The Candle Problem (Why Bitcoin Is Misunderstood)

By Chris at www.CapitalistExploits.at

Karl Duncker, that"s who came up with it.

The Candle Problem, that is.

If you haven"t heard of the candle problem, here"s the skinny.

In 1945, just as Hitler was murdering himself (thankfully), psychologist Karl Duncker was turning his attention to how humans solve problems. He came up with "the candle problem," a cognitive performance test measuring the influence of functional fixedness on a participant"s problem solving capabilities.

Here"s the problem he presented...

Participants are given the following task: They have to fix and light a candle on a cork board that"s attached to a wall in such a way that the candle wax won"t drip wax onto the table below. To do so, they can only use the following objects:

A book of matches, a box of thumbtacks, and a candle

Here"s what most do...

Oh, and by the way, if you think you"re different...

This has been tested on numerous "subjects" including MBA students. Odds are you"re not.

Many subjects try all sorts of creative, but inefficient, methods such as trying to tack the candle to the wall. Nah, doesn"t work. Others attempt to melt some of the candle’s wax and use it as an adhesive to stick the candle to the wall. Nope. Doesn"t work either.

Here"s the sneaky little kicker. When the task is presented with the tacks piled next to the box (rather than inside it). Like this:

Tacks... outside the box

Virtually all of the participants manage to achieve the optimal solution, which is...

Thinking of the box as something other than a mere receptacle, participants quickly find the solution.

A "box of thumbtacks" vs. a "box and thumbtacks". You"d think we homo sapiens are smarter. Proof if you ever needed it we"re only a half chromosome away from chimps.

Which Brings Me Neatly to the Internet...

Grab your beanie babies and holster your Pokémon cards. We"re stepping back in time to the 90"s — you know when the internet was just cranking up. 1995 to be precise when famous astronomer Clifford Stoll wrote an op-ed for Newsweek stating:

"The truth is no online database will replace your daily newspaper, no CD-ROM can take the place of a competent teacher and no computer network will change the way government works."

Around the same time, Nicholas Negropone, director of the MIT Media Lab, predicted:

"We’ll soon buy books and newspapers straight over the Internet."

Ah... no.

And just one more for good measure.

"We’re promised instant catalog shopping–just point and click for great deals. We’ll order airline tickets over the network, make restaurant reservations and negotiate sales contracts. Stores will become obsolete. So how come my local mall does more business in an afternoon than the entire Internet handles in a month?"

Hindsight is a wonderful thing, and we can all scoff and laugh now, but the truth is 99% of people who use the internet today don"t know how it works. And guess what? They don"t need to. The fact that it does is what matters.

The internet solved problems we never even knew existed with respect to communication, shopping, banking, trading, entertainment, authentication, education, marketing, finding out what the hell a tranny is, and a zillion other things.

The pieces necessary for it had existed for some time — the proverbial thumbtacks, candles, boxes, and matches if you will. But until it actually happened, nobody saw how to put it all together, let alone how thoroughly it would transform our lives.

And here"s why it was so hard to understand what the internet was and how it would work.

Search and Retrieval Systems

That"s what our brains are. If I"d never seen a pear before, how would you explain it to me?

You: "Well, Chris do you know what an apple is?"

Me: "Sure, of course. I"m working on one now. Only kidding. Yes, red, crunchy, sweet... got it."

You: "Well, it"s like that only green and a bit fatter at the bottom than at the top. But it"s quite similar."

My brain does the search and retrieve thing and comes up with this.

Ok, I say to myself, so a pear is basically a wonky apple... and green. I think I understand.

But as you can see, I don"t really, though I"ve a better idea now thanks to your explanation, but I"m still unlikely to visualise this.

So when the internet came along, people used their search and retrieval databases (brains) to come up with what it was and what it could look like.

But there was nothing in there to retrieve. And so unless you"d taken way too much LSD as a teenager and seen things that the rest of us hadn"t, you had nothing to go on. Which is why folks struggled to see the pear. Heck, it was like having no idea what fruit was.

And then bam! Along came a pear.

The reason I bring up the internet is because we all know about it now. And that"s important because it"s easily the best reference point we"ve got to understanding bitcoin.

Who Owns the Internet?

