders interest over all? 

 

[AsymmetricInformation]

Its been shown in theory and in practice, that if the accounting isn't transparent, the shareholders actually benefit. It is the business which suffers, as it cannot prove it's legitimacy, and must fund-raise under great suspicion. Shareholders always have the option to sell, or not-buy. This effect sometimes bundled with the famous "Market for Lemons" Nobel paper.

Interesting. I see no evidence there that shareholders would choose a company with lesser/perceived lesser accounting transparency though. So the theory would simply say that over time traditional businesses would outperform DAC's because of their lower accounting transparency. OK. Even if it were true, it would have to be partly offset by the savings in fraud, embezzlement, and theft a DAC would enjoy.   

It is interesting. Its the foundation of my forum username.

The point is that shareholders do NOT choose a company with lesser accounting transparency. Those companies are forced to borrow at the high rates charged to actually-doomed companies, but occasionally there is a good egg in there (a still-breathing company which could not prove it would still be breathing a year from now). Investors receive a reward disproportionate to the risk they assumed, so they actually win. Its the managers that lose, not the owners.

Imagine you were applying for a job, but there was no "transparency" (no one can call your references or school, or meet you). They can always not hire you (its probably not even worth their time to interview anyone under such conditions), so its actually your problem, not theirs.

As I said in my original post, colored coins (or something like it) can step in for the 'ownership token' in the stock market case.

[Empirical1]

As I said before, Bitcoin is useful. This is because (to repeat it yet again): a blockchain is required to store value.

To disagree, you need to propose a blockchain service that would "be economically profitable" but would not "store value". The comments you made referencing Bitcoin are therefore irrelevant.

Just because no one specifically labeled an account "Bitcoin dev fund" and announced that to the world, doesn't mean that the development of Bitcoin didn't consume scare time and energy. Voorhees estimated that the establishment of Bitcoin cost at least 1 billion dollars.

Delegates can go to jail.

Yes, but ownership of shares of a company is an example of storing value on a blockchain. The advantages have already been listed privacy, tax, freedom from confiscation and seizures.  There are also no legal costs & compliance issues as well as approval delays for DAC's vs. Firms. This makes DAC's as an ownership model 'economically profitable' to shareholders. 

I think your main rebuttal to this so far, has been your SilkRoad response.

DACs also provide tax, confiscation & privacy benefits & have the advantage of being border/'jurisdiction-less'

Wrong again. SilkRoad was a firm, not a DAC.

I never said SilkRoad was a DAC? If you're under the illusion firms offer the same advantages, maybe you missed the part where SilkRoad was shut down and the owner arrested?

You missed the part where dozens of replacement firms appeared near-instantly. There is still no SilkRoad DAC. If DACs are so good, where are they?

So what if dozens of firms replaced them near-instantly? The owner of the original is in jail.
That is what proves the point that firms don't offer owners & shareholders the same advantages DAC's do. 

In your latest response you've mentioned twice that delegates can be arrested. But again the delegates are not necessarily the owners, therefore it doesn't negate any of the advantages of choosing a DAC as an ownership model over a firm. 

If Company ownership can be stored on a blockchain which it can, and the advantages of privacy, tax, freedom and confiscation and seizure are economically beneficial to shareholders, which they are, then it is likely we'll see new businesses and even existing firms transition to the DAC ownership model.

The capitalisation of the worlds stock markets is circa $70 trillion, so the potential of any existing or new businesses switching over to a DAC base is obviously a huge market. Currency & Commodity trading is also a multi trillion dollar market which DAC's can vastly undercut in terms of trading and other fees. Banking, Lotteries, .p2p, Music, Insurance and Lending as well as a decentralised market place are all examples of potential industries where accounting trust, no central point of failure and the ability to store value will be an advantage to the customer too. 

Its been shown in theory and in practice, that if the accounting isn't transparent, the shareholders actually benefit. It is the business which suffers, as it cannot prove it's legitimacy, and must fund-raise under great suspicion. Shareholders always have the option to sell, or not-buy. This effect sometimes bundled with the famous "Market for Lemons" Nobel paper.

Interesting. I see no evidence there that shareholders would choose a company with lesser/perceived lesser accounting transparency though. So the theory would simply say that over time traditional businesses would outperform DAC's because of their lower accounting transparency. OK. Even if it were true, it would have to be partly offset by the savings in outright fraud/ embezzlement/theft a DAC would enjoy. (As I stated in my original example I doubt shareholders holding the bag when Lehmans/Madoff collapsed benefitted from lack of transparency.) 

Edit: - Added on below

If DACs are so good, where are they?

That's like popping up in 1993 and saying - 'If impersonal 'online stores' are so good. Where are they?'

It's easy to just say "new paradigm". Much harder to use logic to back up that claim. Many things were fads in the 90's, like Beanie Babies. What sorts a paradigm-shift from a fad are the economic fundamentals.

Yes but either way, whether they turn out to be a fad or a 'new paradigm', asking 'where are they' now, is like doing the same in 1993, as the technology and the ideas surrounding DACs are still in their nascency

[donkeypong]

Right. I didn't mean to imply that BitsharesX could be replicated for $5. In fact I'm nearly suggesting the reverse: that what you guys are doing is very, very, hard. So hard that I predict that like-minded entrepreneurs will actually decide that they don't want to try it anymore (except perhaps for the challenge, or for the public good), and will instead do the traditional thing, and set up shop and sell their labor.

You do understand this is open source software, don't you? Now that the basic code is nearly complete, anyone can build their own DAC relatively easily; they will not be deterred by some great cost. I recently took a train ride up a mountainside in Alaska. It took a huge team of men many months and lots of black powder to blow apart the mountainside, at the cost of many lives. But today, I can buy a ticket and ride to the top comfortably in less than an hour. With the open source software toolkit that Invictus has created, anyone will be able to make their own DACs pretty easily. Does the price of my train ticket factor in how hard it was to blast that track out of the mountain? Does the simplicity with which anyone will be able to create a DAC factor in the difficulty and delays in getting the basic code built? Factor in that initial groundwork if your formulas and theories so demand, but don't be surprised if they don't quantify the relatively light burden remaining for anyone wishing to jump off from this platform.