How to Avoid Buying Trash Crypto That Wastes Your Money

Original posted at The Bitcoin Consultancy

If you can imagine a way to lose money in crypto, I’ve heard it. Since 2017, I’ve heard from thousands of victims of every crypto scam imaginable.  

But for every crypto scheme which is outright theft, there are ten trash crypto-assets created mainly to take your money and run. Each project has a story of why they are a great investment. But dig deeper and the business model is a mirage. What the founders really want to do is create as much momentum as possible and sell at the top before the illusion of value vanishes.

Sometimes you don’t have to dig very deep. For example, “BabyCake” is an explicit Ponzi scheme, if you look beyond their promises of “bringing passive income into people’s lives.” It’s one of the first tokens to have a Ponzi scheme built right into the smart contract. I count 63 other “baby” named pyramid schemes.

Usually, though, the catch is buried deeper and requires understanding the crypto ecosystem. Let’s review why there are so many scams and trash coins in crypto and how to avoid them.

Why are there so many crypto scams?


Cryptocurrencies are only pseudo-anonymous. It’s impossible to know who owns some coins from an address alone. But if you interact with the legacy financial system, for example, by cashing out your gains for fiat, your identity can sometimes be found. If you commingle your funds by moving them together, it’s possible for a chainanalysis algorithm to link activity to an identity. When I try to help victims of fraud, I can often follow the transaction trail to the cold-wallet of some exchange where the crooks traded Bitcoin for a local currency. 

I think the bigger problem is that our legal systems aren’t adapted to deal with crypto fraud. Our legal institutions don’t take small-scale crypto fraud as seriously as fraud with “real” money. Lack of international cooperation means that even if I know which exchange was used to cash out stolen crypto loot, they are unlikely to cooperate with local law enforcement.

Bleeding Edge Technology

Bitcoin and cryptocurrencies are still very new. The tools needed to secure Bitcoins are still evolving and rough around the edges. I predict that in a few years, we will carry credit-card-sized devices with biometric readers that make storing and using Bitcoin both safe and foolproof. Until then, the tools for storing and transacting cryptocurrencies are rapidly evolving. There are safe methods to keeping your crypto safe (like hardware wallets, multi-sig, and steel seed backups), but many people aren’t aware of the proper techniques. Accidental and malicious loss of funds is, unfortunately still common.  

Transaction Finality

A bigger reason for fraud in crypto is that crypto transactions are irreversible for almost all coins. In the legacy financial system, a fraudulent credit card charge, bad check, or unauthorized wire transfer can usually be reversed. If the theft is big enough and your lawyers are good, the legal system will tend to intervene on the victim’s side. In the crypto space, however, no matter how unjust the theft, there is nothing that can be done.  

(Keep in mind though that government theft of savings through inflation and taxes is a far bigger problem than theft of crypto. While this is unfortunate for victims of theft, transaction finality is one of the primary reasons why Bitcoin is so revolutionary: it is impossible to conduct legal plunder of people’s wealth.)

A Free-Market Alternative to Wall Street

“Wall Street” (i.e. traditional securities markets) is often portrayed as the epitome of capitalism. The reality is that the government has regulated most of the profits out of securities available to the non-elite. Crypto-assets and exchanges allow novice investors access to venture capitalism for the first time since the Securities Act of 1933 limited investments in unregistered securities to “accredited” investors. Initial Coin Offerings offer normal people the ability to invest in startups without having to be worth or put up millions of dollars. DeFi (decentralized finance) exchanges operate using smart contracts, without any centralized entity to regulate. With DeFi, anyone to mint and create a market for a new token, outside the ability of any government to regulate.

The flip side is that just because everyone can create and sell their token does not mean they have a viable business model or any technical skills. All you need to be able to do is market your coin, not do anything useful with it. The vast majority of crypto projects trend back to a value of zero.

Bitcoin’s Success Inspires Copycats

Most crypto scams are not outright theft but an attempt to make a quick buck by riding on Bitcoin’s coattails. Profiting from Bitcoin’s rise requires an initial buy-in and patience. Want to make billions with an investment of zero? Too impatient for a mere doubling of your money each year? Just copy Bitcoin’s code, change a few parameters (invent some justification why they are needed) and launch your own altcoin. Repeat the scheme a few more times and get 12,881 crypto-assets tracked by CoinMarketCap.

Many projects start out well-intentioned. The founders may want to be revolutionaries just like Satoshi Nakamoto or they might have some justifiable disagreements with the team that maintains Bitcoin. However, the decentralized nature of crypto assets means that once a coin is out there, speculators will run with it. Quite often, the founder exits early with a small fortune and the project evolves in a completely different direction. The founder of Dogecoin sold everything to buy a used Honda Civic. His coin now has a $32 billion market cap.

Today, the crypto-asset market has a market cap of $2.5 trillion, 48% of which is Bitcoin. Many beginner crypto investors are branching out into altcoins hoping to see the same astronomic returns as Bitcoin in the early days. Let’s explore why they are wrong and why you should focus on Bitcoin.

How to Avoid Trash Cryptos

I’ve already written how to avoid having your crypto stolen by scams and how to safely store your Bitcoin. Unlike outright theft, “trash cryptos” are schemes where you might not realize that you’re the victim.

Buy And Hold Your Entire Crypto Portfolio In Bitcoin

The only guaranteed way to avoid falling for a crypto scam is to keep 100% of your crypto portfolio in Bitcoin. Investors fall for crypto scams when they try to beat the returns of Bitcoin through a variety of other coins and schemes.

Let’s analyze objections to a 100% Bitcoin portfolio and how it gets investors in trouble:

Objection #1: Bitcoin’s returns are not good enough

Over the last ten years, Bitcoin has consistently earned almost a 200% return. In other words, if you just kept your money in Bitcoin, you would have tripled your investment every year.  

No other cryptocurrency can match Bitcoin’s track record. Consider Ethereum, which has beaten Bitcoin over the last 4 years. But this assumes you had the foresight to participate in Ethereum’s ICO. Ethereum is up 2.7x since its 2017 high, whereas Bitcoin is up 3.3x. The point is that you’re not missing out by not buying the latest hot altcoin. By the time you hear about it, any potential for astronomical returns is long gone. If you had bet on Ripple when it was #2 In 2017, you would only have 1/3rd of your portfolio left.

