Rural Entrepreneurship Post #2

I submitted a Entrepreneurship Support Grant request for this rural entrepreneurship project with the Clinic. In the grant application, I used a lot of the information from Post #1 as support for the need. I asked for the money to support a few things that we think that we can do to support entrepreneurship in rural communities:

1. Make a more explicit outreach to provide Clinic legal services in rural communities. While our Clinic is right at state averages in terms of our clients with respect to the state population in rural communities, that number can (and should be higher) to reflect the need that is clearly there. Second, rural communities don't just need the support to entrepreneurship, but rural law firms (especially in Wisconsin) are being decimated. By bringing law students out to the communities where they can see these communities first hand and meet the entrepreneurs and business owners there, they can see that there is need. Moreover, while we are in the community, we will arrange for students to meet with local attorneys and local community leaders.

2. Provide education around issues that are critical to supporting rural entrepreneurship, namely: (a) implementation and regulations around rural broadband; (b) information and infrastructure to support access to capital for rural entrepreneurs; and (c) more information about business structures that are critical to supporting agricultural businesses such as business transition issues and cooperatives.

Rural communities are being left behind in the "digital divide" (god, it pains me to even write that cringe-y sentence; it is loaded with cliche) - but the short of it, that there is a dearth of access to "broadband" (defined as at least 20mbps down) internet which hampers the capability to do business. Just one example that came up in the Clinic is a farmer that had a piece of machinery that had an electronic control system that took 3 days to update because the internet connection was so slow - three days that the equipment was unavailable. Not to mention, without internet, the people that want to live in rural communities, but hold modern, well-paying jobs that rely on always-on connectivity (eg. programmers) have to leave which draws people and resources out of the community.

The whole point of this post is actually the Access to Capital problem. Namely, how can rural entrepreneurs even succeed without access to the kinds of modern capital structures that power modern entrepreneurship. Not to mention the closing of numerous community banks. But even just looking at entrepreneurial ecosystem funding from accelerators to bridge financing to angel investors and friends and family to seed money to venture capital. It's all hard enough in a large city, but made even more difficult in the rural community. Below are just some of the questions that have come to me as I contemplate how we even begin to solve this problem:

• What kinds of things are rural entrepreneurs doing? How does "rural entrepreneurship" look differently from "city entrepreneurship"?
• Are "city technologists" that create things for the rural context (e.g., agricultural drones being developed on-campus) "rural entrepreneurs"?
• Does the presence of a nearby University or College change? How near does the University or College need to be to make an impact?
• How does the rural context change investment decisions and opportunities?
• Do investors need to change their expectations with respect to rural entrepreneurs? If so, is it in the returns they should expect? The "sophistication" of the founders? The types of technology they should be investing in?
• Does the rural context matter in terms of the kinds of money that needs to be deployed? In other words, do outside investors need to get involved earlier? Is it pre-seed money that is super-important (are ideas falling off the vine before they're ripe?) Is seed stage money more important (they can get the idea developed in a workshop, but initial commercial prototyping and sales need support)? Is early-stage money for scalability and access to markets the bigger problem? Are all of these problems, and if so, what is the priority for these issues?
• Can a typical entrepreneurial ecosystem be fully executed in a non-metropolitan place?
• In other words, assuming that a proper ecosystem involves incubators, accelerators, coworking, maker spaces, pre/early/seed stage capital, business support services (like L&E), etc. Can these things all exist in a non-metropolitan place, let alone a rural town or small (sub-100k) city?
• Are some support services/ecosystem services less important in rural communities? E.g., while 3D printing may not be prevalent, the typical kinds of "shop tools" found in maker spaces may be more readily available.

Rural Entrepreneurship Post #1

A new article on Quartz says "The US Startup is Disappearing." The article quotes freely from a report from the Brookings Institute about "The state of competition and dynamism: Facts about concentration, start-ups, and related policies." The basic gist is that there are, objectively, fewer startups (companies between 0 and 2 years old) in the economy than there ever have been and that fewer people work for startups than ever. Consolidation is rampant across all industries, and the government is not as active in preventing mergers where it would result in high industry concentration (i.e., fewer than 5 firms). Entrepreneurship is down across the board, especially amongst those with college degrees. According to Brookings, the three policy factors most likely playing a part:

1. State subsidies to private businesses have tripled since 1990
2. Occupational licensing decreases worker mobility
3. Licensure is especially impacting the health care industry

In other words, not only have states been enacting barriers to entry, principally in the form of licensure requirements, they have been financially supporting entrenched firms at the expense of new entrants. As a result, consolidation across virtually every industry has created competitive barriers for new market entrants.

