Three news items caught my eye this week. One reported that China just cracked down on an esports (electronic sports) cheating ring, seizing $76 million along with luxury cars and other ill-gotten gains. For those who haven’t been keeping up, esports, or competitive video game playing for prizes, and the gambling that accompanies it, has become a big business. Clearly, if cheaters can amass $76 million and change doing it. The largest competition, the International, offered a bit over $34 million in prizes in 2019, and had 90 players in 18 teams competing for that money. The games played are usually relatively violent first-person shooter games like Fortnite or Dota 2, in which very quick reflexes matter.
Drexel University and Northwestern University in the U.S. even offer an undergraduate business degree in e-sports business, and there is a whole class of investors who invest in it for profit. Major competitions are even broadcast. The global market for esports in 2019 was about $700 million, and growing rapidly.
The second news item reported that there will continue to be a shortage of video cards (GPUs), because amateur bitcoin miners are buying them all up to build home bitcoin mining systems. Again, for those who perhaps haven’t been keeping up, bitcoins are a pseudo-currency which has recently reached astronomical heights ($60,000+ per coin at its most recent peak) of a flurry of speculative trading. Bitcoins are “created” by building huge computer banks to solve a difficult but otherwise meaningless mathematical equation – in essence guessing very large random numbers, though the actual mathematics are a bit more complex than that.
The point is that bitcoin mining has also become a big business, with major investors building massive bitcoin mining systems based on thousands of specially-designed microchips and drawing immense amounts of power. As of January, 2021, bitcoin miners were drawing more power than the entire nation of Argentina, about 130-150 terawatt hours per year and growing rapidly.
The third news item reported that high-speed trading firms in the stock market were shifting to hollow-core fiber cable to connect their trading sites to the market computers because it gains them 1-2 nanoseconds more speed in making their trades. Apparently some firms intend to replace hundreds or even thousands of miles of perfectly good fiber cable with the new cable, just to gain a nansecond or two advantage over their rivals. Once again, for those who might not have been following this field, high-speed trading firms make their money by having computers that take advantage of tiny (microsecond or even nanosecond) delays in the market that create momentary imbalances in prices between locations.
What connects these three disparate news items? They all involve massive investments in money and resources and talent in essentially meaningless activity. I suppose one could make a weak argument for the value of esports as entertainment, no different than football or basketball or movies. I don’t see any comparable argument for the value of high-speed trading or bitcoin mining. Nothing is actually created or built, no useful service is delivered to the nation, no useful knowledge is added to civilization. It is just, I would argue, a massive waste of money, resources, fossil fuel, and bright minds.
I have always thought that gambling had an essential nature; it is a sucker game. That is, in almost all gambling what is involved is someone making money out of fleecing suckers. Casinos don’t really care who wins or loses from moment to moment, because they take their percentage on every play the suckers make. The stock market operates largely the same way, though it is marginally more socially acceptable. But in fact, most daily market activity is people betting against one another – will this stock rise or fall? If it is high right now, can I find some sucker to sell it to before it begins to fall?
It seems to me the three things I discussed above, esports, bitcoin trading, and high-speed market trading, are essentially sucker games in which a few people are willing to make a big investment because there are so many suckers waiting to be fleeced. Clearly they are right, because a few people are making millions or even billions from these activities.
I can’t help but worry about the state of the nation if this is what some of our best and brightest minds are drawn to, and if we are wasting our resources on such meaningless activities.
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