The only way to become a successful long-term investor is to study the fundamentals of an asset, not its price. Bitcoin is the future of money. No other altcoin comes close to Bitcoin as money. Bitcoin’s top competitors are smart contract platforms of various kinds. Their usefulness for real-world business models is currently unproven.  

Objection #2: You heard some altcoin is better than Bitcoin

Novice Bitcoin traders want to be above-average investors. Of course, we can’t all be above average. But many nonetheless try to add some extra alpha to their portfolio by buying a hot new coin or timing the market. 

Those familiar with the efficient market hypothesis understand the difficulty of consistently beating the market. The prices of assets reflect all current information known by participants. Unless you can consistently evaluate the fundamental value of assets more accurately than others, you won’t beat the average. When you try to time the market, your emotions work against you, urging you to buy after an asset goes up, and sell when the asset is low.

Of course, if you invest in Bitcoin, you’re already disagreeing with the vast majority of investors who have little or no exposure to it. Why not disagree a little more and buy some altcoins? Here is the difference:

Bitcoin has a simple business model (“Hard Money You Can’t F*ck With”) and a 12-year track record. Altcoins are all either a technical variation on Bitcoin (fba vs proof of work, or dag vs blockchain) or an entirely different business model (smart contracts). It’s much more difficult to understand the technical merit and value proposition of these assets. None have Bitcoin’s track record.

As a managing partner of a cryptocurrency hedge fund, it is my full-time job to research and write about cryptocurrencies. Yet the vast majority of my crypto portfolio is in Bitcoin because I do not feel qualified to judge the technical merits of various projects. I have a background of 17 years in software development and architecture. I personally designed a Bitcoin exchange. Do you think you can do better based on YouTube and Twitter personalities?

For example, even if Dash is technically better than Bitcoin, is it going to beat Bitcoin’s network effects? What’s to stop Bitcoin from adding whatever killer feature Dash offers? Are you qualified to make these judgments, or are you buying based on the rumor mill?

If you are personally involved in a crypto project, I understand your decision to invest. But don’t expect to beat Bitcoin based on scrolling crypto news sites.

Objection #3: You want to be a crypto trader

It’s an awesome experience to sit down in front of an exchange trading screen full time. For many of us, crypto exchanges were our first introduction to the power interfaces of marketplaces, with their continuous order books, market depth & candlestick charts, and advanced orders. 

Once you master the advanced trading screen, you feel like you have the key to mastering the markets. By taking a few online courses, you can develop a unique system that consistently earns you profits. During a bull run, when everything is going up, it’s easy to conclude that you are in fact a pro.

It is possible to earn a consistent edge in crypto – just not by you. Crypto markets are manipulated by whales (big traders) with powerful marketing machines. There is no way to predict their actions, but they will use your emotions against you. They also pay lower trading fees than you, while your profits are eaten up by fees.

Objection #4: You want to diversify your crypto portfolio

One of the main reasons people hold a basket of crypto assets is that they don’t know which will be successful in the long run. This is a reasonable concern. In practice, however, choosing which assets should go into your portfolio is very difficult.

The principle behind diversification is that by holding uncorrelated assets, you can reduce the volatility of your portfolio while maintaining the rate of return. Diversification works great for the stock market because the profit margin tends to be the same across different sectors. Also, the stock market has 120+ years of precedent to predict future trends.

The same isn’t true of the cryptocurrency market. The price of crypto is based almost entirely on anticipation of future demand, not current demand. Bitcoin’s price depends much more on speculation than current demand as money. Furthermore, money is a natural monopoly, so it’s likely that only a single coin will emerge dominant. (Likewise for smart contract platforms.)

If we assume that a single asset will emerge dominant, which one do we choose? One option is to look at the total market capitalization of each coin (hence being the #1 crypto site). But this is misleading. If I create a token called “Veksler Coin” with a supply of 1 billion and sell a single coin to my friend for $1, I instantly have a $1 billion dollar market cap with a $1 inflow. MarketCap rankings are key for adoption, so there is extremely strong pressure to manipulate them. Even though Bitcoin has less than a 50% market cap, the vast majority of fiat inflows go to Bitcoin. In short, there is no reliable metric for market capitalization.

Some organizations advocate automatically rebalancing your portfolio in response to market cap changes. My fund does that to an extent, though we only trade coins that our research has vetted. However, if you are managing your own portfolio, are you prepared to continually rebalance your portfolio — and pay the capital gains tax on any profits?

Objection #5: You want to earn passive income from staking/yield-farming/crypto lending

Many Bitcoin investors believe that it isn’t enough to hold Bitcoin. You don’t just sit on your cash, right? You invest it in a productive enterprise to earn a return. Just holding an asset is speculation, and that’s bad, right?

There are two problems with this reasoning:

First, Bitcoin is fundamentally different from fiat money. The problem with fiat money is that it’s an inflationary asset. You have to put your money to work just to preserve your wealth. By contrast, when the quantity of money is fixed (as with hard money like gold or Bitcoin), a growing economy means that the share of wealth represented by each unit keeps increasing. Furthermore, the adoption and therefore demand for Bitcoin is rapidly increasing. Bitcoin is not just a static asset like cash or gold. It is also a money transmission network that provides ongoing value to people. Simply holding Bitcoin is an investment into the future of money.

Is a few extra percent return on top of Bitcoin’s 200% average worth risking your principal?

The second issue with many “crypto-investments” is their inflationary design. Consider staking. Cardano staking returns a 5.x% APY reward rate. Cardano also has a 5.7% inflation rate. You must stake to preserve your wealth. This is Cardano’s way of motivating users to delegate their ada to trustworthy stake pools. Staking may be a legitimate way to secure a crypto asset, but it isn’t a legitimate income stream.

More egregiously, consider coins like CAKE, which has a 73% APR (previously 450%+) in the Auto CAKE Syrup Pool. How is PancakeSwap able to offer those returns? There is a handy chart here. Clear as mud? The supply of CAKE is completely arbitrary and the reward rate is a combination of investor subsidies, high growth rate, and high inflation that changes day by day completely at the whim of the CAKE governance process. It’s fun to gamble with, but should you trust your life savings with this scheme?

