Electronic fare collection on Bermuda’s public transportation system

One of the more interesting things to arise from today’s budget is the government’s pledge to introduce electronic fare collection for public transport. I think people underestimate how complex and challenging this can be to achieve if you get caught up in flashy solutions vs. looking at the root problems to be solved. Bermuda’s limited economy of scale makes it difficult to implement solutions in a cost effective manner.

People are excited and suddenly have visions of systems like the British Oyster card powering our local transit. In theory it sounds great, in practice, perhaps not so much. These sorts of systems are expensive and complex. It would require a massive undertaking for us to implement it and the important question needs to be ask whether they’d be the right. In order to determine that, it helps to identify what exactly is wrong with our current paper / token system. Why is it a problem? Does the proposed solution address that problem? If not, why change?

The overarching problem with the current paper system is that it is difficult to buy tokens. You have to go into a central location to buy them before you can take the bus. Otherwise you can pay using exact change. Thus, if you’re a tourist visiting the island or an infrequently travelling local, it can be difficult to use public transit. This is the clear pain point to be addressed.

Would an Oyster card system solve this pain point? Not really. The trouble is that card based systems are designed for transit systems with large economies of scale. Systems like subway lines where it is affordable to put kiosks at every station. How about for Bermuda? Can we afford to put kiosks at every bus stop? Not likely. So, we end up with a solution that requires you go to to a central location to be able to purchase and charge a card. Which of course takes us back to the original problem we’re trying to solve. Its a fancy tech solution that sounds great on paper but doesn’t address the pain point.

How do you solve the pain point in a simple, cheap and cost effective manner? Create a pair of smartphone apps for transit users and operators. Transit users could use a simple app to be able to register their payment details and load credit or purchase passes. That app can then be used to display a barcode when boarding. Transit users could also top up their accounts via existing sales points via cash rather than card.

Transit operators could then have an app that scans barcodes and verifies their validity or triggers a ride charge against the users credit. The app could offer the added benefit of leveraging GPS to provide live route tracking as well as monitor passenger numbers as users scan in. Theoretically it could be tied into a wireless barcode scanner to make the process more seamless for drivers.

Perhaps not an inspired technologically impressive solution like Oyster cards but simple, cost effective and largely implementable in both a short timeframe and at low cost. Here’s hoping the new government keeps it simple.

The confusing case of CT scan fee reductions

I remain entirely confused by the whole diagnostic fee debate.  Honestly there hasn’t been much clarity on the issue.  Here’s my current understanding and thoughts with the wholesale admission that I don’t have all the facts and am not certain what the real situation is.

  • The Health Council recommended a reduction in fees
  • The OBA opted to reduce fees beyond this recommended rate (their PR statement on the issue glossed over this entirely which was wholly disappointing.  I would link to it, but I can’t even find it, especially not on their website which hasn’t been updated since the election)
  • Premier Burt and Health Minister Kim Wilson believe the rates set by the OBA were unreasonable.  They have taken the step of stating that they will return the fees to the Health Council’s recommended amount and reimburse the various providers the difference between the OBA’s rate and the rate originally recommended by the health council.
  • Dr. Brown and his various supporters do not agree with the Health Council’s proposed rates and that they should be returned to where they were.

One of the biggest questions I have is how the prices are set.

  • Are these fixed rates?  Ie. all diagnostic providers are only allowed to charge these rates and nothing different.
  • Are these fixed reimbursement rates?  Ie, diagnostic providers are free to charge what they like but insurance companies are only required to reimburse at the set rates.

This is a key point I haven’t been able to verify as of yet.

The first is a very firm price control which I am not in favor of except in very special cases where due to our size a provider has a complete monopoly (eg, Belco’s rates would be a whole different discussion).  However, in this case, similarly with grocery prices, I am not convinced a firm price control is the answer.

The second is more reasonable in terms of a soft price control.  It would mean Dr. Brown is free to charge what he likes but he really has to convince people or insurers to choose to pay extra for his service.  In cases where the hospital facility is down or busy that would certainly be an outcome.

Personally, I believe firm price controls should be an absolute last resort and usually are a sign of a poor regulatory environment rather than a good solution.  A soft price control is more reasonable though still not absolutely ideal.  It points to inefficiencies in the process that should likely be examined.

