I recently got the opportunity to interview Josh Harvey of StompRomp, a company that sells guitars, effects pedals and all variety of associated accessories for Bitcoin. The result looks less like an interview and more like a three-hour-long rambling conversation between two people with a fair amount in common. I’ll apologize in advance for the length of this article, I’m hardly known for brevity but I’m not famous for 5,000+ word posts either. Without further ado…
(My words in italics, notes in bold)
First off, thanks for agreeing to the interview, Josh.
No problem, thanks for having me.
So while I do play, I’m not really part of your core demographic. I play mostly acoustic, so I can still use picks and strings and such, but I tend not to need pedals or amps, but it’s still nice to know that the next time I need some accessories there’s a place to buy them with Bitcoin.
Yeah, we do want to eventually get into acoustics. The story is, we started off in Israel, in Tel Aviv, 5 or 6 years ago and we had a guitar store there and we basically, my brother and I, moved the whole store and ourselves to New Hampshire because the bureaucracy there was just getting to be too much, you couldn’t do anything and in the store in Israel we were selling acoustics, mostly an Australian company called Cole Clark but starting off here we’re focusing on electric stuff and once we start building that up we’d love to get into acoustics again.
Well it’s nice to know you’re expanding more into my arena. My current instruments are kind of cheap and one of these days I really do need to buy a nice guitar. You’re currently at the top of the list when that day comes, just based on what I’ve seen so far. So you said you started in Tel Aviv?
Could you tell me more about your history, personally?
Well, my family moved to Israel from Baltimore when I was about 13, so I was there with my family until I got out of the military – you have to do 3 years of manditory service in Israel – so after that I was about 23 or so and I moved to San Diego for a couple years, then I came back to Israel for a bit, went to New York City for about a year and a half, back to Israel and that’s when I opened the guitar store with my brother and then we had that for about 5 years and it was going pretty well. I mean, we were definitely doing something exciting in Israel and a lot of people were excited about it, we were bringing in all kinds of stuff they’d never seen before, but it got to the point where we couldn’t import amps any more because the bureaucracy was just geared up to shut down anything that wasn’t a mainstream electronic item.
Interesting, so the problem wasn’t necessarily you or your business model – you’ll probably have a hard time finding amps in Israel in general?
Well, everything is going to be really expensive and it’s very hard to find more unique stuff, like you’ll find really mainstream amps that you can bring in a ton of.
Gotcha, so they’ll have your Fenders and your Marshalls and stuff.
Right, and they’re very expensive. First there’s about a 16% or 17% VAT which is like a sales tax on everything, and on top of that they have a 15% tax just on amplifiers.
That’s an oddly specific tax.
Yeah, and then on top of that you have to go through all these electrical safety tests that are specific to Israel, so you’ve got to pay thousands and thousands of dollars for tests for something that’s already been verified safe all over the world.
Do the same restrictions apply if someone from Israel were to order one amp from your store and you were to ship it to them or is it just for larger scale import?
No, it wouldn’t need to pass their testing if they’re just importing one amp for their own use, so that’s how people get interesting amps, they have to order it themselves from outside the country.
Which I would assume is quite expensive.
It’s expensive – shipping is expensive, and they can’t really order from the U.S. because the electricity is different so they’ve got to order from Europe and the prices in Europe are usually higher than in the U.S. and then they still have to pay all of the taxes when they get it in the mail.
So what prompted you to start accepting Bitcoin?
We actually started accepting Bitcoin in Israel and then continued it when we came here, the main reason was just because I was crazy about Bitcoin, there wasn’t any real practical reason.
So what got you started in the first place?
I was researching alternative currencies in the really early days of Bitcoin, probably 2009, and I think I stumbled upon Bitcoin but at the time it was worth fractions of a cent and I didn’t really think too much of it at the time. Then one day I saw somebody posted on my facebook feed that Bitcoin price was 25 cents and I couldn’t believe it. From that day on I was shocked and the Bitcoin bug hasn’t left my system. I started realizing over the following days and weeks how important this technology was.
Yeah, I think I hopped on board a little bit after you, I showed up just before dollar parity.
Those were crazy days, once it hit 25 cents it didn’t take any time at all for it to hit 50 cents then a dollar, 3 dollars, that was just when it was starting that bubble.
That bubble… I’m sure I wasn’t the only one that got hit hard by that but… I was a fairly heavy GPU miner at the time and it just wrecked my whole operation. I bounced back and obviously I’m still interested in Bitcoin but I don’t think my wife has quite recovered.