The answer to this is the reason Bitcoin is succeeding where E-Gold (shut down by the USG) didn"t.

For reference, E-Gold was a gold backed digital currency. Its flaw? Centralisation.

Things which are decentralised are much tougher to kill. This is why the US army. despite being the world"s largest, is still embroiled in places like Afghanistan fighting guerrillas (decentralised). It"s the same reason that the stinger missile changed the power balance of warfare.

The internet is owned by everyone.

Ok, sure there are significant players in it, but there is no single party, rather hundreds, actually thousands of parties that make up the pieces that we today call the internet.

Should one or more of these significant players get taken down, rest assured the arbitrage and value gap that would open up would be filled faster than you can say "Darling, take a look, this site"s not working anymore."

And this doesn"t even get into mesh networks, IPFS, and an entire smorgasbord of fun stuff like that which is coming and will further decentralise the internet. The point is this: Sometimes there is push, and sometimes there is pull.

As we sit here today, we all know it. We can all feel it. The existing government and financial systems are creaking and groaning under their ever increasingly incompetent weight. The foundation cracked in 2008 but they all banded together to "solve" the problem.

The thing is instead of repairing the shonky foundations, they dug out more of the existing foundation and piled it on top of this creaking groaning mess. And that nearly non-existent foundation is what folks are relying on.

Now, let me introduce a really radical monetary (Shatbit crazy really) experiment to you...

Imagine you"re a little green alien just landed. You know nothing about the world but you understand that value needs to be transferred, thus money is needed.

Now, imagine a type of money. This money is issued by a cluster of central authorities. These central authorities determine what the price is to borrow this type of money, they issue it with wild abandon most regularly to their friends, and here"s the mind blowing part:

More than 20 of these central authorities in control of this money have their interest rates at negative. It"s never happened before in the history of mankind, though I"m sure it"s ok because men with badges and letters and authority stand behind it.

And then you take a look at Bitcoin.

Which of these sounds like a radical monetary experiment to you?

So, you might ask, "well, if these incompetent sociopaths stand behind this monetary system, then who stands behind Bitcoin?"

Well, none of that. Mathematics and cryptology. Which would you trust more?

What is Money

Bitcoin as money? Sure, why not?

Money is anything that we believe is money. Heck, money is simply an abstract token of value. Humans have gone through 5 distinct phases of money.

1. Barter exchange


2. Things such as sea shells, salt, beads, etc.


3. Precious metals


4. Paper money, followed by plastic money


5. And now we"re moving into the stage of using network based, cryptographically secure, programmable, digital money

Furthermore, prior to nation states and kings and queens, transactions were conducted using anything that was deemed to have value, which had nothing to do with a centralised authority or issuer.

Bitcoin takes us back to such a time, which is why most people can"t get their head around it. They are still looking around for someone with a uniform or a badge (or both) to tell them it"s OK and their government approves of it.

The world needs a global currency. Not one that is so deeply flawed as the one we have.

Have you ever asked yourself why should banks and intermediaries make money from you when you exchange dollars to yen, yen to baht, or any other currency?

Have you ever asked yourself why should they have the power to create wealth and distribute it to whomever they please?

Have you ever thought of the incredible friction caused and constraints placed on human progress by the inefficient and corrupt systems of central banking?

Now, if you"d asked me these questions 10 years ago, I would have shrugged my shoulders, nursed my beer, and acknowledged grudgingly that I could see your point but it all looked pretty hopeless. We"re just destined to roll from one disaster to the next, and the best we can do is to navigate our way through it all.

Blockchain can actually solve this problem. Crazy to think about, sure, but true nonetheless.

It was crazy to think that a bootstrapped currency maintained by literally anyone who cares to code for "core-dev" on something called Bitcoin could be utilised to transact value securely and efficiently all around the world. But here we are today.

Looks like a bubble right?

Of course, if you"re using your old search and retrieval system looking for that pear it does.

Let me show you something else.

Here"s another chart showing the relationship between the number of users and price. I prematurely nicked this from some work we"ve been doing here at Capitalist Exploits HQ.

By the way, if you"re on the mailing list, you"ll get access to what I promise you will be a very cool report as soon as we"re finished with it. To get on the mailing list just go here.

