[Plura-list] Wework founder raises $70m for blockchain-based, "voluntary" carbon credits

[Cory Doctorow]

Read today's issue online at: https://pluralistic.net/2022/05/27/voluntary-carbon-market/

Today's links

* Wework founder raises $70m for blockchain-based, "voluntary" carbon credits: It's a scam matrioshka.

* Hey look at this: Delights to delectate.

* This day in history: None

* Colophon: Recent publications, upcoming/recent appearances, current writing projects, current reading

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🐿 Wework founder raises $70m for blockchain-based, "voluntary" carbon credits

Even crypto's biggest boosters admit that the industry has a scam problem. This is especially hard to deny now that hundred of billions of (real) dollars' worth of (fake) "stablecoins" have gone up in smoke.

Crypto apologists will tell you that there are scams everywhere, and they're not wrong. The productive economy has been systematic dismantled and replaced with financialized grifts: private equity, REITs, SPACs, MLMs, ad-fraud, and monopoly. That means the only way to save for retirement, health emergencies or your kid's college education is to roll the dice in a crooked casino where the house always wins:

https://pluralistic.net/2022/05/23/you-got-spacced/#the-house-always-wins

But even at this moment of peak scam, crypto stands out as *especially* scammy. There are some structural factors behind that. For one thing, crypto is complex - in fact, it's doubly complex, because things like smart contracts can only be truly understood if you can read source-code *and* a prospectus, and most people understand neither.

Complexity is a fraudster's best friend. Any time someone adds complexity to a proposition bet ("I'll pay you X if Y happens"), you should assume that the complexity exists solely to obscure the true odds and rope you into a sucker's wager:

https://pluralistic.net/2022/05/04/house-always-wins/#are-you-on-drugs

Then there's pseudonymity and anonymity. Anonymity is key to the right to privacy, but when you combine anonymity with finance - not the right to speak anonymously, but the right to run an investment fund anonymously - you're rolling out the red carpet for serial scammers, who can run a scam, get caught, change names, and run it again, incorporating the lessons they learned.

Go through the Web3 Is Going Great archive for scams and you'll see that crypto implosions are rarely one-offs. Typically, the fraudsters who steal millions from crypto gamblers are repeat offenders who've refined their grifts through a series of crimes that they were able to outrun by assuming new identities:

https://web3isgoinggreat.com/?theme=hack

When you can't understand the nature of a financial product, and you can't know for sure who is offering it, you need some other rule-of-thumb for determining whether you should gamble your savings on it. The big one here is "transitive trust": I trust this person, and this person says the new coin or product is great, so I'll trust that, too.

Maybe you trust Larry David, or Matt Damon, or Madonna, or Reese Witherspoon, or Gwyneth Paltrow, or Spike Lee, or Bill Self, or Paris Hilton, or Tom Brady, or Mila Kunis, or Aaron Rodgers, or Stephen Curry, or Marc Cuban, or Shaquille O'Neal, or Serena Williams, or Justin Bieber, or Eminem, or Jimmy Fallon, or Logan Paul, or Snoop Dogg, or...

https://www.nytimes.com/2022/05/17/business/media/crypto-gwyneth-paltrow-matt-damon-reese-witherspoon.html-crypto-disney-adds-subscribers-the-wide-shot

Of course, it's easy to explain why you might not trust celebrities to give you financial advice - being good at acting or sports or music doesn't mean you're good at finance (think of all those stories of celebs who die in poverty after squandering their millions).

But it's not just celebs who endorse cryptocurrency and related products. Some of the biggest names behind new crypto offerings are A-list investors whose entire public persona is based on their incredible financial acumen.

These investors - including the all-star A16Z, formerly Andreessen Horowitz - have firmly established that they back cryptos based on whether they can make money and get out, not on whether the company they're investing in is offering a sound, sustainable product. For A16Z, bets on wildly unstable "stablecoins" or imploding, wildly un-fun "games" like Axie Infinity are sound investments - not because these firms have any future, but because coin offerings are unregulated securities that let investors cash out before the companies collapse.