I was in a buy and hold pattern back then, but by the time it got down to $2 it really started to panic me so I actually sold most of my holdings at that point but thankfully managed to re-buy them for about the same on the way back up so I got kind of lucky there I guess.
In my experience, Bitcoin tends to attract two kinds of people: economists who pick up a little crypto along the way and cryptographers who pick up a little economics. Which camp would you say you’re in?
I guess I’m more in the economic-political camp even though I am a software developer so I was very interested in the way it worked and the white paper and reading the code – that was fascinating to me, but what was more fascinating to me was the economic and the political power behind it and one of those things kind of ties into what I was telling you about the bureaucracy. For me, all this overbearing bureaucracy really affects my life in two big ways. The first way is this kind of idea that in Israel you can’t do what you want to do because of this bureaucracy and there’s always supposedly a good reason behind it, they’re trying to keep people safe from amplifiers blowing up their house and stuff like that, but in the end you just can’t do what you want to do.
Because in Israel, amplifiers are what blows up houses, forget the whole “war zone” thing, it’s the big scary amplifiers.
Yeah, if you look at the statistics there are actually more injuries from amps falling on people and hurting them that way than any electrical issues. People usually aren’t taking their guitar amps into their bathtub.
Right, so let’s ban all the heavy things someone could put on a shelf. Let’s ban bricks.
Right, if you’re really looking to prevent injuries then anything heavy should not be allowed at all. The whole thing about the safety is ridiculous, we’re kind of getting off on a tangent but by far the most dangerous product out there are cars on government roads. So that’s the most dangerous thing you can do, but nobody thinks anything of it. They’re worried about the one person in the world who was electrocuted by a guitar amp last year – and by the way that amp that electrocuted the guy passed all the safety tests.
Getting back to my original point, if you look at what’s happening in the financial sector in the U.S. it’s way worse than bringing amps into Israel. You can’t do anything unless you’re a huge bank and finance touches everything, it’s money right? So finance touches everything we do and that’s controlled by this bureaucracy. I want that set free, I want people to be able to innovate and do their thing and not be shut down by all these heavy-handed regulation.
The second thing is, the U.S. government is doing some horrible things like keeping 2 million people in jail, most of whom aren’t dangerous to society or violent people and that is all funded by money, and not necessarily by tax money, by Bernanke-printed money so the idea of putting control of the money back into the hands of ordinary people is pretty compelling.
I love that you were a software developer who came for the economics. I get the feeling that a lot of the people who came in before me had to have had a background in both in order to even understand what they were looking at and see why it was revolutionary. I didn’t understand it at all at the beginning. I was fascinated by the idea of using crypto for money but I really had no background in economics before Bitcoin. I actually went out and bought a bunch of books and watched a lot of YouTube videos, took an online class or twelve and taught myself economics just to understand what was going on around me. I’d imagine that a lot of the earlier adopters like you had to have come in with a working knowledge of both.
I honestly consider you to be the lucky ones – I never even had an opportunity to take economics in High School, they didn’t even offer the class. I thought nothing of it back then but now it’s mind-blowing to me that they would leave out such an important subject.
Interestingly enough, you might be better off not having taken the standard economics courses. They wouldn’t really teach you how Bitcoin works, Bitcoin is kind of an alternate economics that most economics professors wouldn’t agree to.
Right, I imagine economics professors look at the Austrian school the same way biology professors look at creationism: they think it’s nutty but they grudgingly accept that they’re forced to teach it. Not that I’m comparing the two, I’m solidly Austrian and I think teaching creationism in biology is nutty as hell, but I imagine the professors’ feelings are similar.
That’s an interesting analogy.
I think there’s a lot of support for the Austrian school starting to come back, not just because of Bitcoin but because of a lot of the economic problems in the world lately. I think people are starting to question a little bit more. When the world is being run by the Keynesians and everything seems to be working there’s no incentive for people to question whether those ideologies are right or not. When you have whole markets and economies imploding around you, suddenly the opposition starts to look reasonable.
Yeah, and you bring up an interesting point about programmers coming in and getting excited about Bitcoin because of the code and the cryptography and trying to understand the economics. When a coder looks at economics he’s going to look at it from a very analytical point of view, so it has to make sense to him. So they might not buy into all these things the economics professors are saying, it might not make sense to them. Economics never made sense to me when I was taught the Keynesian way, but when you look at it like simple supply and demand, there’s nothing fundamentally different about a federal bank or a regular bank or anything else, they’re just in the market, supply and demand and suddenly it makes sense, you can grasp the concepts and how they make sense together.