Bitcoin doesn"t fit into anything we"ve seen before, aside maybe from the Internet, and so nobody"s seen this before. And the easy thing to do is to compare it to something you"ve seen before.

I think that"s a mistake.

Now, before you run out and mortgage the house to start buying frantically remember this: 90% of the crypto coins being issued will almost certainly vaporise and become worthless, taking with them all the dreams and hopes of those who invested.

Peter Brandt pointed this out the other day and I replied.

Come what may this is, I believe, the future of money.

Right now, there are thousands of very sharp geeks worldwide who are building the infrastructure of a completely new financial system. Much of what they"re building and have already built requires looking at the box and thumbtacks — not the box of thumbtacks.

If only to educate yourself, I believe everyone should learn the ropes. Because picking the 10% that make it will be next to impossible if you don"t know where to start, and the odds are that the clutch of winners in this round will bring the world"s first trillionaire.

Right now, this space is still wide open.

I think it"ll be Bitcoin which acts as the final settlement ledger system for what will ultimately be millions of coins used for millions of applications, but I"m not so foolish to think I know the future. And so I"ll be keeping my beady eye on what takes place regardless.

Best of luck and thanks for reading. Have yourself a great weekend!

- Chris

“Bitcoin gives us, for the first time, a way for one Internet user to transfer a unique piece of digital property to another Internet user, such that the transfer is guaranteed to be safe and secure, everyone knows that the transfer has taken place, and nobody can challenge the legitimacy of the transfer. The consequences of this breakthrough are hard to overstate.” — Marc Andreesen, inventor of the first browser, thought leader, and top VC

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Liked this article? Then you"ll probably like my other missives on

this topic as well. Go here to access them (free, of course).

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Read What Happened When Healthy People Were Given Antidepressants

Antidepressants are supposed to ease symptoms of depression, but yet another study shows the drugs may actually increase suicidal feelings in users. According to Danish researchers, the new study wrecks “potentially lethal misconceptions” about the safety of antidepressants. [1]

Click for larger version.

Statistics About Antidepressants

Researchers estimate that 8% to 10% of Americans take an antidepressant. Adults in the U.S. consumed 4 times more of the drugs in the late 2000’s than they did in the early 1990’s. [2]

Are more people depressed now than they were 20 years ago? Probably, yes. But that doesn’t necessarily account for the rise in antidepressant use.

You see, nearly 70% of people taking an antidepressant do not meet the criteria for clinical depression. That doesn’t mean they don’t feel sad, or they’re not going through hard times. It simply means that, from a purely diagnostic standpoint, they are not clinically depressed.

Not only that, but between 25% and 60% of antidepressants are prescribed for off-label purposes, including ADHD, autism, fibromyalgia, bipolar disorder, and even neuropathic pain.

Source: Mad in America

Findings of the Study

Danish researchers analyzed 13 trial studies, and conducted a study of their own involving 374 trial volunteers – all of them healthy – to see how antidepressants affected people who did not have depression. [1]

The researchers said they picked the patients that they did because earlier studies suggesting a link between suicide and antidepressants had been dismissed by those who blamed the deaths on the person’s supposed mental health condition and not the drugs.

Professor Peter Gøtzsche, of the Nordic Cochrane Centre, said:

“The drug industry always tries to blame the disease for these harms, never the pills. This is why our study is important. Healthy volunteers don’t have a disease — so we cannot blame the side effects of the pills on it.” [3]

When the participants were given antidepressant pills, levels of side effects nearly doubled, including suicidal feelings.

“Suicidal feelings” included anxiety, nightmares, and agitation.

Gotzsche said these feelings could be considered as “precursors to suicidality or violence.” [1]

Immediately, Detractors

However, Professor Guy Goodwin, past President of the European College of Neuropsychopharmacology and Professor of Psychiatry at the University of Oxford, called the conclusions “absurd.” He said:

“This manuscript claims to show that antidepressants double the risk of suicide and violence, but it does not. The methodology is fatally flawed and leads to conclusions that are highly misleading.

If ‘nervousness, anxiety, tremor, bad dreams and agitation events’ are risk factors for suicide or violence, then probably the majority of people in the UK would be at risk of suicide or violence, which obviously isn’t so.”