Objection #7: You want to trust an expert (or algorithm) to trade your crypto

Never expect other people to be smarter with your money than you.

Many people will give you advice on how to invest your money. But just because someone made a lot of money managing other people’s money, doesn’t mean they did their customers a favor. Extensive research shows that index funds perform better than actively managed funds. Crypto isn’t any different.

Keep in mind that the volume numbers of many exchanges on CoinMarketCap are fake. It is much easier to manipulate the prices of crypto assets than you would think. Twitter, Telegram, and YouTube are filled with pump and dump schemes. If an investor finds a consistent advantage in the market, he will not give it up by publicly sharing it. Only those who can’t make a living by trading run YouTube channels about it.

The only reputable actively traded crypto funds are crypto hedge funds. They are open to accredited investors and have minimums of $50K and up. Be very clear on the value they are providing over you just holding Bitcoin before you decide to invest in one.

Conclusion: to avoid buying trash crypto that wastes your money, stick with Bitcoin

The crypto space moves fast. Dozens of new coins go live daily. The top 10 coins today look very different than five years ago. I can’t promise you who the leaders in this space will be in the future. What I do believe in is that fundamental value is what drives long-term trends. The asset that has the most universal business model, can scale to meet consumer demand, has the biggest real-world network, and the most robust community is Bitcoin. If that changes, I’ll be the first to let you know.

How Fiat Money Corrupted Savings & Made Us All Market Speculators

Originally posted at The Bitcoin Consultancy

Before the world switched to a fiat monetary system, people who wanted to build wealth kept their savings in a bank. Interest rates tended to equal the average rate of profit, which was enough for all but a small minority of professional investors and entrepreneurs. 

This all changed with the move to a fiat monetary system and the devaluation of money. Today, the majority of households own stocks — not because they wish to be investors, but because it is the simplest means of protecting savings. As a result, the political system has become highly involved in market outcomes. The real return of securities markets has been greatly diluted, created perverse incentives, and global risks for the economy.

Historical context

Before the creation of the Federal Reserve Banking System, the class of investors was small and limited to finance professionals. Everyone else earned income on their savings by keeping their savings in a bank. For example, the interest rate was 8.1% in 1798.

This changed in the 1920s, the Federal Reserve System fueled a huge credit expansion that caused the stock market bubble. Easy credit drove the return of the stock market to dramatically exceed the return on savings. We know what happened next

By 1952, 4.2% of the U.S. population owned stocks. The 2008-9 financial crisis had a dramatic impact on interest rates when the government injected massive amounts of money into the banking system. Rates have remained low ever since. Today, over 50% of households own stocks, rising to 88% of $100K households.

Savings in a pre-fiat, gold-backed monetary system

In a market economy, the rate of business profit tends to equal the interest rate. The rate of profit tends to even out across all sectors since money flows to more profitable sectors until the rate equalizes. Capitalists borrow money in proportion to the rate of return on investment. When investments are more lucrative, the interest rate increases until the cost of borrowing money equals the potential return — and vice versa. In this manner, savers in a pre-fiat monetary system needed to keep their money in a bank to reap the rewards of a growing economy.

Savings in a fiat monetary system

In a fiat monetary system, the government artificially lowers the interest rate by expanding the money supply. Savers have to shelter their wealth in inflation-protected assets because the fiat system devalues savings through inflation. 

Wealthy families have other channels to protect their wealth – such as real estate and business interest, but for the middle class, their main means of protecting savings are their 401k and their primary home. 

The corruption of the joint-stock company by fiat money

Passively managed index funds now account for the majority of U.S. equity funds. While they are great for investors, they only exist because the fiat monetary system has forced savers into the securities market. 

The publicly traded company exists to allow investors to pool funds together in a common enterprise, without incurring unlimited liability for its debts. Participation in a public company ought to come with high risks — offset by high rewards. 

When a company needs funds, it used to raise them through bonds and other forms of debt — with debtors being paid before investors.

This model is very different from the current system. By the time a publicly traded goes public, most of the risk and therefore return has already been taken by venture capital, which only a small group of private equity investors have access to. 

Because so many savers participate in the market, politicians are strongly motivated to intervene in market outcomes. The 2001 and 2008 financial crises led to the 2002 Sarbanes-Oxley and the 2010 Dodd-Frank Act. These regulations made it much more expensive to go public, which has led to an over 50% decline in the number of publicly traded companies. 

There are now just 3,530 publicly traded companies in the U.S. Anyone can buy a stock on their phone today, but by the time the government lets the company sell you shares, most of the profit potential has already been captured by wealthy venture capitalists and private equity investors.

Dividend yield has decreased from 5.49% in 1871 to 1.33%. Because government debt outcompetes private debt, companies issue stocks to raise money instead of bonds. 

Likewise, the price to earnings rate over double historical rates, as savers flock to the stock market — not seeking high returns, but trying to preserve wealth.

Furthermore, the political system is highly motivated to avoid downturns in the market. Politicians cannot prevent economic destruction (that mostly comes from the economic miss-allocation they cause), but they do inflate market prices through inflation.  Easy credit transfers wealth from dollar users to investors, while at the same time, capital gains taxes transfer much of those gains to welfare recipients.  (By “welfare” I mean all recipients of government benefits, individual and corporate.) All this activity accelerates the inflationary death spiral caused by our unstainable welfare system. 

Stock ownership in a free market should be high-risk, high-reward

Stock ownership should be a high-risk, high-reward endeavor for professionals. By contrast, savers should earn the rewards for their thrift by keeping their savings in a bank. A savings account is the original “index fund ETF.”

Bitcoin as a return to sanity

Bitcoin has a limited supply and cannot be manipulated by politicians. In a growing economy, Bitcoin is a deflationary currency. This makes it ideal as a means of saving money. 

Bitcoin savings accounts (such as currently exist in crypto-lending platforms) offer investors a higher return at a higher risk. Their stablecoin interest rate is around 9%. I would guess that this reflects a 6-7% rate of profit plus a 3% adjustment for inflation.

