Deaths from inaction have no face

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Zero Day

There is an excellent book on vulnerabilities in software. Known in the industry as zero-days. A zero day vulnerability allows you to operate software at the base layer undetected. They are extremely valuable and generally available only to governments and elite hacking organisations (who also sell them to governments). 

The story is true and documents how the US and Israeli governments strung together zero day vulnerabilities to attack Iran's nuclear processing facilities by compromising the Siemens software used in the nuclear centrifuges. That was in 2010, but zero-days still exist. 

It also documents the business of Chaouki Bekrar, a French national who sells access to anyone in the world's iPhone or Android phone for upwards of $1 million dollars. His business still exists, website here zerodium.com. His Twitter account is still live, one assumes because he is useful to governments as well to others, perhaps less well intentioned. Naturally, he can also be found on LinkedIn.   

This week though life got a bit more interesting for the purveyors and purchasers of zero days. Anthropic’s latest unreleased model known as “Mythos” is so good at coding that it has found hundreds of zero days in all sorts of commercial software, including Linux and iOS. 

Accordingly, Anthropic has announced “Project Glasswing”. They have released the model to Apple, Linux, NVIDIA and others so they can patch the vulnerabilities before the model is released more generally to the public. It found a 27 year old zero day in one of the best open source firewall programs. 

There will be people and governments around the world already exploiting these hacks, their backdoors into systems are probably disappearing as we speak. It is also true that this model is better at coding than any human because we don’t have anyone that has found hundreds of zero-days in a matter of weeks. Each one, when found, sells for millions of dollars.

It’s squeaky-bum time too for the smart-contract industry. Any coding error now will be quickly exposed and exploited. Once this model is released (if it is released), everything will be put to the test. Every piece of code, every platform. Everything. If you have a piece of software that has had every hacker in the world attacking it for 20 years you have a better chance than everyone else. Are we confident in bitcoin? Yes. Are we confident in some smart contract that was coded in the space of two days, not really.   

For those that understand zero-days, this is seriously alarming stuff. For those that don’t, read the book. 

Crypto Legislation

Australia passed its Digital Asset legislation this week in the form of the “Corporations Amendment (Digital Assets Framework) Bill 2026”.

I have no real comment to make on it other than it probably codifies sensible behaviours that are already happening. If you want to spin up a platform that sells digital tokens of some sort to the public, you will need a special licence to do it which you likely won't get. 

I find Australia to be a special case when it comes to licences. You need one for almost anything (fishing, boating, entering an RSL for a glass of beer). Australia loves a licence. A case in point in NSW. To be a painter you need a special licence. You cannot just paint someone's house and get paid. Indeed getting the licence is not trivial either.

If you do get your licence and want to paint something high up, then you need a special certificate of competency to “work safely at heights”. The guidance here is 2 metres or more, which would imply that some tall painters would not be able to reach up with their own arm without requiring special training. 

That is not my specific criticism though, everyone wants people to come home from work safely at the end of the day. It’s that once people attain these licences they can pretty much do whatever they want, common sense can go out of the window. 

“Got your painting licence and your working at heights mate….good to go then”

He’s at 400 feet painting a wall and holding his certificate of working at heights. Big tick. This is compliant behaviour because he has his licence.  

The problem with regulation is not what it protects people from but what it exposes them to. In Australia, self driving cars are banned. One of the most dangerous places in this country is our roads. The regulation permits you to have a glass of wine with your lunch and drive home. So, people do. 

It’s also less fine than self-driving cars which are proven to be 99% safer than a human driving. Insurance premiums for self driving cars in California are much lower than for regular vehicles. Somewhere though, there is a regulator saying no to self-driving because it is safer for their career to take no risk at all, while exposing everyone else to massive risk. The incentives are skewed. 

So it is in the case of this crypto-regulation. A classic example of cowardice really, somebody somewhere has simply codified what already happens while making anything innovative very hard. They covered their own backside and delivered nothing of future value. There has been no attempt to roll out new technology that might benefit people, or even give it a chance to benefit people. Things that might have existed, will not now exist or be developed in Australia. The regulations will be deemed a huge success.

A better characterisation of this argument was provided by Milton Friedman 50 years ago. Yet still we have rooms full of people that are preventing the things that will make our lives better. Particularly in this country. 

Friedman is asked: “Without regulation on drugs, people could die from taking dangerous products. Don’t you find that serious?”

Yes, says Friedman. An unregulated drug can kill people. It’s visible. It’s in the newspapers. It’s a scandal. Everyone sees it.

But what nobody sees is the people who die because a drug that could have saved them was blocked for 10 years by the regulatory process. That death, nobody counts it. Nobody puts it on the front page. Nobody knows their name. Because they died from the absence of something that never existed.

That’s the fundamental asymmetry of regulation.

The regulator has two types of possible errors. Error 1: approving a dangerous drug. Result: public scandal, lawsuits, the regulator loses their job. Error 2: blocking a drug that would have saved lives. Result: nothing. Nobody knows. Nobody protests. The silent deaths have no spokesperson.

As a result, the rational regulator optimizes to avoid Error 1. Always. They add studies. Phases. Committees. Delays. Each additional layer of “safety” protects them, at the expense of the patients who are waiting.