Very true, I think one of the things that resonates with me is that one of the first things I was taught as a new programmer, after they teach you flow control and I/O and the basics, one of the first higher-level concepts I played with were things like Conway’s Game of Life where you have these very simple rules and interactions that on the face of them don’t seem like they should be capable of creating anything interesting or complex but given the right starting conditions you get these intricate emerging phenomena. It reminds me a lot of the way Austrians view market forces, supply and demand aren’t super complicated but you create this big tangled hierarchy of supplies and demands and sometimes-rational sometimes-irrational people making trades and you end up with something very complicated that despite following simple forces does really complicated and often unpredictable things. Maybe if you could control all the starting states and account for every actor you could steer or predict a market but we can’t even predict the weather more than a day or two out.
Exactly, and we can see what happens with heavy-handed manipulation. It doesn’t matter what kind of complex human interactions you’re trying to control whether it’s the market or morality, it doesn’t really work. Not only that but it’s kind of a violation having the government try to tell you what’s good for each individual person – if it’s not hurting anyone else, why should they get to tell you what to do?
I can’t recall the source, but I do recall reading something very recently that resonated with that. It was a big long paper that boiled down to something like “The difference between crime and vice is that vice only hurts me. Don’t try to outlaw my vice.” I’m probably getting a little more political than I usually do in my articles, but it’s an important point.
I agree, I think we should have the minimum possible number of laws to have a functioning society, don’t kill anyone, don’t steal things, that sort of stuff.
I think it’s pretty telling that when the U.S. was founded, one of the first things our founders did was not to pass a bunch of laws prohibiting citizens from doing things, but instead drafted a document limiting what the government could do to the citizens.
Right, and I think that comes out of their contemporary experiences. They were fighting their way out from under this power that they felt was abusing them so it was very much in their minds.
Yeah, the entirety of North America was dominated by European colonies for most of its early life and if you look at the stuff that was happening in Europe in the 16th to 18th centuries… I think there’s definitely a truth to history being cyclical – one of the interesting statistics I came across when self-educating on economics was the division of wealth in France at the time of the revolution is approximately what it is in America right now, the only difference being that we’re not dying of the plague and we have better agriculture tech so most of us aren’t starving. It was enough to behead leaders back then, and today no one really seems to notice.
Well there’s some interesting studies about the distribution of wealth, having to do with power laws and the 80/20 law and basically the idea, the theory, is that it doesn’t matter what happens you’ll always have 20% of the people owning 80% of the wealth, it’s not a normal distribution. So that’s another thing, maybe fighting that will only lead to disaster, like these other manipulations we were talking about.
That’s pretty interesting. It’s one of those difficult topics where I sort of fence-sit because part of me wants to take everything the multi-billionaires have and give it to the folks choosing between paying rent and buying food, but part of me also recognizes the right of an individual to amass wealth. Economics, more than any subject I ever had proper schooling on, seems to have the most moral dilemmas. It’s such a deep topic and I still can’t imagine why it’s not a required topic.
That’s why Mises called his book “Human Action” which is kind of startling, because you’re used to the idea that economics is about money but it’s really about humans just interacting with humans.
And any time you have a large number of often-irrational humans interacting with one another you get incredibly complex results, moral dilemmas, drama… It should really be a bigger deal than most people make of it. There’s as much philosophy as science and it deserves a lot more study than it gets.
At this point we had to move the conversation from Skype to cellphones – and after the standard niceties, the topic abruptly changed.
I really look forward to any opportunity to talk to other Bitcoiners. There are a few where I live, and I’ve met some good people, but Vegas doesn’t really have the most active Bitcoin culture.
We’ve got a pretty active Bitcoin community here in New Hampshire. We usually get 15 to 30 people at the meetups. We had one guy at the last meetup who was brand new and he wanted to buy some bitcoins. We had a local exchanger there and they whipped out their phones and tablets, traded cash and the coins showed up on the guy’s phone and his face just lit up. He’d done it maybe over the internet before, but it was different in person.
Yeah, there is something about an in-person exchange that makes it feel more real, more tangible.