Ultimately we need proper regulation to ensure a fair and equitable free market and price controls don’t achieve that any better than a complete lack of regulation.  It’d be great if we had more clarify on how this is being achieved.


Crypto Contagion?

How much contagion will the cryptocurrency bubble popping create in the greater markets?

As noted last month the bubble had reached $800 billion market cap, about 1/3 the size of the dot com bubble.

However, the SEC didn’t allow planned ETFs to proceed and regulators started cracking down which limited the bubble’s potential spread.

The greed that drove the bubble has quickly shifted to fear as many people undoubtedly got wiped out investing money they didn’t have.  Others have had to shift market investments to cover losses and still others may now be fearful that we’ve had far too good of a run in the markets for far too long.

So the question now is, how much contagion will the collapse from $800 million create in the greater markets?  If significant, what impact will that have on Bermuda’s attempt to recover its economy?

“The number of community health workers has been greatly decimated.” – Where?

I’m rather confused by a statement Premier Burt made in the pre-Budget public forum.  He said “The number of community health workers has been greatly decimated.”

According to the Employment Survey data released by the statistics department, the number of health workers have been on a fairly reasonable upward trend if you discount the blip in 2011 likely caused by the hospital project.  I don’t see evidence that supports the suggestion that the numbers have been “greatly decimated”, quite the contrary.

Wary of the cryptocurrency bubble

Welcome to 2018, a time to be wary of the developing bubble but watchful for the opportunity it will create. The markets and economy work as a form of pendulum of emotion.  They swing from a point of balance toward greed driven by over hyped expectations.  When the hype doesn’t measure up it drives us to despair and fear.  Only then do things begin to return to equilibrium where potential begins to match hype and real change begins.

We’ve seen it recently in the dot com boom and the sub prime crisis but it is a cycle that has repeated for generations.  Bubbles represent inflated short term expectations for underappreciated long term results.  In other words they create pain but also create opportunity.

Speculative bubbles are a certainty as people forget the last crisis, gain confidence in their ability to make money and gain comfort with increased risk taking.  Social Capital points us towards Hyman Minsky’s 1992 paper on bubbles and summarizes by suggesting they develop in three phases.  The first is when money is given to those who can pay it and the interest back with certainty.  The second, when given to those who can pay the interest with certainty, but not the original payment.  The third, when money is given to those with whom there is no certainty the interest or original payment can be paid back, but hype for the potential drives investment anyway.

We saw something similar occur with real estate locally prior to the sub prime crash.  It began with banks only lending to those who could readily save enough to cover 20% down payments.  As the housing market boomed and banks ran out of customers to loan to requirements were lowered to 5% savings.  Finally, banks started rolling out 0% and even “interest only” loans.  In 2007 many seemed to think the market could only go up.

When concerns regarding US interest rates rising and their impact on housing came to bear, the bubbled popped both locally and abroad.  The banks survived but those who speculatively gambled money they didn’t have on houses they couldn’t afford lost everything.

In 2010 I wrote a post crash review of pre crash thoughts and numerous other observations that at the time were rather prescient.  I finished my review of those times with a warning.

In good times it can be easy to get caught up in the party and forget all about the mess that’s left to be cleaned up when the party ends.

This brings us back to 2018 and the state of the markets.  Cryptocurrencies and Blockchain (or Distributed Ledger Technology) are the source of a great deal of hype.  The question is, is it a bubble?  Have we reached the point where people are giving money to those with whom there is no certainty the interest or original payment can be paid back?

We recently saw the local announcement of an “Initial Coin Offering” for wireless internet startup Horizon Communications.  The regulatory authority has come out saying this company has no license to operate.  The company at present has no assets and no equipment and is taking advantage of an unregulated means of fundraising to raise money for the project.

The problem with ICOs is that typically they provide no ownership and no say in the running of the company.  It is a glorified Kickstarter/Indiegogo/GoFundMe style scheme repackaged.  Purchasing a “utility token” effectively gets you nothing more than promises of discounts on future services and possibly weak IOUs.  If the company doesn’t deliver you get nothing and they owe you nothing.  You have no rights to any assets or collateral.  The majority of the risk lies with you, not the company.  If they fail, you lose.  Your potential to recoup any of your money is extremely limited.

