The Back of the Envelope (a blog)

Don’t abolish bar exams, abolish law schools

This post underwent a major edit on 8/8/21. tl;dr version of this post:

  • If people are really interested in increasing access to the profession, they would propose abolishing the requirement that prospective lawyers enroll in $250,000 law school courses which take 3 to 4 years to complete.
  • The cost of attending U.S. law school is 3-6x the cost of a comparable overseas education. I should know; I’ve done law school twice (once in England and once in the USA).
  • Students would still probably attend law schools as a signaling exercise, as they do with the MBA. But the important thing is: they wouldn’t be forced to.
  • Law school is the single most time-consuming and expensive prerequisite for, and deterrent to, admission as a lawyer in the United States.
  • The absurdly-named “juris doctor” is not a doctorate, it is a survey course. It can be learned through book study or online just as easily as in person.
  • Despite the lofty name of the degree, in any given year up to 20% or more of the country’s juris doctor graduates fail to master the material and this translates into failure on the bar exam on the first attempt. The pass rate varies widely by state and by date of administration; California’s Feb 2020 bar pass rate was a mere 26%, for example, where its July 2019 pass rate was (a still very low) 50%. Although in 2021 this increased to nearly 80% on the first attempt and 90 per cent. on a two year timeframe for ABA-accredited graduates on a national basis, this number varies widely year to year, there is a a lower pass rate in jurisdictions with higher cut scores, and a considerably lower pass rate for schools lacking ABA accreditation or at the lower end of the rankings.
  • Legal academics propose to address the issue of students who cannot pass the bar by making a juris doctor, not bar passage, the prerequisite for professional licensure, plus either extra courses or a period of supervised apprenticeship.
  • Such proposals exhibit NYC-taxi-medallion levels of rentierism. Lowering standards to wave these students through does nothing to address the obvious inequities of forcing unemployed twentysomethings to take on a quarter-million dollars of debt to obtain professional licensure.
  • Supervised apprenticeship proposals are not a cure-all, either, as countries which have employed them (England and Wales) have actually instituted bar exams due to the fact that apprenticeship requirements have made it harder for law graduates to obtain admission, since admission to practice was predicated on getting a job with a legal employer and there are more law graduates than there are law jobs.
  • Even in the United States, among students passing the bar, competition for legal employment is ferocious. Making legal employment a prerequisite to admission will necessarily make it harder, not easier, to become admitted.
  • Abolishing the law school requirement and allowing people to take the bar exam, MPRE and state law tests e.g. NYLE via independent study in their free time at their own pace, straight out of college, could reduce costs of attaining admission by up to 98.8% without lowering standards for students who elect to self-study, would allow students to read law as an undergraduate discipline as is commonplace in other countries, and would permit new lawyers to start their careers without a penny of additional debt.

Long version of this post:

Utah has done the unthinkable: it has cancelled its bar exam and decided to admit future lawyers, for one year only, on the basis of diploma privilege.

I joke, but only a little. Covid-19 is the sort of force majeure scenario which justifies such a drastic course of action, although I’m sure that prospective lawyers in Utah from the law schools that benefit from the so called “diploma privilege” exemption aren’t crying themselves to sleep every night over the fact that they didn’t have to take what is, by any account, the worst thing most lawyers will ever have to do.

Which is not to say that I regret taking the exam myself. Far from it. I am glad I took the test. I felt incomplete being an American citizen and English lawyer who hadn’t passed the test. I will remember the day I passed it (first attempt, fyi), and the day I was sworn in about 35 days later, for the rest of my life. I am particularly glad that, unlike these poor souls in Utah, I will never have to endure the asterisk: “Well let me tell you, when I was your age I remember passing the bar exam… you didn’t have to take the bar exam?… well LET ME TELL YOU…” …that every law partner in Utah will tell to the Class of 2020 for the next twenty years.

Of course, legal academics and legal education observers, who love to talk and thinkpiece their way through life, have now begun to contemplate the implications of not holding the exam – not just this year, but permanently. I’ve seen this argument made a hundred different ways over the past ten years. Recently Law360 ran this article – Don’t Just Delay the Bar Exam, Cancel it Forever – in which an attorney wrote that

Law students go through three years of legal education (or not) and have to take exams in all the required courses (and some electives). More and more law schools are providing clinical education and courses about law practice management. And while the profession questions whether today’s law students are prepared to be lawyers, we still make them sit in a large ballroom or convention center for two or three days and answer questions about legal concepts.