The good news is that we are currently in a market with low unemployment. Indeed, as of August 2019, the state-wide unemployment rate is a mere 3.1%. But, the story isn't as clear cut as all that. Sure, Dane County has unemployment at 2.5% (indeed most of South-Central and South-Western Wisconsin are doing pretty well), but Northern Wisconsin particularly, and South-Eastern Wisconsin aren't exactly doing as well. Menominee County's (largely a Native American reservation) unemployment rate is over 13%, indeed, the counties doing the worst are all in Northern Wisconsin. Below are all of the counties in Wisconsin with Unemployment at or above 4%:

County	Unemployment Rate
Menominee	13.4%
Iron	5.9%
Bayfield	4.9%
Marinette	4.8%
Ashland	4.8%
Forest	4.6%
Burnett	4.6%
Adams	4.5%
Milwaukee	4.4%
Rusk	4.3%
Racine	4.3%
Sawyer	4.2%
Kenosha	4.2%
Florence	4.0%
Douglas	4.0%

These unemployment numbers account for approximately 33,000 people. Of course, about 29,000 of that is the Milwaukee area (including Racine and Kenosha). Removing the Milwaukee market, leaves almost 4,700 people unemployed where the workforce is still about 100,000 people. And, we're currently in a very good economy. If you look at the same counties in the depth of a recession, you'll find that Dane County continues to hold up well and Milwaukee retains approximately the same level of joblessness (implying that Milwaukee area unemployment may be more systemic and related to factors other than the health of the economy.

But, rural Wisconsin does not fare well at all. The counties listed above all had unemployment rates above 10% in April of 2010. And that was before Wisconsin had a record number of farm closures. Over the past 10 years the number of dairy herds in Wisconsin has dropped from more than 13,000 to less than 7,600; a drop of over 40%. Since 2015 more than 2,500 Wisconsin dairy farms have gone out of business. In 2019, Wisconsin leads the nation in farm bankruptcies (pdf) by a fairly significant margin.

All of which is to say that even if the dairy industry somehow bounces back, Wisconsin's dairy industry is unlikely to come back with it. Wisconsin's farming industry was largely comprised of small family farms, not the large concentrated animal feeding operations ("CAFO") that predominate in other agricultural areas. So even if some of the bankruptcies and "closures" were absorbed into consolidated farming operations, it's unlikely that these larger farms will actually grow proportionately with the industry - CAFOs employ fewer people than family farms, up to 80% fewer people for equivalent output in small dairy operations. Even when they do hire, CAFOs rely on low-skill, largely immigrant workers.

Startup rates are declining, largely due to policies that encourage entrenched companies and encourage consolidation. Wisconsin's rural economy is hard-hit by this trend, particularly in the dairy industry. While we are currently in a fairly decent economy, predictions of a downturn are starting to manifest as the yield curve inverts and the trade war continues to drag on. While the good news is that we are not currently behind the 8 ball, now might be a pretty good opportunity to start looking at policy options for preventing bigger problems in rural Wisconsin if and when the downturn comes. One hypothesis that we will be testing at the L&E Clinic is that support for entrepreneurship in the non-farm economies of rural Wisconsin can and will have a particularly large impact in mitigating unemployment.

Closing the Loop on Blockchain and Governance Course

Back in September I published what I thought was a tentative course schedule or outline for an independent study in Blockchain and Governance that I was asked to supervise. This course was definitely a "Build as you fly it" kind of thing, so the end product ended up not looking a whole lot like the starting product, but here it is in all of its glory. In all, I was pretty happy with the course; I think it lent a nice development of a multi-factor approach to governance in blockchain applications.

I think the key insight that came out of this course, is that governance isn't just on one tier of the platform, but all tiers of the platform and that governance decisions need to include the holistic, and complicated, interactions of multiple nodes. In short, and by way of example, Ethereum (or HyperLedger or Bitcoin or Ripple), isn't just the platform/protocol layer, but also consists of the application layer, and the "user" layer and each layer has some stake in the governance of the other layers. Any governance in any layer that doesn't account for that will fail. For example, see this Maersk article about their partnership with IBM on a HyperLedger-based shipping application that is struggling to find adoption. By locking down governance in the protocol and application layer, users are, unsurprisingly, saying they don't want to participate. And, indeed, without considering the implications of governance decision in other protocols, there is general reticence to adopt the technology more generally.

We can look at models of international governance through network modes of governance and how it integrates both the international organization theories of governance and even the governance theories of anarchy to show that the complex system of blockchains is much more than letting miners vote whether to fork or not.