There is no easy way out of the current mess. The same forces driving more and more of the public to become market speculators also make those markets ever more unstable and unprofitable. Loan-bearing crypto deposit accounts (whether they hold stablecoins or cryptocurrencies) are rapidly growing in popularity and may become the high-yield savings accounts of old for savers everywhere.

The shortages were unevitable

What did you think would happen?

1: Lockdowns and unemployment subsidies constrain production

2: Print trillions of dollars and throw it out of helicopters

3: Consumers start spending stimulus money

4: Manufacturing shifts to the production of consumption goods

5: Producers bid up prices of production goods and labor

6: Price increases, shortages, and unfilled jobs everywhere.

It has nothing to do with a “chip shortage,” or the Suez canal blockage, or just-in-time manufacturing. These are only the symptoms. The root cause of the “everything shortage” is the government’s manipulation of the money supply.

One of the most important concepts I learned from Austrian Economics is capital has structure.

In order to produce consumer goods, capital must be employed. To make your Venti Frappuccino (first-order good), a barista uses an espresso grinder (second-order good). The grinder requires steel and microchips (third-order goods).

The stimulus money went to consumers, who voted with their wallets to shift the structure of capital from the production of higher-order (production) goods to lower-order (consumption) goods. In other words, the government robbed producers with low time preference and redistributed the loot to consumers with high time preference. The rest is inevitable.

What should happen when an external shock (such as pandemics and lockdown policies) constrains production? The economy needs to re-structure to rebuild the structure of production to reflect the new reality. Uncertainty causes consumers to save more, which frees up higher-order capital to shift to new demand trends. Capital can focus on producing PPE, webcams, home exercise equipment, and consumer groceries rather than restaurant supplies, office buildings, airliners, etc.

By attempting to “freeze” the economy in pre-pandemic spending levels, the government crippled the adjustment to the new reality. The rest will be inevitable.

Why aren’t all economists rich?

Why aren’t all economists rich? Some are. Economics is the most common degree amongst the world’s top 100 billionaires. Some famous economists such as David Ricardo and John Maynard Keynes were very wealthy indeed. However, for the most part, economists will give you a list of excuses why understanding economics won’t make you rich.

They are wrong.

How do I know this? I used my understanding of economics to become wealthy.

I won’t go into the (lame) excuses economists give. Instead, I will tell you how I used my understanding of economics to build my fortune.

Some of these topics could fill a book, so I’ll just cover the basics. I’ve already written articles about most of these topics.

Compounding returns:

The returns from re-investing profits from an investment are the single most important principle of personal finance.

This taught me a few things: (1) maximize my savings rate (2) invest while I’m young (3) time in the market is more important than timing the market.

Efficient market hypothesis:

The efficient market hypothesis (introduced by F.A. Hayek in 1945) is the idea that prices incorporate all public information about markets. This means that “buy low, sell high” is impossible using only public information.

This taught me:

  • (1) Technical analysis/day trading is stupid
  • (2) Don’t pick stocks (unless you can dedicate your career to it). Invest in broad-based index funds
  • (3) Keep costs low. You can’t consistently generate superior returns, but you can maximize the return from the market by buying cheap ETF’s.
  • (4) Maximize time in the market because you can’t time the market.
  • (5) Consistent alpha generation requires non-public information
  • (6) Don’t trust your money to an “expert.” They are unlikely to do any better than random.

Austrian business cycle theory (ABCT):

The Austrian business cycle theory (Ludwig von Mises, Theory of Money and Credit, 1912) explains how expansionary monetary policy leads to unsustainable investments (the boom), followed by a necessary correction (the bust). This has huge policy implications, but it’s also important for investors.

It taught me:

(1) Bull markets are headed for a correction when investments become unsustainable.

Signs of an upcoming correction may be:

high P/E ratios,

dumb projects getting funded, etc.

(2) Credit expansion (and associated inflationary policies) cannot be reversed. Don’t bet on fixed-return investments.

(3) All fiat regimes end lead to hyperinflation — so protect your assets from inflation. Stocks, precious metals, and Bitcoin provide protection from hyperinflation.

Modern portfolio theory (MPT):

MPT ( Harry Markowitz, “Portfolio Selection”, 1952) is a model to understand the relationship between investment risk and performance. Given a set of investment categories with a given risk and rate of return, you can graph all possible allocations of a set of investments on an efficient frontier: a hyperbola that represents a combination of investments that has the least risk for a given level of return.

It taught me:

(1) While you need to take more risks to get superior returns, you can get a free lunch if your risky investments are uncorrelated. Diversify your portfolio with non-correlated assets to maximize returns given a certain level of risk

(2) Lower your risk with a small allocation into safer assets with minimal impact on returns.


The capitalist-entrepreneur organizes capital and labor in new ways to make a profit. More generally, entrepreneurship is the activity of creatively organizing these elements to create value. (Ludwig von Mises, Human Action, 1949)

The reward for entrepreneurship is the profit the entrepreneur collects from the value he generates.

Everyone faces the decision to become a wage worker (employee) or entrepreneur. The upper end of the wages an employee collects is the value he creates for the business. The lower end is whatever another potential employee will offer for the same service — in other words, “what the market will bear.”

What this taught me:

No matter how much value I create for the business, my salary will always be limited to the market rates.

There are two ways to raise one’s income:

1: Redefine your job so that the pool of competitors is more exclusive.

2: Become an entrepreneur, so that your income is limited only by the value you create, not the prevailing wage.

In practice, I have done both in my life.

As an employee:

For example, I started my career as a software engineer. I then became a software architect, technology lead, director of marketing, then Chief Technology Architect. My strategy was guided by two questions:

1: how can I create more profit for the business and thus increase my value and

2: how can I limit the pool of competitors by working in a more exclusive role?

As an entrepreneur:

In contrast to employees, entrepreneurs can collect all the additional value they create (after expenses). Aside from a few exceptional careers (CEO, movie star, athlete, etc), entrepreneurship is the primary way to real wealth.

Ever since I discovered the role of entrepreneurship from the Austrian School of Economics, I’ve strived to engage in entrepreneurship even while I pursued my career. Currently, I do this as Managing Partner of Vellum Capital, a hedge fund specializing in cryptocurrencies.