Absolutely. Once we were at this bar and some guys who had heard about the meetup and wanted to buy some bitcoins came in. So we sat down, opened our computers, they took out some cash and gave it to one of us to do the exchange and then the manager of the bar came over. He must have thought there was a drug deal or something going on and he started being very authoritative, asking what it was all about and saying “there’s no soliciting in the restaurant” and stuff like that. We tried to explain it to him and he came back and apologized for his tone and everything. We’re going to go talk to him later and see if we can get him to accept Bitcoin at the bar.
That would be an awesome success story if it actually goes down that way.
Yeah, we’ll see. We’re trying to get everybody that we can. We’re trying to copy the success of that neighborhood in Berlin where they have a bunch of shops on the same street accepting Bitcoin. I don’t know if you saw that on the forums?
I did, actually, I actually got a lot of information about it when I was doing my Bitcoin Friday article, because I believe that was their big launch date for the whole thing. I honestly feel a little bad for not having included that in the article because it’s kind of a big deal.
Well you could still do a whole post on it. I think that’s one of the most inspiring things going on right now. It sort of showcases the two big ways Bitcoin grows, because you get these big players like WordPress.com but you also get these local, small, mom-and-pop type places where you can actually speak to the owner. Once you’ve got a few neighbors accepting Bitcoin you can say “Hey, accept Bitcoins, the whole neighborhood is doing it” and then if that works then it can be scaled across the whole world, and that’s just really beautiful, this grassroots thing that can’t be stopped.
Yeah, that’s basically the definition of geometric growth, you start expanding at a point and the surface area of your local bubble, the number of businesses you touch, increases exponentially. Just pick a place and start expanding outward.
I think they key to that is having the right pitch for these guys and it has to be based more on a community type of thing, maybe a little anti-bank sentiment (nobody likes banks) but more of a community thing. These people don’t really understand cryptography or the bigger political messages, but sometimes they do surprise you – I’ve had a few interesting conversations just asking somebody if they accept Bitcoin – but I think it could work, you can bring examples of how it’s worked for other places. I can go to a cupcake store on Elm street in Manchester and say “hey, there’s a place in San Francisco that’s doing it and it’s working great for them.”
I think one of the other big pitches, that was supposed to be the big pitch from the beginning but while the infrastructure is still fairly small and young isn’t a very realistic pitch, was that… They may not understand cryptography and they may not even understand who’s responsible for the problems they’re experiencing, but they sure understand fees and chargebacks. Right now, the fees, because your bills are all still in dollars or euros or whatever and there’s costs for exchanging back and forth you end up in a scenario where it’s still cheaper and you don’t have the chargeback risk, but it’s still more fees than Bitcoin itself sort of advertises it has. I think that’ll change with scale, I mean the more people accept Bitcoin directly the less often you have to exchange, but I think that’s a big hurdle for a lot of businesses – it adds another layer of complexity and at the moment it doesn’t actually save them as much as they’d like it to.
Right, I think that’s right. There’s a pitch about “you don’t have to pay the 3% credit card fee” – that’s not a really winning pitch right now. The chargebacks for e-commerce is huge though, there are a lot of countries I can’t even sell to. Even if they buy something on my site and I’ve got the credit card transaction in my hand, I can’t sell to them because I know the charge will get reversed. I have to do detective work sometimes to determine if I should send the guitar or not and all the risk is on me so it’s really pretty terrible for business. I always write to them “if you want the guitar send me bitcoins” but of course that never works, but if they do send me bitcoins I have no problem sending the guitar anywhere in the world, so that’s a really good point but for the average restaurant, I don’t know how much chargebacks really hurt them.
For a restaurant, to use your example, I don’t think chargebacks are even the big risk. I’d imagine the big risk is the dine-and-ditch and without getting money up front I can’t imagine there’s much you can do about that.
Right, so that’s not really something that Bitcoin can address.
Actually I had an article a while back about some exotic transaction types you could do with Bitcoin, and I can’t recall if this was in there or not but you could so something like a pre/post authorization. That’s the kind of transaction they do when you’re pumping gas, for example, where they pre-authorize your card for one amount to make sure you have the funds (but don’t actually take any money yet) and then post-authorize it for the actual amount you spent.
What happens if you just leave and don’t pay, how do they get the money?
It depends a lot on how the transaction is structured, you could write it in such a way that both parties have to sign it or you could write it so the restaurant gets to finalize it for the actual amount, giving them a little more power. They already do it with your credit card anyway to allow for tips.