2018 - Fall Semester 

  

Wk 1 Blockchain Basics 

Wk 2 Proof of Work 

Wk 3 Proof of Stake 

Wk 4 Hashgraph 

Hashgraph White Paper 

Wk 5 Ethereum Fork  

https://qz.com/730004/everything-you-need-to-know-about-the-ethereum-hard-fork/ 

SEC DAO Report (see Readings) 

https://www.etherchain.org/hardForks  

review forks 

why did the “unplanned forks” happen? 

what were the “planned” forks intended to resolve? 

Wk 6 Intro to Managing Decentralized Development 

Kogut & Metiu - Open-Source Software Development and Distributed Innovation (see Readings) 

Krahmann - National, Regional, and Global Governance (see Readings) 

Crane - From governance to Governance (see Readings) 

Wk 7 - Anarchy 

Oye - Explaining Cooperation Under Anarchy 

Axelrod and Keohane - Achieving Cooperation Under Anarchy 

Mercer - Anarchy and Identity 

Wk 8 - International Organizations 

Morrow – Modeling the Forms of International Cooperation 

Abbott – Why States Act Through Formal International Organizations 

Barnett – The Power, Politics, and Pathologies of International Organizations 

Wk 9 - Network Governance 

Provan and Kenis - Modes of Network Governance (see readings) 

Hafner-Burton, Kahler, and Montgomery – Network Analysis for International Relations 

Banczyk and Potts – City as Neural Platform: Towards a New Economics of Cities

Dear Anyone #2 - October 5, 2018

Book I'm Reading: Bored and Brilliant: How Spacing Out Can Unlock Your Most Productive and Creative Self. Normally I avoid anything that looks like a business or self-help book. This book was recommended to me by a colleague at a different university, so I felt obligated to at least read it. I did so thinking I would give it the yeoman's effort and then give it up about 1/2 way through. It's been more interesting than I expected. The folksy writing gives it the air of a transcribed podcast (not too surprising, I think). But, I was also looking for justification (to myself) for less "phone time." It turns out, in the grand scheme of things, I'm actually not that bad with my phone; I thought I was a "heavy user" but it turns out I'm barely on the heavy side of average.

Best Thing I Read This Week: The Myth of the Infrastructure Phase - Dani Grant and Nick Grossman. A great article about blockchain protocol development. This feeds into my theories on blockchain governance that we (software developers) typically think of things like governance as being an application-level issue. But recent problems with security, and with building robust usability in blockchains themselves, have many experts thinking security and governance need to be built into the protocol itself.

Best Music I Listened to This Week: I went to the We Were Promised Jetpacks show at The Majestic Theater in Madison last week. The opener was a lady/band called Jenn Champion. Openers can be really hit or miss; she was a grand slam.

Open Source Licenses as Blockchain Governance

Bitcoin Core is licensed under the MIT License - a permissive, non-copyleft, open source license. Ethereum is licensed under GPL v.3. IBM Hyperledger is closed source core, but its Fabric (smart contract development framework) and Composer (application development framework) products are licensed under Apache.

The choice of how to license the core of the blockchain is a governance decision and it has consequences for the future of these chains. For example, by failing to put any significant conditions on its license, just about anyone is free to fork Bitcoin Core for any purpose. For example, a joke coin designed as a satire for cryptocurrency itself, or a coin whose every transaction is truly anonymous and thus a facilitator for global terrorist transactions.

Clearly, and without judgment, Bitcoin Developers are OK with these forks. But we could imagine a universe where a blockchain developer were not OK with these applications. In such a way, one mechanism for avoiding undesirable forks would be to impose license conditions that prohibit the undesired activity. Provided that a fork followed the conditions (e.g., don't use this code to directly or indirectly aid terrorist activity - a condition that, for example, ZCash could not fulfill because it can't guarantee its compliance). Of course, post hoc compliance isn't exactly optimal; if (in our example) ZCash violated the license, then, Bitcoin may feel that its complicity in terrorist activity is complete despite the violation of the license.

On the other hand, Bitcoin could institute multiple governance methods to ensure compliance with its license. It could create a license approval process that every developer, user, node, or miner (or an approval panel) in the Bitcoin chain could vote whether to permit the fork or not. It could institute Digital Rights Management schemes that enforced license compliance. There are a universe of other mechanisms that could be instituted that wouldn't require taking the drastic step of making the code closed source.

I know a lot of these words are "bad words" to the crypto and blockchain purists, but I see them as tools of governance - of creating a platform/protocol for doing business and transacting on the web. Moreover, I've railed incessantly about "private blockchains" being stupid (they are). Adding licensing restrictions wouldn't close the chain's permissions, just the permissions for forking and further chain development; in other words, to paraphrase Hashgraph, it's a permissionless chain, but permissioned source code.