Last word on Abundance:

Economics is all about the study of scarcity. Human beings have unlimited needs in a world with limited resources. The field of economics studies how to best allocate these limited resources to maximize human satisfaction.

But this focus on scarcity can lead us to miss another important lesson of economics. Value does not exist in nature but human beings. Human beings create value for themselves and others when they re-arrange capital and labor to produce goods and services.

While the elements of nature are finite, the potential value that humans can create is infinite. For example, some sand on the beach can provide momentary value when kids play with it. It can provide more lasting value when it is used to mix concrete for a building, or even more if the silicon is made into solar panels, or even more if the silicon is made into a million-dollar supercomputer. The combinations of labor and capital are infinite, and so is the value that they can create.

Economics is all about managing scarcity, but it teaches that the economy is not a fixed pie. Economic activity creates value rather than distributing it. The universe is full of opportunity, and we need only to develop an entrepreneurial eye for our small part of it, to learn how to profit from it.

McAllen, Texas is consistently the fattest city in America, and they are not happy about it. They can’t figure out why, as they have plenty of parks and organize 5K runs nearly every weekend.

What they don’t realize is that for non-athletes, exercise has very little to do with bodyweight.
The obesity epidemic is caused almost entirely by the consumption of processed carbohydrates, which the U.S. government and the medical establishment still encourages despite many decades of evidence to the contrary.

My city of Denver is the healthiest in mainland America, but walking around town, the obesity epidemic is still evident.

What’s interesting is the comparative rate of obesity in different grocery stores. Whole Foods shoppers have 1/10th the rate of obesity than mainstream grocery store shoppers. (According to researchers at the University of Washington.)

Yes, Whole Foods is about 15% more expensive, but what are the shoppers buying? A 15% markup on food for a 90% decrease in obesity rates would be a great trade-off. Is simply switching to Whole Foods a viable diet plan?

Most of the price difference is the much higher price of meat, dairy, and seafood (30% more) at Whole Foods. The prices of most other products are comparable to mainstream stores.

The difference between Whole Foods and Kroger shoppers is all in the name: Whole Foods customers prefer whole foods, not endless derivations of processed corn syrup.

5 strategies I used to reach financial independence

My portfolio growth rate over the last 6 years has averaged 130% of my salary. In other words, my portfolio increased by 100% of my salary plus 30%. My actual saving rate was between 60 and 70%.

More importantly, over this period my portfolio* grew from about 4x my burn rate to 22x my burn rate. This metric is key because 25x is the standard retirement escape velocity, according to the 4% rule. The 4% withdrawal rule is the rule of thumb used by most financial analysts to predict the percentage of a portfolio a retiree can safely withdraw without drawing down his principal.

Here are five ways I accomplished my financial goals:

My portfolio growth rate over the last 6 years has averaged 130% of my salary. In other words, my portfolio increased by 100% of my salary plus 30%. My actual saving rate was between 60 and 70%.

More importantly, over this period my portfolio* grew from about 4x my burn rate to 22x my burn rate. This metric is key because 25x is the standard retirement escape velocity, according to the 4% rule. The 4% withdrawal rule is the rule of thumb used by most financial analysts to predict the percentage of a portfolio a retiree can safely withdraw without drawing down his principal.

Here are five ways I accomplished my financial goals:

1 Rent instead of buy:

I held out buying my first home as long as I could until covid-19 forced my hand. While homeownership is great for a growing family, renting for nearly the first 20 years of my career was crucial.

The financial tradeoff of rent vs buy is complicated. In short, over the long run, home prices merely keep up with inflation, while the stock market provides a 7% return. On average, it takes about 5 years to break even on the buy vs rent decision.

More importantly, renting allowed me to focus on my career. I could quit my work and move across the country or the world without worrying about a home full of material possessions to drag me down. And I did – moving from Dallas to New York City to Shanghai to Atlanta to Denver within 10 years. I never had to worry about mowing lawns, broken washes, or leaky roofs. It’s possible to throw money at these problems, but avoiding the distraction allowed me to focus on growing my income instead.

2 Track your spending:

You can’t improve what you can’t measure. It’s essential to track your cash flow (both in and out) to improve your situation. I’ve tried dozens of apps to do this, but the key was tracking my finances in Personal Capital – a free tool that tracks your cash flow and investments. The results speak for themselves – it took the first 15 years of my career to save 4x my burn rate. After installing Personal Capital, it took me 6 years to save 22x my burn rate.

Personal Capital can do budgets, but I’ve never kept a budget. Budgeting is a terrible way to think about money.

Let me repeat that: a monthly budget is a terrible way to manage your money.
If something delivers more value to you than it’s worth, you should pay for it. Who cares what you paid for it last month? Every few years, I will go out and spend a fortune on new work clothes, or a computer, or a new car, or (recently) a home improvement project. Who cares how much I spent on it the previous month?

What matters is not how your spending compares to a previous period, but how it compares to the next-best use. For example, before I spent $1000 on a new suit, I will calculate the total return if I saved the money instead. For example, $1000 invested over 30 years will be worth about $8000. Will I value spending $8000 when I’m 70 more than $1000 today?
Your timeline will be different of course – it depends on what percentage of your income is saved for retirement vs upcoming major purchases. The point is that you should balance each potential purchase against the time-discounted value of the next-best purchase, whether that is an iPhone next month or a yacht 40 years from now. It takes time and data to make this calculation automatic and intuitive, which is why a personal finance platform like Personal Capital is key.

3 Single-income household:

My family is a single-income, two-child family – my wife has been a parent and/or a student since we got married. While many see this as a disadvantage, I’ve come to see the benefits of a stay-at-home parent.

The cash flow of a second income is easy to see, but the costs are not so obvious. Aside from higher taxes, work-related expenses, running a household with kids has a lot of overhead, and working parents usually have to throw money at problems to stay afloat.
It’s virtually impossible for both parents to fully dedicate themselves to a career without neglecting their children. Something has to give – either one parent will sacrifice their career, or both will have mediocre career progress. By focusing on parenting, my wife can let me focus on my career during the day, so I can support her needs as a student at night.
Second, because we homeschool, we have very low childcare costs. We took our daughter out of an expensive Montessori school because we found that she learned better at home. Our kids will probably go back to school at some point, but for now, homeschooling is efficient both financially, time-wise, and particularly in giving me the necessary mental break to focus on work each day.