Friedman estimated that the FDA had probably killed more people by delaying good drugs than it had saved by blocking bad ones. It’s impossible to prove precisely. But the logic is airtight.

A concrete example. The beta-blocker Propranolol was available in Europe years before being approved in the United States. During those years, Americans died of heart attacks that could have been prevented. How many? We’ll never know. Because we don’t count the deaths from inaction.

It’s the same principle everywhere. Not just in medicine.

In France, autonomous taxis are blocked by regulation. Every year of delay means road accidents that could have been avoided. But nobody counts those deaths. We only count the first accident with an autonomous taxi, which will make headlines in every newspaper.

AI in medicine is slowed by approval processes that take years. Diagnoses that could be made in seconds by an algorithm wait for validation while patients wait months for an appointment.

Nuclear power has been blocked for decades by fear. How many people died from the pollution of coal plants that ran instead? Nobody counts them.

The pattern is always the same. We see the risk of action. We never see the risk of inaction. And since the risk of inaction is invisible, the regulator always chooses inaction. Because inaction doesn’t produce scandals.

Friedman summed it up in one sentence: “The people saved by the FDA are visible. The people who died because of the FDA’s delays are invisible. And in a democracy, the visible always wins against the invisible.”

The next time someone tells you “we need more regulation to protect people,” ask just one question: how many people die while waiting for regulation to let them live?

The answer is always bigger than we imagine. But nobody calculates it. Because the deaths from inaction have no face.

Red

I was musing on this chart after a very marginally positive month in April for Bitcoin. 

87 green months, 73 red months since launch. 55/45 ish, which compared to stock markets which are closer to 65/35. You would expect that I suppose from newer assets. Apropos of nothing really, I just looked at the chart and didn’t believe it. 

Satoshi Nakamoto

The New York Times published a new “exposé” on the identity of Bitcoin’s creator. It's long and interesting because it contains lots of details about the history of Bitcoin’s creation and release. 

I am suspicious. The article is good if you don’t know much about the search for Satoshi, but nothing in it was new to me. I have seen and read it all before. It isn’t paywalled either. Why? Everything is paywalled at the NYT unless there is an agenda and what could that agenda possibly be? The article even has flashy graphics on a page dedicated to it. 

Adam Back is CEO of the Bitcoin Standard Treasury Company (BSTR). It plans to go public on the Nasdaq through a merger with Cantor Equity Partners (CEPO). The deal has been hanging around for a while but they plan to go public this month. 

Is it possible to imagine a meeting with the investment bank sponsoring the deal that went something like this:

“Guys, we can’t just be another treasury company that holds bitcoin, we have to have something different. What could that different thing be? What about we just get an article out there in the New York Times rehashing old rumours about the CEO being Satoshi. People will love it, who doesn’t want to invest with Satoshi Nakamoto?” 

And, it has worked. It’s all over the news and I am convinced the listing will go ahead as planned.” 

This is an excellent example of Epsilon Theory’s “Why am I reading this now” heuristic.

Incidentally, if Adam Back were Satoshi Nakamoto, would he be spending his time listing a Bitcoin Treasury company on the NASDAQ when he already owns bitcoin worth $100 billion? I don’t think so.

Euro-Trash

You would think a surging Euro would be good news, a sign of success perhaps. I’m afraid not. The return of $1.20/Euro is causing alarm across the former Roman Empire. Chief of the Gauls, Christine Lagarde, said that the soaring exchange rate would be “an element that guided policy”. 

In fact what she means is that the Euro must be weakened, in the same way that the pound must be weakened and for the Americans, a weaker dollar would also be wonderful. Indeed, the whole merry-go-round of currency weakening has been going on forever but is likely to get more intense. It shows up in some places too, like Switzerland, where they are rather proud of their currency and so tend not to print more and more of it. 

Exhibit 1: Australian dollars have roughly halved in value versus the Swiss Franc over 12 years.

The Australia economy itself has outperformed Switzerland over the same period. The huge devaluation is simply down to the amount of Australian dollars in circulation which has increased dramatically. I don’t think anyone in Australia really knows about the growth in AUD supply, or cares. 

Faring slightly better, the Euro, losing about 40% over the same period.  That loss rate is just not high enough though. The ECB needs to print a lot more Euros to keep up with the likes of Australia with its debt funded property boom. They need to lift their game and I’m sure they will. 

As a result, Swiss interest rates remain at zero to try and dissuade too much speculative capital turning up in their accounts. In all likelihood they will turn negative later this year, and the reason is simple. Other countries print near unlimited amounts of currency and dump it on their citizens, who then seek to dump it on the Swiss. In the end there is only so much Australian Wagyu the denizens of Klosters can consume and when they are full, Swiss interest rates will go negative. 

There ought to be national outcry about this level of state sponsored theft but nobody seems to mind. In the same way that 2% inflation is generally accepted as good, for reasons nobody understands. A policy of competitive devaluation is also accepted as good. Yet every country that was super successful had a strong currency at its height. The Pound (100 years ago), the Yen 80s, the Deutschmark 90s, the dollar. But fiat currencies always die. 

It’s a brilliant scam really. All the while the currency weakens, your house price rises, your investments rise. 

The more the currency falls, the richer you get. Right?

Further Information

Our March 2025 report to investors can be found here.