The Capital Note

Twitter’s Merkel Problem

(Kacper Pempel/Reuters)

Welcome to the Capital Note, a newsletter about business, finance, and economics. On the menu today: Twitter’s escape into a trap, the boredom market hypothesis, losing a Bitcoin password, Rhodium’s colossal run, and monkeys and money. To sign up for the Capital Note, follow this link.

Big Tech, Big Government, and the Power to Suppress Speech

In yesterday’s Capital Note, Daniel Tenreiro sketched out a sharply drawn picture of Twitter’s CEO, Jack Dorsey, noting the contrast between the younger Dorsey, a “preacher of crypto anarchy,” and (regardless of the merits of the Trump ban) today’s “Censor in Chief.”

I (probably) see less of a contradiction in that evolution than might seem to be the case. That’s a discussion for another time, but here, I think, Daniel is spot on:

[Dorsey] realizes the inherent constraints of the client-server Web model, in which large platforms will inevitably receive backlash, and potentially legal action, for failure to moderate. Twitter and other social networks are in a bind: If they moderate, they’ll anger a critical mass of their user base; if not, they’ll likely be regulated into oblivion. With Democrats firmly in control of the federal government, Twitter and its peers have cast their dice . . .

They have, although I suspect that they found it rather easier to do so with Democrats rather than Republicans soon to be at the helm.

But the underlying problem for Big Tech has not gone away. Indeed, rather than postpone what is looking like an inevitable showdown with big government, the actions taken by the silicon posse may, in fact, have brought it even closer.

That’s because, regardless of the rights and wrongs of what Twitter and other tech companies have implemented in recent days (and, on a narrower point, I felt that, as private companies, they were within their rights to do what they did), the steps they took were unmistakably an impressive demonstration of power. And as angered as some on the right maybe by the way that power has been used, the mere fact that Big Tech had the ability to do what it did will have disturbed those on the left who instinctively prefer to see as much power as possible concentrated in the hands of the state. They may have appreciated the measures recently taken by Twitter, Amazon, and the rest, but they almost certainly will have resented the fact that those companies had the power to decide whether to take them in the first place.

This is the context necessary to understand the superficially surprising intervention by Germany’s Angela Merkel in the controversy over Trump’s banning. Merkel, to the deluded the “leader of the free world,” is an authoritarian who transcends simple ideological categorization, but, as her social-media law shows, she has an unhealthy fondness for censorship. For her spokesman to describe the banning of Trump (someone for whom Merkel has no time) as “problematic” might then have been considered unexpected.

Reading on, the mystery is resolved.


Asked about Twitter’s decision, Merkel’s spokesman, Steffen Seibert, said the operators of social media platforms “bear great responsibility for political communication not being poisoned by hatred, by lies and by incitement to violence.

“This fundamental right can be intervened in, but according to the law and within the framework defined by legislators — not according to a decision by the management of social media platforms,” he told reporters in Berlin. “Seen from this angle, the chancellor considers it problematic that the accounts of the U.S. president have now been permanently blocked.”

The problem was not so much the censorship itself (if that’s the word to describe what a private company was doing by refusing to host someone on its site) as (again) who was doing the censorship. Such power should, in Seibert’s (and, presumably, Merkel’s) view be primarily reserved for, and exercised by, the state, regardless of the basic property interest that Twitter has in the running of its own site. And anyone who believes that modern European states, saturated in the dogmas of coercive liberalism, will wield that power with restraint can have been paying no attention to the way things have been going in the last decade or so.

So, what happens next?

Alexei Navalny, the Russian opposition leader (another figure unenthused by Trump) who is currently recovering in Germany after a failed attempt to assassinate him ordered by, well, I think we know who, tweeted his belief that the Trump ban on Twitter was “an unacceptable act of censorship.” In the course of his thread, which is well worth reading in full, Navalny points out some uncomfortable home truths (“I get death threats here every day for many years, and Twitter doesn’t ban anyone (not that I ask for it)”), but, perhaps the most interesting tweet in his thread was this:

Of course, Twitter is a private company, but we have seen many examples in Russian and China of such private companies becoming the state’s best friends and the enablers when it comes to censorship.

Maybe that is what lies ahead for Twitter and its West Coast kin. In fact, agreeing to accept such a role would be another example of the growing corporatist ascendancy also now manifesting itself in the drive to establish “stakeholder capitalism” as a C-suite orthodoxy, a process with ominous implications for both shareholders and, more obliquely, democracy.

By being seen to be doing their bit for the state, Big Tech would probably hope to preserve more autonomy than would otherwise be the case. And as their controls on private expression would be confined to the private sphere, they would spare the U.S. government from having to face some tricky First Amendment issues (Uncle Sam’s counterparts elsewhere have no such problems to worry about — and may thus be quicker to head down the route to even tighter control of expression than their existing social-media laws already provide).