4 Choose side hustles that further your career:

I encourage developing a “side hustle,” but many people get hustles that do more harm than good. The proper function of a side hustle is not to earn a few extra dollars — it’s to grow your value proposition and train for a life of financial independence and entrepreneurship.
Many people get a side hustle that distracts rather than enhances their career. Driving Uber at night or hosting Airbnb guests every night is not going to enhance your career unless your dream is to be a chauffeur or enter the hospitality industry. Same with being a jack-of-all-trades who takes whatever job he comes across.

Is your side hustle causing you to sleepwalk through the workday or work on your gigs from the office? Are you spending more money on tools and supplies for each new gig that you bring in? Are you growing as a professional and building a sustainable, revenue stream with customers that come back to you, or are you doing random, one-off jobs, often for free? Are you giving up new projects at work, a promotion or a demanding new job for your side hustle? If so, it’s holding you back rather than helping you. You don’t need more spending money: you need to create opportunities for you to grow.

A good side hustle should help you to grow in your career or to explore a new one. You should come to the office excited to try out new ideas, not just tired from staying up all night working in an unrelated field. Side projects in your current field often allow you to be in charge of a small project and use the latest technology or techniques that are too risky or difficult to approve with your boss. I’ve used this trick to qualify for jobs that I couldn’t dream of otherwise.

5 Invest aggressively:

After maximizing the spread between your income and your expenses, you need to leverage the magic of compound returns by investing it in the market.

There are as many opinions on investment strategies as there are investors, but unless investing in the market is your full-time job, you will probably not beat the market. You may get lucky, but chances are that if you try timing the market, you will be guided by your emotions, and buy high and sell low. Even the best money managers in the world can’t beat the market.
So my suggestion is: just invest in the market. The whole market, not just the S&P 500. You can either invest in an index fund like VTI (USA) + VEU (not USA) or use a robo-trader that buys individual stocks (this can lower costs and save on taxes).

I use Personal Capital. I can’t speak for other robo-traders, but Personal Capital re-balances my portfolio not only by asset class, but also by market sector, so I’m positioned to benefit from growth in any industry.

  • By portfolio, I am referring to liquid securities and some real estate. I have other assets like business interests, but I’m trying to keep this advice universal.

Restore deleted rides from your Wahoo bike computer

How to restore accidentally deleted rides from your Wahoo Bolt/Roam/etc bike computer:

  1. Get the Android SDK platform
  2. Connect your Element Bolt, Roam, etc via USB
  3. In a command line window, run ./adb devices. This is just to check that adb can see your Wahoo device.
  4. Run ./adb pull /data/media/0/exports ~/Desktop/wahoo_exports with the last part being the folder you want to save to. This will export every single ride to your PC. Your deleted ride(s) will be there. Look by the date.
  5. You can now sync the deleted ride. I airdropped the deleted ride to the ELEMNT app. That was enough for it to sync.

Adding complexity to a system does not make it more valuable

Every month, my company spends about $50K on software development. We’ve been doing this for 10 years. We think that we’re building something valuable well into the future.
Yet if the company went bankrupt, our work will instantly become worthless. Our business system serves our unique needs and would be useless in any other context. Likewise, if enough senior developers left at the same time, the business might be OK, but without in-depth knowledge, we would have to start over with the code.
Our code only has value when it makes money for the business. Like a living being, it only has value when it contributes to a common purpose (profit) and begins to disintegrate the moment that purpose is gone.
One difference between living and constructed things is that all of the parts of a living being are usually necessary for its function. If you remove any part of it, you will kill it, or at least imperil its ability to survive.
A complex codebase on the other hand usually serves multiple goals, and these goals change over time. Inevitably, some parts of the system become irrelevant to the system’s well-being.
98.5% percent of human DNA does not code for any proteins. It’s “junk” DNA. While not entirely useless, it’s a relic of evolutionary history. Given enough time, the same happens with any codebase.
This month, I tried to remove a feature from the codebase. It’s a small and simple feature, but one of the oldest. I found that I couldn’t get rid of it. Various parts of our system made certain assumptions that broke when the feature was removed. Subtle interactions caused things to break in unpredictable ways. This feature had wormed itself into the deepest layers of the logic engines and removing it broke dozens of unit tests.
I gave up and put the feature back in the backlog. I considered paving over the complexity by hiding it from the user, while letting it run in the background, like a vestigial organ. In fact, the feature had never been useful, but it took years for the business to admit that the tens of thousands spent on it were wasted. If we had recognized this earlier, stripping it out would have been much easier.
Adding complexity to a system does not make it more valuable — it makes it more costly to maintain. Humans have high-calorie needs because our brains require a lot of energy to run. Nature didn’t give us the largest brains it could, but the smallest brains that we could survive with. Human brains are mostly full of heuristics that provide shortcuts to perceiving and simulating reality just well enough to keep us alive long enough to reproduce. Likewise, software systems should have the minimum complexity needed to satisfy business requirements.

Three problems with the science of The Tomorrow War

Here are three problems I have with the science of The Tomorrow War:

1: On the proper use of time travel

Time travel requires the creation of a closed timelike curve (CTC): a closed loop in which spacetime returns to the starting point.

Let’s assume that a CTC is possible (an open question in physics), and it allows a single signal (yes=signal, no=no message) to be sent to a time machine that’s already operating, after which the connection ends. What can be done with this low bandwidth connection?

Say your goal is to win the lottery. You start your chrono-receiver and buy a lottery ticket. If you win, you send a yes. If you don’t get a signal, you increment the lottery number and try again. Even if your chance of winning is 1 in a billion, you will eventually get to the correct number.

What do you do after winning the lottery? Solve the next problem. Anything that is physically possible for you to becomes trivial given enough attempts. You just need to build an Ideal Solution Database (ISD) to keep track of successes and ensure each attempt is unique. You are using the CTC to perform computation on an infinitely powerful computer. You can’t go back to before the time machine was invented (that’s how a CTC works), but you can optimize your action post-creation to achieve any and all outcomes that are physically possible. (If this is confusing, watch the Rick and Morty episode “Edge of Tomorty: Rick Die Rickpeat”)

Where does the energy for this process come from? Where does the entropy go? From a thermodynamic perspective, time travel is problematic, whether you want one trip to make sure your parents have that first date, or a quintillion trips to become God-Emperor of Earth.