Even amid this pump-and-dump ethos, one of A16Z's investment stands out as especially cynical. The firm led a $70m Series A investment in Flowcarbon, a "voluntary carbon market" (VCM) cryptocurrency led by Adam Neumann, the notorious Wework founder whose unethical conduct and misleading statements scuttled a $47b IPO.

https://protos.com/flowcarbon-funding-round-proves-reputation-means-nothing-in-crypto/

There were lots of things wrong with Wework, and Neumann was behind all of them. Protos provides some of Neumann's greatest hits:

* Running a business culture shot through with substance abuse

https://archive.ph/C7xS8

* Rampant self-dealing, including rent real-estate to his own company and extracting his investors' cash by offering himself below-market loans out of the company's coffers:

https://archive.ph/3T5dN

* Filing a personal trademark on the word "We" and then charging his own company a $6m license fee to use it (he eventually refunded this, after public outrage):

https://www.businessinsider.com/wework-ceo-gives-back-millions-from-we-trademark-after-criticism-2019-9

Protos doesn't mention Neumann's most relevant misconduct, though: employing a nonstandard valuation scheme that allowed him to falsely claim that his company was worth $47b. At the time, I felt this was obviously fraud, and subsequent events bore out this assessment:

https://qz.com/1685919/wework-ipo-community-adjusted-ebitda-and-other-metrics-to-watch-for/

Despite Neumann's manifest untrustworthiness and his history of capital-destroying financial shenanigans, A16Z has helped him raise $70m. Remember: if you don't understand crypto products, and you don't know much about businesspeople, you are forced to rely on the judgments of celebrity investors like A16Z to guide your financial decisions.

Neumann's new venture, Flowcarbon, will only be profitable if naive, retail investors also buy into it. Flowcarbon's main product is a speculative crypto asset called the Goddess Nature Token (GNT). What is a GNT? It is meant to represent "a non-binding, self-created carbon offsets for excess pollution."

Basically, a carbon offset. Now, carbon offsets are already *incredibly* scammy. Large firms deal in tens of millions of dollars' worth of carbon credits that represent - for example - forests whose owners have pledged not to log them. But in many cases, these are forest that would *never* be logged (because they're owned by a wilderness trust, say). In other cases, the forests have *burned down* but the credits for not logging them are still being traded:

https://pluralistic.net/2022/03/18/greshams-carbon-law/#papal-indulgences

Flowcarbon's goal is to take this market for lemons and make it *bigger* and *faster*, to facilitate "price transparency, liquidity and accessibility." The target customers are DAOs and defi projects, especially ones using planet-destroying proof-of-work systems like Ethereum and Bitcoin. These projects will be able to buy carbon credits based on even shakier promises of carbon offsetting and claim that they are carbon neutral.

As Protos points out, the traditional finance markets for these voluntary offsets have failed spectacularly. Companies like the Chicago Climate Exchange (CCX) tanked and took their investors' capital with them. The major distinction between Flowcarbon and CCX is being "web3, bro" and being helmed by a man whose funny accounting and self-dealing cost his investors $47b.

A16Z and Flowcarbon insist that this will all be very successful: that there will be a long line of people with sound carbon offsets converting them to Goddess Tokens and listing them on Flowcarbon's exchange, and an equally long line of environmentally concerned DAOs buying those Goddess Tokens.

Their pitch to you, the person hoping to retire without freezing or starving to death, is that you should buy the Goddess Tokens now. Get on the waiting list, and hold Goddess Tokens against the day that they shoot up in value as Adam Neumann - the $47b failure who nevertheless walked away with $480m of his investors' money - leads the company to glory.

Even worse, the scam at the core of Flowcarbon is carbon offsets. Flowcarbon's mission is to allow other businesses to claim to be good for the planet based on dubious carbon offset projects. On one side of Flowcarbon's market, you have investors being lured into buying dubious tokens. On the other side, you have customers of companies who are lured into buying their products because they believe them to be good for the planet.

"Two-sided markets" are the darling of the tech investor set. From Uber to Amazon, tech investors correctly understand that there are fortunes to be made from Chokepoint Capitalism, where a firm corners a market and extracts rent from buyers and sellers who can't reach each other otherwise.

https://www.penguinrandomhouse.com/books/710957/chokepoint-capitalism-by-cory-doctorow-and-rebecca-giblin/

With Flowcarbon, we see true innovation in two-sided market design. Usually these markets are only an obviously bad deal for one side of the market. For example, Spotify gives listeners access to a lot of music at a low price, while robbing musicians (long-term, Spotify also rips off listeners, too, of course). But Flowcarbon has proposed a two-sided market that's a bad deal for *both* sides.