Horizons Communications could prove to be a viable business.  That isn’t the point.  The point is that these sort of investment schemes are a sign of the third stage of a bubble and it is worth being very wary.  People are willing to give money to those with whom there is no certainty they will earn their money back and they own nothing other than promises.  This isn’t happening simply on a “venture capital” level with companies specifically geared towards high risk investments making such speculative games.  No, this style of investment is reaching the every day layman.

The approaching trouble is that cryptocurrency awareness has transitioned from the fringe to the mainstream.  The total market cap of cryptocurrencies listed on coinmarketcap.com (which likely doesn’t include many ICOs) stands at $800 billion dollars.  To put that into context, the dot com boom was suggested to have reached nearly $3 trillion dollars before it collapsed.

The rather shocking thing is that this bubble may still have room to grow.  We’re only now starting to see advanced financial concepts like futures, leverage and ETFs being applied.  Cryptocurrency ETFs are making cryptocurrencies and the risks of borrowing money to invest incredibly more accessible to the lay person.  When people start borrowing money they don’t have to invest in something they don’t understand it is a very bad omen.

$800 billion dollars invested is an incredible number.  What tangible value have cryptocurrncies generated thus far?  How have cryptocurrencies fundamentally reformed our banking system or made banking accessible to the presently unbanked?  It hasn’t yet and much of the investment is driven by the potential for disruption rather than disruption itself.  Worse, the sheer power requirements and environmental cost, which for Bitcoin is estimated at 240 kWh per transaction and amounts to power consumption at the equivalent of the country of Serbia is presently horrendous and completely unsustainable.

With all that said, despite the signs of a bubble, I remain a fan of the underlying concepts of Distributed Ledger Technology and even ICOs for their long term potential.  In the longer term timeframe when the hype subsides there is considerable opportunity.  The trick is ensuring we set the right foundation to take advantage of that opportunity and don’t get caught up in the hype.

The dot com boom was similar.  Much of the underlying global fibre optic cabling infrastructure that enabled the internet we benefit from today was created as a result of the euphoria of the dot com bubble.  Investment that likely wouldn’t have occurred if it hadn’t been for the bubble. Look at all of the innovations that have arisen as a result of the dot com bubble.  It’s incredible.  However investing in global cabling companies or over hyped companies that had little value based foundation was a waste.  Timing and infrastructure is incredibly important.

Bermuda is making strides to get involved and become a leader in this new industry.  It is a welcome move if we ensure we stick to areas of value creation that will provide long term returns while not getting too caught up in the hype of the party.  There will be considerable opportunities to use these new technologies to reinvent and disrupt many  industries.  However we need to be very wary of the bubble mentality that could wreck our house and leaves us with little more than a huge mess to clean up after the party is over.

Where is the better deal on the airport?

In the run up to the election the PLP hammered the OBA on having struck a bad deal regarding the airport. So much so that parliament was physically obstructed over how bad of a deal the airport was suggested to be.  They assured the people that a better deal could be had and that they could deliver it. We’re 6 months into a PLP government and have yet to hear anything regarding the better deal they promised. Where is the airport project review and what is the status on the better deal?

Originally it was a first 100 day campaign promise to review and try to get a better deal.

The wording suggested a review would be done, but when the 100th day passed, clarification was made to suggest that the pledge meant a review would be commenced, not completed.

In keeping with our promise to the people of Bermuda, this latest development and the overall arrangement are the subject of a full review
Premier Burt On Government’s First 100 Days

We were told that the government had set a goal to finish the review by December.

The controversial airport redevelopment deal is under review by an international firm of consultants, Minister of Transport Walter Roban said yesterday.


Mr Roban told The Royal Gazette: “Our goal is to finish by December.”

So it’s now January.  Where have the results of the review been published and what kind of better deal has been achieved?