So this is the basic problem with all time travel in fiction. Even if you don’t set out to create the ISD, the temptation of optimizing any action leads toward the creation of an ISD. As each goal is achieved, the next goal is brought forward in time. The only limitation is the time to record each goal in the ISD, and the process can be used to optimize the ISD too. History compresses into a singularity and the flow of time as we know it ends.

While the time loops may be infinite, the ISD calculations and actions still generate entropy, so the ISD civilization has an expiration date. Assuming the civilization remains in a particular area of space (such as a solar system), it will perform all work possible until reaching heat death. From the perspective of an outside observer, the ISD civilization accelerates to a singularity, then vanishes.

If a CTC is impossible, what’s the point of this speculation? All intelligence tries to approximate a CTC+ISD. When you try to throw a basketball into a hoop, you first create a simple model universe in your mind that simulates the trajectory of the ball, then test the hypothesis by shooting the ball. You repeat the process, using simulation and testing to perfect the ISD in your mind. All intelligence works by running simulations, testing them, then creating a solutions database from the results. Unlike a CTC, each iteration has takes time and uses energy. To minimize this cost of simulation, civilizations are likely to trend to ever more efficient computing, bound only by Landauer limit, the theoretical lower bound on energy consumption.

Currently, we recognize a big difference between simulations (whether in our mind, computer software, or a physical system, such as a wind tunnel) and reality. However, a future civilization which exist entirely as software, and may convert the fabric of reality into computational substrate (aka comptutronium) may not recognize such a distinction. If the Landauer limit is somehow overcome, future civilizations will achieve what is effectively a CTC+ISD.

#2: On the threat of invasive species

Earth already experienced a great extinction from an invasive species 2.4 billion years ago that killed 99% of all life on earth. It produces a chemical that was highly toxic to nearly all other lifeforms. That phylum is still the most plentiful lifeform on earth. (That chemical is oxygen and the lifeform is cyanobacteria.)

Today, we are still dealing with lifeforms that are constantly trying to convert the entire biomass of the planet to copies of themselves.

Can you guess what that lifeform is? It’s every single living organism, from the smallest bacterium to us humans. Every organism has evolved over billions of years to optimize the conversion of inorganic matter and other living organisms into copies of itself. The introduction of a new, alien species that dramatically outcompetes other lifeforms in every ecosystem on a purely evolutionary basis would be a quite difficult problem.

To take a small flaw as an example: the “White Claw” invaders in the film can take down top predators – and they can also glide. But flight requires light, hollow bones, whereas brute power to take down large animals and throw military vehicles like matchsticks requires massively strong bones and bulky muscles. The laws of physics constrain all life to specific ecosystems because all life faces all sorts of compromises.

#3 On the proper use of intelligence

In The Tomorrow War, the invaders compete with humans by a non-intelligent (or at least low-intelligence), non-tool using species. Whatever consciousness they have, the White Claws presumably do not adapt strategy or technology to the human responses.

This summer, I’ve been trying to get rid of weeds in my backyard. At first, I tried pulling them by hand, but they grow back. Then I tried an edger, but it does not destroy the roots, so they grow back quickly. Then I tried 30% concentrated vinegar, and it works because it’s absorbed by the roots and kills the plant. While the weeds might eventually adapt to vinegar, the point is that I can change technology much faster than the weeds can evolve new defenses.

Humans have been dealing with invasive species for as long as agriculture has existed. Our key weapon in the fight is our technology. We determine which strategy works and then scale it up. We don’t keep using the same failed methods (small arms fire), like the protagonists of The Tomorrow War.

What should we have done to deal with the White Stripes? Well, wasting resources to firebomb them when they already dominate an ecosystem is stupid. Instead, all initial resources should have been spent to identify a viable defense method, then scale it up. Even within the movie, it only took a day to find a toxin — why did they only think of that in the last gasp of the war? If not a toxin, then what about armored vehicles? Here’s another problematic aspect of big dumb animal invader science fiction: living beings are still made of blood and guts. Physics puts upper limits on density and power so that a tank will always be able to take out a biological being — and do it beyond line of sight.

A small, hidden invader is much more difficult to defend against. A virus, bacterium, or even something mosquito-sized is a much scarier threat than a big dumb animal. Mosquitos have been around for over 200 million years, and their victims still haven’t been able to mount an effective defense.

Top ten ways you can appear rich even when you’re poor

1: Be fit and slim: there is a strong negative correlation between wealth and obesity. Why?

Contrary to popular belief, the rich are not slimmer because a healthy diet is more expensive or they can afford personal trainers. They are slimmer because they invest more thought into what they eat. This is because the wealthy have a lower time preference: they are willing to forgo the short-term pleasure of a sugar rush for the long-term reward of truly delicious food, good health, and good looks.

In developed countries where calories are cheap, our choice of food is determined by three factors: stress, culture, and availability.

Stress is the main determinant of time preference with food. Chronic stress makes us unable to make intelligent decisions about diet, and dietary sugar is the main pharmacological compound we used to deal with stress. Sugar and other processed carbohydrates are the main cause of obesity. For non-athletes, exercise has nothing to do with it.

There is much more to say on this topic, but to sum up: if you can learn to manage your stress, you will learn to manage your cravings. You can choose to develop a culture of cooking real food, and even though good food will not be as available to you, you can learn to go out of your way for it.

2: Wear well-fitting clothes: the rich are not fashionable because they can afford luxury brands. They are fashionable because they are conscious about fit and style. You don’t need to go to a bespoke haute couture tailor to dress well: you can find something that fits you at Goodwill. You just need to do free online research and make a conscious effort to design your wardrobe.

3: Show up on time: this is not to say that the rich are always punctual and the poor are late, but that the wealthy can afford to be physically and mentally present for occasions that they deem worth their time. The poor are usually distracted and either physically or mentally absent.