That said, my best guess is that Washington, once it is run by a party traditionally not notably squeamish about expanding the power of the state will see, with help too from some on the right, how far the government can go in muzzling discussion on social media that may, to use a fashionable word, be “problematic,” but is not, under any reasonable interpretation of current law, illegal.

Around the Web

Lockdown, Stocks Up.

Bloomberg’s Matt Levine:

We have talked before about my “ boredom market hypothesis,” which says that retail investors will trade stocks more actively to the extent that (1) it is fun and (2) nothing else is fun. My calculation has generally been that (1) free trading, Robinhood Financial LLC’s gamified trading app, Elon Musk’s … whole … thing, and a pretty good bull market since March have all made trading more fun, while (2) the pandemic has made everything else less fun. But I wonder if I have underestimated the effect. The pandemic has been particularly difficult in that it has cut off sources of socialization. If trading stocks can give you back that human connection you lost—if you haven’t seen your parents since March, but you can see the rest of your day-trading Discord server on Zoom—then, sure, I guess that’s a reason to open some options positions.

The Perils of Losing A Bitcoin Password.

The New York Times:

Stefan Thomas, a German-born programmer living in San Francisco, has two guesses left to figure out a password that is worth, as of this week, about $220 million.

The password will let him unlock a small hard drive, known as an IronKey, which contains the private keys to a digital wallet that holds 7,002 Bitcoin. While the price of Bitcoin dropped sharply on Monday, it is still up more than 50 percent from just a month ago when it passed its previous all-time high around $20,000.

The problem is that Mr. Thomas years ago lost the paper where he wrote down the password for his IronKey, which gives users 10 guesses before it seizes up and encrypts its contents forever. He has since tried eight of his most commonly used password formulations — to no avail.

“I would just lay in bed and think about it,” Mr. Thomas said. “Then I would go to the computer with some new strategy, and it wouldn’t work, and I would be desperate again.”

Of the existing 18.5 million Bitcoin, around 20 percent — currently worth around $140 billion — appear to be in lost or otherwise stranded wallets, according to the cryptocurrency data firm Chainalysis. Wallet Recovery Services, a business that helps find lost digital keys, said it has gotten 70 requests a day from people who want help recovering their riches, three times the number of a month ago . . .

Rhodium, Colossal.

The Financial Times:

Stricter rules on car emissions have helped drive a dramatic rally in rhodium, a niche metal used in catalytic converters, in the latest sign of how the environmental agenda is reshaping commodity markets.

Car companies in Europe and China are using ever more rhodium to meet tougher clean-air legislation, at the same time as supply from South Africa, the biggest producer, has been disrupted by the spread of Covid-19.

Assisted by the economic recovery in China, the world’s largest car market, benchmark prices for rhodium have hit a record of $17,790 an ounce, up more than 200 per cent since their March 2020 low. That means one kilogramme of rhodium is worth almost half a million pounds.

“You have a massive scramble for metal” by car companies, said Nicholas Hops, co-manager of the Coronation Resources Fund. “If you don’t have sufficient rhodium you can’t meet the emissions legislation and we know how draconian those fines are.”

That has propelled shares of the largest rhodium producers, with Johannesburg-listed Northam Platinum’s market value rising almost 300 per cent since its March low. Impala Platinum is up more than 280 per cent.

Rhodium is used alongside precious metal palladium to absorb harmful emissions such as nitrogen oxides from car exhausts. The hard silvery metal is mined alongside palladium and platinum, mostly in South Africa. About 1m ounces was used in car catalysts last year . . .

Random Walk

Monkeys and Money (h/t Marginal Revolution).

From the Royal Society:

Around the Uluwatu Temple in Bali, Indonesia, a large free-ranging population of long-tailed macaques (Macaca fascicularis) spontaneously and routinely engage in token-mediated bartering interactions with humans. These interactions occur in two phases: after stealing inedible and more or less valuable objects (e.g. pairs of glasses, hats, empty bags) from temple visitors, the macaques appear to use them as tokens, by returning them to humans in exchange for a certain number/type of food rewards proffered by the temple staff. In many respects, these naturally occurring token-robbing and token/reward-bartering interactions are reminiscent of the token exchange paradigm experimentally implemented by researchers in captive settings, in which the symbolic value of a token lies in the quantity and quality of the food reward gained in return. Our research project is the first to explore the cognitive and behavioural mechanisms underlying the spontaneous expression of token-mediated bartering interactions in naturalistic circumstances (i.e. the macaques initiate token-robbing interactions without any encouragement from humans). These interactions are at least partially monkey-driven (i.e. even though token/reward-bartering interactions depend on the willingness of human barterers to exchange, the macaques can choose to barter or not), and exhibited by a large number of free-ranging individuals.

— A.S.

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