That’s actually a big misconception that drives me nuts. I got a lot of comments on that article from people screaming that we shouldn’t be making the protocol more complicated because it could introduce bugs and so on. Nothing in that article actually requires modification of the protocol, Bitcoin can already do it because every single transaction is a script, they just happen to be really simple scripts right now. Making this kind of transaction happen is just a matter of writing a script for it. The only modification you’d need to make is maybe adding a menu option if that kind of transaction became common enough to deserve one.
I’d imagine that’s a lot like the chargeback argument, if say 5% of people leave without paying then the restaurant could afford to charge 5% less with a system like that.
That’s the idea, BitcoinStore seems to be doing pretty good with that so far. I’ve got my fingers crossed they’ll hit their minimums and stay open. But yeah, less fraud means you can lower prices by however much the fraud was costing you… Or just make that much more profit.
Well if there’s competition that would drive down the profit margin, so as long as you can take out the extraneous cost you should get better prices and the market should take care of it all.
And you get to sell to Nigeria again.
Yeah. We’ve actually had orders from Malaysia and places like that but we couldn’t send the product because we knew they’d be charged back. I don’t think people who live in places like that even try to order things online because no one will sell to them, there’s so much fraud. If Bitcoin were more widespread maybe we’d see more legitimate business from these countries that are sort of blacklisted right now.
We actually got a Bitcoin order from the far north of Canada, like igloo territory, no one lives up there, it was a really remote place – it was a Bitcoin order for strings. We were theorizing that maybe they’ve got a mining rig up there in the snow getting free geothermal energy or something.
Another thing I wanted to tell you about is this Philly Bitcoin conference we’re doing in 2 weeks, December 15th. It looks like it’s going to be pretty big, there are about 70 people signed up on facebook already and we haven’t really started doing the main promotion yet. I also went to one of these student conferences, this one was in Philly, and there’s a guy I met there and we got together for drinks and we talked about starting some kind of Bitcoin thing and it just developed from there. It’s looking like it’s going to be really nice.
At this point we exchanged contacts for a bit and discussed potential speakers for the conference and once again the topic abruptly changed.
I’m pretty excited about StompRomp, by the way. I mentioned that I’m more of an acoustic player, but I have been meaning to branch out a bit.
Yeah, electric is an entirely different thing. The guitar itself is different, but then you’ve also got all the pedals and the things they can do are so wildly different, just hooking up a new pedal can be like being handed a completely different instrument.
I’m also very interested in the electronics and engineering and pedals seem like really intriguing projects.
They really do represent some complex systems. A lot of it is, y’know, how waveforms get modified as they go through these old transistors, vacuum tubes, they just do crazy things with these signals that are very very hard to model.
It seems like one of the last places where analog is still the norm, though there is a lot of digital showing up on the marketplace these days. There’s some software out there that will provide a pretty convincing simulation of different pedals and amps. You can still hear the difference but it gets more convincing by the day.
I have no doubt it’s going to go there, it’s exactly the same thing that happened with film. For a long time they had digital cameras, and they were good but they weren’t quite there in terms of quality, convenience, ease-of-use, but once it hit a certain point it just overwhelmed film so much that it just left them in the dust and no one is using film any more – except maybe for actual films, movies, some of them are probably still shot the old fashioned way but that’s going to go by the wayside too. I think that’ll happen with guitars, amps and pedals too. We’ve already sold some really convincing pedals, delay pedals, echo pedals, you can still tell the difference if you’re really looking for it but there’s something “dirtier” about the analog, more interesting, but eventually we’ll get there, especially with tubes. Vacuum tubes are such a pain in the ass, and there are people just waiting to ditch them.
You made a great analogy there with film going digital. What I’m looking forward to is this threshold, even more than the convenience threshold… I don’t know if you knew this or not, it’s one of my favorite pieces of trivia, but the original movie “Tron” was disqualified for a Visual Effects Oscar award because computer graphics were considered “cheating” and today obviously computer graphics are the norm. For a long time, computer graphics were just simulating what happened in the real world more and more convincingly, sort of like the digital effects pedals are just simulating analog now. Today, CGI has moved beyond the constraints of reality and can define its own rules – I’m waiting for people to start doing that with digital pedals, break out of the analog box.
There are some effects pedals that are digital and are starting to do crazy things. That’s actually what happened in the analog world, the analog pedals in the beginning were just trying to emulate certain kinds of amps and then people started doing crazy things with these pedals that you can’t do with any amp. I agree, though, that’s when you really know that a technology has arrived is when people are doing new crazy things with it, not just trying to copy the old stuff in a new way. Hopefully the same thing will happen with Bitcoin.
I was just about to draw that parallel.
How could you not?
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