Phil Cowen, Professor of Psychopharmacology at Oxford University, agreed, saying:

“These side-effects are clinically significant, frequently distressing and an important topic for discussion between patient and clinician.

However, the notion that they are necessarily indicative of violence and suicide seems to me rather like arguing that transient annoyance with a colleague is much the same thing as attempted murder.” [3]

Drug Companies Seriously “Under-Report Harms of Antidepressants”

But Gøtzsche said that his findings are even more disturbing, considering drug companies seriously “under-report the harms of antidepressants related to suicide and violence, either by simply omitting them from reports, by calling them something else, or by committing scientific misconduct.” [4]

Gøtzsche is right about that.

It came out in 2005 that a Harvard psychiatrist and the pharmaceutical company Eli Lilly covered up a secret 1988 internal memo indicating that Lilly’s own controlled clinical trials of antidepressant drug Prozac had a significantly higher rate of suicide attempts, hostility, violence, and psychosis than 4 other commonly used antidepressants in the 1980’s and 1990’s.

Earlier this year, another study conducted by Gøtzsche and his colleagues found that SSRI antidepressants – the most common class of antidepressants – doubled the risk of suicide and aggressive behavior in teens under 18.

That study, a review of 70 clinical trials of SSRI antidepressants, which involved more than 18,000 people, also found that 1 drug company misreported 4 deaths in favor of its product. The company also chalked up over 50% of suicidal incidents to “emotional lability” or “worsening of depression.”

No mention that either problem could have been the result of taking the drug itself.

And let’s face it – there’s a reason why antidepressants list “suicidal thoughts” as a potential side effect on their labels.

Serotonin and Depression: Lacking a Link

You’ve probably heard that depression is a result of a lack of brain chemicals, or an imbalance of them.

Researchers are still trying to figure out what causes depression, exactly, still arguing over whether a lack of the chemical serotonin is or isn’t actually the cause of depression.

And what do SSRI antidepressants do? They increase serotonin in the brain. SSRI stands for Selective Serotonin Reuptake Inhibitors. Well, there’s more to it than that. Maybe I’ll just let the Mayo Clinic explain:

“SSRIs ease depression by increasing levels of serotonin in the brain. Serotonin is one of the chemical messengers (neurotransmitters) that carry signals between brain cells. SSRIs block the reabsorption (reuptake) of serotonin in the brain, making more serotonin available. SSRIs are called selective because they seem to primarily affect serotonin, not other neurotransmitters.”

For years, doctors and patients alike have believed that depression is caused by a lack of serotonin, not because anyone told them so, but because they just assumed that because SSRIs improve the symptoms of depression, depression must be caused by not enough serotonin.

Antidepressants might make you feel better, but because they interfere with the delicate chemistry of the brain, they might also be causing you irreparable brain damage.

It’s like saying that eating pancakes might help you deal with the stress of an upcoming business meeting, but they’re still making you overweight and spiking your blood sugar.

Many scientists, including Dr. Turhan Canli of Stony Brook University in New York, have come to believe that depression might have more to do with gut microbes, viruses, or bacteria than brain chemistry. In fact, Cali believes depression should be reclassified as an infectious disease.

Only more research can prove or disprove this theory, which doesn’t offer the quick fix that so many people find in antidepressants. But this theory makes sense, because 80% to 90% of the serotonin in the body is located in the gastrointestinal tract.

But wouldn’t it be worthwhile to find and treat the cause, rather than just treat the symptoms?

No one should guilt you into or out of taking any medication. (And if you’re taking antidepressants, this is NOT my way of telling you to stop taking them! I know people who seem to experience much more benefit than risk.)

However, if you’re going through a divorce, you’ve just lost your job, or you’re grieving a loved one, counseling, yoga, and other methods for dealing with your pain may be a safer option for you.

Sources:

[1] The Telegraph

[2] Scientific American

[3] The Sun

[4] The Express

Mad in America

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About Julie Fidler:
	Julie Fidler is a freelance writer, legal blogger, and the author of Adventures in Holy Matrimony: For Better or the Absolute Worst. She lives in Pennsylvania with her husband and two ridiculously spoiled cats. She occasionally pontificates on her blog.