America’s Cup: delivering on a plan

The America’s Cup event was over hyped.  Many held unrealistic expectations of how it would do.  However, hype shouldn’t be the benchmark.  What we should be considering to determine whether or not the America’s Cup event was a success was comparing it to the original estimates.  Those were the basis upon which the decision was made the host the event and should be the benchmark as to whether or not the event was a success.

As noted back in August when musing about the eventual report’s outcome:

Smart financial decisions are not based upon hype.  They are based upon conservative projections of a return on investment. America’s Cup was not brought here because of hype, it was brought here because conservative projections suggested it was a good investment.

What we really need to do is take a step back and compare the results that we’re seeing against the projections to prove if the investment was worth it. The conservative projections suggested that based upon the invested amount we would generate $235 million of direct spend on the island.  We need to figure out if the returns generated met or exceeded that estimate.  If you expected it to bring the second coming of Jesus then I can only shake my head that you bought into such hype and suggest you’re reading the wrong blog.

The America’s Cup was a well planned event.  It was the only case I’m aware of where an estimated potential economic impact assessment was done to justify whether or not the event should be done.  These sorts of things are critical.  It is easy to throw money at something and hope, but that doesn’t always yield results.  It is much better to take a measured approach to develop a plan and estimate conservatively as best you can so you have a good idea of expectations.

Here were the key findings of the potential economic impact assessment report.


The categories didn’t match exactly as there were some variations in terms of estimates for more cruise visitors, increased impact on government and concerts.  Visitors was given as a total which has been compared against the $25.9 million total estimate for visitors.  There was no impact from cruise provisioning, government-other or concerts.

Overall however, every category outperformed the estimate of gdp impact with the exception of government.

How did the actual event measure up?  In total expenditure, the impact was reported as having been $336.4 million vs. the original $242.2 million.

Was the America’s Cup a success?  There has been a great deal of debate about whether it could have done more or shared the benefits better.  However, when considering whether the event was planned, estimated and executed successfully, the numbers suggest that it exceeded expectations. Let us hope that future events and initiatives are planned, estimated and executed in a similar fashion while yielding a similar level of success.

The swing vote matters

Here’s my chart of poll results going back over the last few years.

Notice something?  The big change in the election was that the swing vote wholly supported the PLP.

This is key to understand.  The OBA, if they want to maintain any sort of relevance, need to target the swing vote, not hardcore PLP supporters.

Who are the swing vote?  What does the swing vote want?  How do they target those desires and deliver?  Those are the key questions the OBA needs to answer with any strategy.


Again… seeking profound change

The OBA’s strategy and vision is to keep recycling the same failed strategy which hasn’t worked.  It is honestly so repetitive that I don’t even feel its necessary to write anything new on it.  I can just quote old commentary regarding the UBP where most of it still applies for the OBA.

Here’s a post from 2009 regarding a need for fundamental change in the way the party conducts themselves rather than new faces.

Seeking profound change

Originally published June 2009

John Barritt was recently quoted in The Royal Gazette condemning the suggestion that the UBP should rename itself.

“A rose is a rose by any other name. Something more profound than that is required.”

Mr. Barritt is absolutely correct.  However, peering through rose colored glasses could detract oneself from distinguishing between a rose in bloom and one which has wilted.  As Mr. Barritt suggests, the UBP needs profound change and a new name won’t do it.  Members need to either walk away from the party and go independent or the UBP needs to start being the change it says it would bring.

When it comes to the “do as I say and not as I do” mentality it is hard to differentiate the UBP from the PLP.  The PLP have been known to skirt laws, policies and procedures while expecting the people to have respect for them.  The UBP subsequently condemns such actions and suggests that government should embody ‘good governance’ and transparency when it itself doesn’t follow such principles.  While the UBP may claim ‘we’ll earn your trust’, we shouldn’t have to wait until after their elected to start trusting them for  maintaining a shroud of secrecy only works against its development.

If the UBP play the way they practice then the way they run their party is a good benchmark for how they’d run government. Thus despite many promises to the contrary, people still believe things likely wouldn’t change if they were elected.  If the UBP hopes to gain any form of traction a real step forward would be to first change in themselves what they would like to see changed in government.  This means reversing the culture of secrecy within the party and making as much of it as transparent as possible.