Another articleIs the Bar Exam Necessary? written by Stephen Foster of Oklahoma City University, tweeted below by a law professor from Ohio State, had this to say:

From the article:

Aside from the obvious financial bias, the white paper conflates bar exams protecting the public with their version of the bar exam protecting the public. They espouse the MBE’s greatness through reliability and validity. Their argument is an objective MBE is fair, and thus the best assessment. The argument is persuasive if fairness also related to the practice of law, but unfortunately, I believe the MBE only tangentially relates to competence to practice law...

I contacted over a thousand former students and attorneys in OKC to take a simulated MBE provided by a bar review company.  Approximately 20 agreed to take the exam.  The practice experience ranged from 1 year to over 15 years.  Unsurprisingly, 0 (zero) people passed the simulated MBE according to the Oklahoma MBE cut score at the time (135).  A litigator passed the Evidence section, but no one else passed the subject they practiced the most.  ADAs and PDs failed the Crim Law section.  Transaction attorneys failed Contracts.  As attorneys’ experience increased, MBE scores decreased.  I had Superlawyers, local award winners, and Superlawyer Rising Stars take the test.  The results were the same for everyone.

This is a garbage argument, because (a) the bar exam does not test competence and (b) a bar test-taker’s competence to practice law the day after the exam is non-existent or very close to it.

Here is a picture of some students in a math lecture which I am including here just so that there’s an academic-themed thumbnail with this post. Pixabay licensed.

Virtually no law student is competent to practice on the day they leave school, or even on the day they pass the bar exam. They have never practiced law a day in their lives; they have no idea what awaits them. Competence at law practice can only be acquired and added to through experience, “on the streets,” with actual clients and actual legal work. Law school is about teaching students the language and logic used in law practice, not practice itself.

“The criteria for admission should be competence” is therefore little more than a pretty lie we tell ourselves. We cannot make policy based on a lie, however convenient it may be.

What we really mean, and what we should say, is that the bar exam is a test of intelligence and mettle, to be combined with a background investigation that assesses moral fitness. Brilliant candidates can and do fail if they do not put in the work; the most determined candidate can and does fail if they’re just not cut out for it (one of the test takers in Connecticut in 2018 had taken, and failed, the exam something like 13 times). Nobody admits this because doing so would offend test takers, particularly those who do not pass, and law school professors, particularly those at schools with low pass rates.

“Protecting the public,” “ensuring lawyers are competent,” blah blah is all doublespeak designed to avoid stating the obvious, and uncomfortable, fact that, while all lawyers make mistakes, dumb and undisciplined lawyers have the potential to make many more mistakes than average. The exam serves as an intellectual hazing ritual which weeds out less able candidates by testing a huge battery of basic knowledge the bar has decided students must have, even if they will never use it, much like medical boards which young doctors must take.

Seeing and understanding that material easy-does-it, steady-as-she-goes, at a slow pace, as students do in law school, with the assistance of group outlines, in many cases tested by open-book or even open note(!) exams, is easy; most 3Ls don’t flunk out, whereas anywhere from 25-50% of 3Ls fail the bar exam, year after year. Having enough familiarity with the material to comprehend problem questions and compose answers on the bar exam proves the student has at least seen the material once, has mastered it, and is smart enough to recall it and form coherent thoughts about it in an immensely high-pressure situation.

(As an aside, the Common Professional Examination battery of academic law exams in England, by contrast, is not open-book, is 100% essays, expects detailed knowledge of case law and takes 21 hours over 10 days rather than 12 over 2 days. It was considerably harder than U.S. law school finals and in my opinion it was moderately harder than the Uniform Bar Exam, although perhaps has a higher pass rate since re-sits are permitted if a single CPE module is failed, whereas the UBE is a one-shot deal and must be retaken from scratch if failed. Unlike the UBE, one’s CPE score matters for future employment prospects; a failure on a single CPE module, even if cured, will be regarded as disqualifying by many English legal employers much in the same way as bar exam failure would be in America.)