Seen in that light, Adam Neumann is the perfect leader for this business. Wework was sold as a platform for other businesses to run on. Flowcarbon is a scam that is also a platform for scams - scams that roast the planet and bankrupt desperate retail investors, who naively assume that what's good for A16Z is good for them.


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🐿 Hey look at this

* Fixing a $380 toaster with a $12 part and six screws https://42t.com/insights/how-rob/ (h/t This Week in Repair)

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🐿 This day in history

#20yrsago “I am the very model of a Usenet personality” https://web.archive.org/web/20020604064454/http://www.antipope.org/charlie/blosxom.cgi/2002/May/27#copyright-4

#10yrsago Quebeckers take to the streets with pots and pans: a charivari https://www.theguardian.com/world/2012/may/26/montreal-casseroles-student-protests

#10yrsago Innovation Under Austerity: Eben Moglen’s call to arms from the Freedom to Connect conference https://www.youtube.com/watch?v=G2VHf5vpBy8

#10yrsago Bruce Schneier explains security to a neurologist who believes in profiling Muslims at airports https://web.archive.org/web/20120717103722/https://www.samharris.org/blog/item/to-profile-or-not-to-profile

#10yrsago The butler did it! Pope’s butler is the leak behind Vatileaks https://www.nytimes.com/2012/05/26/world/europe/popes-butler-arrested-in-vatican-letters-leak.html

#5yrsago Medical implants and hospital systems are still infosec dumpster-fires https://www.bbc.com/news/technology-40042584

#5yrsago 19th century reporters carried clubs and knives to defend themselves against murderous Congressjerks https://www.washingtonpost.com/news/retropolis/wp/2017/05/25/greg-gianforte-is-lucky-reporters-once-carried-daggers-to-deal-with-unruly-politicians/?variant=c44b726edf25a662

#5yrsago The Realist: trenchant, beautifully surreal Israeli comics about a sweet and complicated existence https://memex.craphound.com/2017/05/27/the-realist-trenchant-beautifully-surreal-israeli-comics-about-a-sweet-and-complicated-existence/

#5yrsago The Malta Files: a European version of the Panama Papers, revealing a global web of corruption https://theintercept.com/2017/05/26/malta-files-revelations-25-million-oil-tanker-gifted-to-erdogans-family/

#5yrsago Leaks: Mercenaries targeted Standing Rock water protectors with anti-terrorist tactics https://theintercept.com/2017/05/27/leaked-documents-reveal-security-firms-counterterrorism-tactics-at-standing-rock-to-defeat-pipeline-insurgencies/

#1yrago Workers want real jobs: Bosses want contract, temp and gig workers https://pluralistic.net/2021/05/27/8-hours-for-what-we-will/#zero-sum

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🐿 Colophon

Today's top sources:

Currently writing:

* Some Men Rob You With a Fountain Pen, a Martin Hench noir thriller novel about the prison-tech industry. Friday's progress: 504 words (8715 words total)

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* Picks and Shovels, a Martin Hench noir thriller about the heroic era of the PC. Yesterday's progress: 508 words (92849 words total) - ON PAUSE

* A Little Brother short story about DIY insulin PLANNING

* Vigilant, Little Brother short story about remote invigilation. FIRST DRAFT COMPLETE, WAITING FOR EXPERT REVIEW

* Moral Hazard, a short story for MIT Tech Review's 12 Tomorrows. FIRST DRAFT COMPLETE, ACCEPTED FOR PUBLICATION

* Spill, a Little Brother short story about pipeline protests. FINAL DRAFT COMPLETE

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Currently reading: Analogia by George Dyson.

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* OpenJSWorld (Austin), Jun 8
https://events.linuxfoundation.org/openjs-world/program/schedule/

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* "How to Destroy Surveillance Capitalism": an anti-monopoly pamphlet analyzing the true harms of surveillance capitalism and proposing a solution. https://onezero.medium.com/how-to-destroy-surveillance-capitalism-8135e6744d59 (print edition: https://bookshop.org/books/how-to-destroy-surveillance-capitalism/9781736205907) (signed copies: https://www.darkdel.com/store/p2024/Available_Now%3A__How_to_Destroy_Surveillance_Capitalism.html)

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Upcoming books:

* Chokepoint Capitalism: How to Beat Big Tech, Tame Big Content, and Get Artists Paid, with Rebecca Giblin, nonfiction/business/politics, Beacon Press, September 2022

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