Why? Let us use the changes we would like to see in parliament as an example.  At present there is no advance schedule, little room for public consultation, no hansard minutes and no publishing of voting results.  All of these are things the UBP would likely claim they would change if elected and yet none of these things are reflected in the way the party is run.

Take caucus meetings as an example.  It is a rather secretive event.  Now certainly there are portions that are necessarily secretive but then there is likely also a great deal which is not.  Thus, why not bring transparency to everything that does not specifically need to be kept secret?  The UBP could publish an advance schedule including descriptions of topics to be discussed.  They could open themselves to public feedback on those topics ahead of time.  They could record and publish hansard minutes and finally publish voting records.  Beyond this they could do the same with other meetings including trying to document what they are able to of parliamentary sessions.

You might ask if the process of reaching consensus is made public, would this tarnish their ability to maintain a unified front?  In order to combat this assertion let us take a look at when parliament works best, which is when people vote on conscience.  When votes reach a consensus everyone falls behind that consensus and government resolves to pursue the result.  People debate, discuss and finally agree on a way forward.  Should this parliamentary process be made public?  If so, why is transparency in parliament any different from transparency in a party caucus?  Why is it not possible to disagree, debate, come to a consensus and finally unify behind the decision, all in the public eye?

Bringing transparency to the party would reap rewards greater than just improved trust.  The party can demonstrate what government would be like if it was in charge.  It could bring greater visibility to the less outspoken and less publicized members allowing for greater promotion of their individual candidates.  It could enable them to garner more support by welcoming feedback and public input.  It would encourage people to feel like they could have a greater impact on decisions and give the party a more participatory feel.  Subsequently the party could look to other initiatives it hopes to bring forth should it be elected and move for implementing them today.

Let us take a moment to call a spade a spade and realise that sometimes roses need to be replanted in order to flourish.  Upturning the roots of the party would reflect a profound change that could set the UBP on a new course.  It would finally be able to demonstrate a real commitment to the democratic change that so many know we need.  It would give the party new found life and potentially entice greater support, thus enabling the party to rejuvenate itself more empowered to better serve the public, whether as opposition or incumbent.

What are cryptocurrencies?

MONOPOLY MONEY TEMPLATE | cvsampleform.com

Previously I wrote  laymans explanation of the blockchain.  I’ve been asked to write an explanation of what cryptocurrencies and distributed ledger technology is.  This is my attempt at explaining cryptocurrencies and hopefully later I’ll come back to distributed ledger tech and it’s potential.

What are cryptocurrencies?  Well to start off with, let’s not over complicate it by worrying about the “crypto” part and simply things down a bit.  A cryptocurrency is a virtual form of money that anyone can create.  Imagine you had a large printing press and decided to print your own money.  By doing so, you would effectively create your own currency.

Virtual currency is the same, except the money exists digitally rather than in paper form.  The key thing to understand is that it is only transferable and only has value based on who or what is backing it.

If I offered you $100 USD vs. $100 Monopoly money, which would you take?  USD you know you can readily use and would be accepted almost anywhere on the planet.  Monopoly money, by contrast, is really only valuable in a game of monopoly.  Outside of monopoly, it is worthless and no one sane would give you anything for it.

Currencies that aren’t backed by a physical asset of some sort are a figment of human imagination.  They only hold value if people think they do for otherwise they’re worthless.  For many years, USD was backed in value by physical gold.  The ability to exchange your USD for gold at any time is what made people believe in its value.  Today, it is a global medium of exchange backed by the US government and US Treasury and that backing is what lends people to still trust its value.


Bitcoin is also a figment of human imagination.  It is backed by nothing of actual value but is built on a technology called the blockchain.  The block chain provides a near irrefutable medium of trust backing the bitcoin currency.  That trust is acheived through distribution and cryptography.  Meaning it is near impossible to corrupt it and the log that backs all of the transactions made in it going through history.  So the currency itself is nearly uncorruptible, however it’s value is a different story.

Bitcoin is only as valuable as people deem it to be.  It is not tied to any underlying asset so a bitcoin is only worthwhile if you can exchange it with someone else for something of value.  This is the looming problem with the debate over whether or not bitcoin is in a bubble.  Many people are buying bitcoin because other people are buying bitcoin, not because they want to exchange it for something else or use it as a medium of exchange.