Dear Anyone #1: Friday September 7, 2018

This series of posts was inspired by a friend of mine. We'll call her Erika. Erika was a reading a book by a guy (doesn't really matter) and this guy, apparently, sends out weekly emails to his loyal followers with a quick hit of things that interested him that week. Articles, videos, music, books, whatever. It didn't have to be work-related, though often it was. It was just a good way to introduce people to things the author thought was cool that week.

So, "Erika" said "Jeff you like cool things." To which I immediately agreed. And, with that, we're off...

---------------------

Dear Anyone,

This is the cool stuff I've been looking at this week.

Currently Reading: Still slogging through Michael Chabon's Moonglow. Don't get me wrong, I've actually come to really like this book and as I'm wrapping it up, it is surprising that the book it most brings to mind is Everything is Illuminated by Jonathan Safran Foer. A book that was also at times a bit of a slog to get into because of the strange frame of reference (quasi-first person), which made it hard to pick up and put down.

Best News/Article I Read This Week: I mean, it has to go the New York Times Anonymous Op-Ed, "I Am Part of the Resistance Inside the Trump Administration," right? But, it could also go to Bruce Kogut and Anca Metiu's Open-Source Software Development and Distributed Innovation, Oxford Review of Economic Policy, Vol 17, No. 2 (2001). I was a software developer in the 80s (as a kid) and through the 90s (as a newly minted college grad and even into my MBA). I was deep into open source software and policy and its licensing and legal nuances is the reason (or one of the main reasons at least) I went to law school. While the article completely bungles the legal concept of "public domain" and intellectual property ownership, it's largely besides the point, as the authors dissect how programmers from around the world organized themselves to create such monumental pieces of software as Linux and Apache and Mozilla (it was still Netscape at the time). I'll admit that I giggled gleefully throughout most of it and it kind of blew my mind.

Best Music I Listened to This Week: Yello's 1981 second album "Claro Que Si." Great dance-y, early EDM best listened to alongside Bowie, Kraftwerk, Devo, the Talking Heads, and Gang of Four.

Governance in Blockchain in the Government

I was asked to supervise an independent study for an undergraduate student in International Studies. The student came to me interested in the use of blockchain in Government, and, in particular, the use of blockchain in Estonia in creating their digital identification system that underlies many of the social and financial services.

I thought I would share the course outline and initial readings for anyone interested in this subject. I'm wondering how and if this might turn into a course, but I haven't gotten that far yet - so ignore the non-teacher-y parts of these data dumps.

COURSE OUTLINE

1. Technical Governance v. Meta Governance
1. Blockchain Basics
2. What is Consensus?
1. Proof of Work
2. Proof of Stake
3. Hashgraph
3. What is a Fork and why do they happen?
1. Ethereum Forks
2. Kogut Article - What can Open Source Development teach us about decentralized governance?
2. What is the Role of Government
1. Anarchy: State-to-State Negotiation and Accountability
2. International Organizations
3. Decentralized/Network Governance
3. Technological Issues
1. Interoperability
2. Scalability
3. Decentralization
4. Institutional Legitimacy
5. Security
1. Blockchain Security Issues(Upper Tier Attacks)
1. Lack of Governance: Who determines what happens with the chain when something goes wrong and what are their motivations? Transparent democracy or closed dictatorship?
2. Bad Contract Code (Middle Tier Attacks)
1. Replay (51%) Attack: duplicate transaction on each node in chain
2. DDoS Attacks: Forks 2 and 3
3. Lack of Quality Control and Certification (The DAO Attack)
3. Wallet Security Issues (User Attacks)
1. Phishing, Spoofing (wallet, address), etc.
4. Case Studies
1. Case Studies: Decred and Hashgraph (Governance)
2. Case Studies: Z-Cash (Privacy)
3. Case Studies: Ripple (Blockchain in Banking)
4. Case Studies: Cicero/Accord (Blockchain in Law)
5. Case Studies: Estonia (Blockchain in Government)

Reading List (so far, this is very incomplete - the outline is pretty set, particularly the first half of it, but I'm still working on the reading list; if you (is there a you out there??) have any thoughts, let me know.

• Hashgraph White Paper (see Readings)
• https://qz.com/730004/everything-you-need-to-know-about-the-ethereum-hard-fork/
• SEC DAO Report (see Readings)
• https://www.etherchain.org/hardForks
• Kogut & Metiu - Open-Source Software Development and Distributed Innovation (see Readings)