Like with diet, the root cause is stress: it’s much easier to be present when you can throw money to make your distractions go away. But if you’re poor, there is something else you can throw away to make your stressors go away: attachments. All relationships and possessions cost time and money. Some relationships and possessions are worthwhile and produce a positive return, while others are a net drag. When you are poor, it’s much easier for minor things to drag you down, so you must keep your load to a minimum. Partying is expensive. Owning a car is expensive. Owning the latest iPhone is expensive. Let go of attachments that are not vital to your long-term success and you will thrive.

I didn’t have a car until I got my master’s at 23. It’s not that I couldn’t afford or didn’t want a car (living in a small Texas college town). I knew that it would be an ongoing cost and a distraction from my main goal of completing my education.

4: Be young: no amount of wealth will give you a younger body, but you are in control of the two biggest causes of aging: obesity and sun damage. You may not be able to afford plastic surgery, but you can control the main reasons why the rich need plastic surgery in the first place.

5: Have a big family: while there is a strong relationship between poverty and more children, the cost of raising kids is one of the main reasons parents don’t have more children.

Children are expensive at all income levels since the expectations on parents grow proportionately. But I think the problem is the same: parents think that being good parents means spending money on their idea of a good parent rather than spending time being a parent. For example, in my family, we took our daughter out of an expensive private school because we found that she learned more from us at home. We don’t spend our time shuttling her from one activity to another, but go hiking, play chess, and cook together. Being a parent is cheaper and more rewarding than hiring someone else to parent your child.

6: Have a successful marriage: There is a very strong relationship between divorce, single parenthood, and poverty. Why do the poor get divorced more often? The root cause is an inability and unwillingness to negotiate conflict: all relationships take work and generate stress. Successful couples can take time to do the work because they manage their stress. Couples who divorce let stress and resentment build up. It is said that the overwhelming reason relationships fail is “lack of commitment.” But why are people not committed to relationships? It’s because it does not create value for them. Once the sensual aspect wears off, the inherent friction of human relationships overweights the positive aspects of the partnership. Poor people divorce for the same reason they get fat, and it has nothing to with money. The root cause of poverty, obesity, and divorce is high time preference.

7: Don’t complain: Wealthy people are happier, while the poor are much more likely to be depressed. Part of the reason is that they can throw money at problems. A more fundamental reason is that the poor have a scarcity mindset, while the wealthy have an abundance mindset.

The abundance mindset sees the universe as full of opportunity — for friendship, love, and financial success. By contrast, the scarcity mindset sees everything as a fixed pie and leads to hoarding, envy, and stagnation in every aspect of life.

Poor people with a scarcity mindset think that if their neighbor has something good, whether it’s a possession or relationship, it must be unavailable to them. So they complain about the cruel, unjust universe.

Wealthy people with an abundance mindset see others’ success as an inspiration: if their neighbor has a great marriage, a beautiful house, or a successful business, there is something positive to learn, and potentially a valuable relationship to build. The universe is full of opportunities, so there is no reason to complain about failure – they have only themselves to blame.

8: Enjoy great art: while the rich can afford an original Banksy their wall, and at their kid’s bar mitzva, the world’s greatest paintings are in public museums, and great music and film are nearly free for you to enjoy — if only you developed a taste for it.

It is said that Howard Hughes once locked himself in a hotel room and watched Ice Station Zebra for months. If I developed an OCD desire to watch a movie on repeat for months, it would the 2003 film “Master and Commander.” I’ve heard some people complain that the film is boring and doesn’t have enough action. Once again, high-time preference is at fault. You are addicted to crave the rush of sugar in food, the cheap dopamine thrill of pornography, and the freight train of explosions in the latest Michael Bay Transformers 7: Faster and Exploder.

Nurturing a taste in great art takes patience and time, but if you want to explore the highs and lows of the human condition and be inspired to be a deeper, more passionate soul, you must put in the time and work.

9: Keep a clean house: yes, the wealthy can hire housekeepers to pick up after them. But if you’re poor, you have an advantage they don’t: you have fewer possessions and less space to store them in.

While weekly cleaning is necessary for every household, being organized is more important: by putting things away after you use them (and teaching your kids to do the same) you can keep your home from becoming a mess in the first place.

The messy appearance of poor households has another cause: the scarcity mentality. People hoard things they don’t need because they worry that they won’t be able to get a hold of them again. But possessions you don’t need right now are only a drain on you: they take up physical and mental space in your life. Let go of the things you don’t need with the faith that they will be there when you need them again. There are “Buy Nothing” neighborhood groups all over the U.S. where families freely exchange things they don’t need anymore. This year, I got a punching bag, a shop vac, a kids trike, lightning for my garage, toddler clothes, yard tools, and much more. We gifted just as much. Relying on relationships and having faith in people’s generosity frees us up for physical and mental baggage.

10: Don’t stress about money: in developed countries, stress about money is the worst aspect of poverty, worse than the physical deprivation it forces. Few people in America have to worry about going hungry or homeless, but many more live paycheck to paycheck with chronic stress about money. A $500 surprise expense would put most Americans into debt.

A high income is no guarantee of financial well-being: if your spending rate is greater than your income, you will never have financial security. Real wealth is not measured in income, but financial security: the confidence that no matter what happens to your income stream, your lifestyle won’t be affected.

The solution to money stress is simple: live below your means and build an emergency fund. It’s easier not to stress about money when you’re young and broke. When you’re starting out, all you need to worry about is living below your means and keeping your emergency cash fund topped up. When you’re wealthy, very little of your net worth is cash. You have to balance your net worth between business interest, real estate, securities, and other assets. Managing your portfolio becomes a part-time job – unless you hire expensive money managers, which is another set of worries.


Wealth is one possible reward for developing good habits in life. It takes time and luck to build wealth, but you don’t need to wait to become rich to enjoy the other rewards that result from striving for physical and mental health.

  • Find life-enhancing ways to manage stress (such as sports or hobbies rather than food, porn, drugs, or tv)
  • Eliminate relationships that drag you down and distract you from your life’s goals
  • Put as much thought into your appearance as you do into other important aspects of your life
  • Make a concerted effort to nurture your soul with great art
  • Eliminate possessions that do not bring you joy or add more value than the financial, physical, and mental burden they carry
  • Live below your means to avoid financial stress