The trouble is that in order for it to maintain its value, you need to have someone else to sell it to.  There are realistically few places that accept it, the transaction costs are high and if suddenly everyone wants to recoup their earnings at the same time it can lead to a crash where there are many more sellers than buyers.

I highly recommend reading this article if you’d like to know more about Bitcoin’s underlying value.  It is the clearest writeup I’ve seen yet.

So bitcoin bitcoin fundamentally has value because people believe in it and it’s potential.  As long as people continue to believe in it it will continue to have value.  If that changes, bitcoins value will change.  So that’s bitcoin, how is it different from other cryptocurrencies created as part of “initial coin offerings” (ICOs) and referred to as “tokens”?

Other cryptocurrencies and Initial Coin Offerings (ICOs)

What are ICOs?  ICOs are the equivalent of people printing their own money.  Fundamentally, people create their own money and then, via the internet, offer their newly created currency for people to purchase.  This “initial coin offering” is being used as a funding mechanism for various concepts.  An important thing to understand is that when you purchase the money/tokens/currency of an ICOs, your purchasing the equivalent of paper money someone has printed that in most cases gives you no entitlement to ownership of any sort of an asset.

For many years the retail chain in Canada called Canadian Tire printed it’s own money.

Canadian Tire: A True Canadian Icon: Canadian Tire 'Money ...

That money was usually given out as part of a loyalty scheme where a certain percentage of your purchase was given back in the form of Canadian Tire money.  It is a currency that is only valid and accepted in Canadian Tire stores.  Outside of those stores it has no value except in trade with people who would use it to shop in those stores.

Imagine that Canadian Tire was struggling financially.  They decided they wanted to raise money by using an ICO.  They turned around, created a new “cryptocurrency” version of Canadian Tire money and sold it via an initial offering on the internet.  This would allow people to trade currently accepted, transferable and government backed Canadian or US dollars for this new Canadian Tire cryptocurrency or tokens.  Canadian Tire gets real money they can use to fund their operations, you get virtual money you can use to buy things in their stores.

Here’s a key point to understand.  By buying Canadian Tire’s cryptocurrency you don’t actually end up owning anything.  It provides absolutely nothing more than the ability to spend that currency in their shops.  If Canadian Tire goes out of business?  Your currency is worthless, just as your stash of paper Canadian Tire dollars would be.

The big challenge of cryptocurrencies like Bitcoin, Litecoin, Ethereum Coin, Bitcoin cash and other ICOs is that the market is horribly unregulated and you could end up buying a currency that in the end is not transferable and ultimately worthless.  This is key to understand before getting caught up in the hype.

Cryptocurrencies and Bermuda

So, if cryptocurrencies are inherently risky and virtual does that mean Bermuda should be avoiding them?  Frankly, no.  Cryptocurrencies are a highly unregulated industry at the moment.  Opportunities exist to provide jurisdictions to provide the right regulatory framework to enable cryptocurrencies to be trusted for everyday use and flourish as a new medium of exchange.

We effectively have arrived at an age where anyone anywhere can create their own currency.  This has power in that it has democratized a key founding principle of what powers modern society.  Currencies act as a transferable store of value and medium of exchange and it is tremendously valuable to enable people to be able to create them to empower groups, organizations or individuals.  Many great innovations will arise as a part of it, however there will be many growing pains along the way.

The opportunity for Bermuda is if we can move quickly with the right streamlined regulation to enable cryptocurrencies which are backed by a robust regulatory framework that establishes trust.  The race is on to be a competitive player in providing the right environment. Bermuda has an opportunity if we move to embrace it and ensure we stay in line with our historical principles of offering a compelling regulatory framework that maintains a strong reputation as above board and trusted globally. (We also need to do everything we can to maintain that reputation and not inadvertently damage it and ruin our opportunity)

So what about distributed ledger technologies and the blockchain?  Cryptocurrencies are only the tip of the iceberg, the most well known application of the blockchain.  The real future is leveraging DLT for much bigger and better concepts, however that’s a wholly larger discussion and one which will have to wait for another article.