Passing the bar exam requires a lot of hard work to commit information to memory, and sufficient intelligence to be able to apply it to problem questions. I would agree with the authors above that possessing a certain number of IQ points and a willingness to work one’s ass off is not, in itself, enough to say a test-taker is competent to practice law — how could it be? — but it is a good indication of some of the basic qualities a lawyer needs to possess in order to serve a client effectively, chiefly, intelligence, the ability to process information while operating with a degree of expeditiousness, the ability to express him or herself coherently and the willingness to focus one’s efforts and work very hard to achieve a singular, arbitrary objective that a third party has set.

Lawyers, like doctors, must fuse practical competence with intellectual competence. A heart surgeon may have outstanding manual dexterity, but failure to match skill with the hands with wider medical knowledge necessary to treat the whole person – failing to demonstrate an ability to master of the basic corpus of medical knowledge required to pass the boards – should be disqualifying. So it is and should be with law.

I therefore think the bar exam is actually not so bad as its detractors portray it. This state of affairs is unfair, of course, as life is unfair. By the same token, so is the requirement that most students must complete three years of postgraduate study before being allowed to sit the bar exam; that is particularly unfair, especially for bright students from low- and middle-income backgrounds who might be in a position to just avoid all the fuss, take a bar review course and sit the exam. (We do not often hear it said by legal academics, “abolish the law schools and allow college graduates to proceed directly to the bar, because taking three years of life and $200,000 in federally-guaranteed student loan debt which is applied towards our salaries from aspirational young people is unfair!”)

The question then is not “should we abolish the bar exam because it is unfair?” The question should be whether the bar exam is the least unfair or least bad option to ensure that individuals possessing the requisite intelligence and drive to be lawyers, become lawyers, so that there may be adequate competition for legal services at the same time as the public is protected and the administration of justice remains efficient.

Due to economics, “Diploma Privilege Plus” is probably less fair than the bar exam

The alternatives seem to be one of two things. “Diploma privilege,” where obtaining a law degree is on its own sufficient to practice, and “diploma privilege plus,” meaning the bar exam is waived, but students have to practice under supervision of a senior attorney for a time.

Except for a few odd jurisdictions like Wisconsin, pure diploma privilege is not practiced; in my view, nor should it be, as this takes responsibility for testing newly graduated students and puts it in the hands of the universities, which are not to be trusted seeing as their incentives are to ensure all their paying students pass. Per ATL,

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“Who does all the supervising?” ATL asks. The answer is “probably no-one,” at least in an economic depression. “Diploma Privilege Plus” will have three consequences.

1) There are those who argue the bar exam is an undue financial burden (about $1,000). Under Diplo Privilege Plus (“DPP”) The price of admission to the legal profession is the cost of three years of law school, which is much more expensive than the administration of the bar exam (for those folks who argue that the bar exam is an undue financial burden).

2) DPP requires all prospective candidates for admission to first find a lawyer willing to oversee them for a period of apprenticeship. Employment is a qualitative exercise rather than a quantitative one. The well-connected and well-educated will be first in line for those jobs, much as they are today. Except, where today being poorly-connected might result in a lower salary, under DPP being poorly-connected might mean not getting admitted at all.

3) In the worst economic crisis in living memory, DPP might make it appear superficially easier for students to pass through the gates. We cannot know what will happen in advance, but if I had to guess, I’d think that if DPP were rolled out in a depression, the number of law jobs available for prospective attorneys would fall dramatically, acting as an absolute cap of the number of attorneys that will be admitted in that year, regardless of ability.

There’s a system that worked like this. It’s called England and Wales.

As it happens, I’m one of very few Americans I know of – I know of two others – who were first admitted in England. Of the three of us I’m the only one who decided to come home and get admitted again. (It’s a lot of school.)

In England, after law school one is required to undertake a one- or two-year apprenticeship (depending on whether you’re a barrister or solicitor) before you’re admitted. If you get an apprenticeship a few years ahead of time, the firm (often) will pay for law school and give you a stipend to live on.

Not bad, right? Well, it’s a contract, and as such, it cuts both ways. During your apprenticeship, you are bound to that employer; your pay is considerably lower than that of a junior associate at a comparable firm in the United States; leave your job, and your entry into the profession will be more or less permanently denied (no-one will re-hire a trainee who quit).

For law students now thinking that “diploma privilege plus” might seem like a *great* idea, a word of caution. “Lawyers pay our law school fees! No exam, we can get straight down to work!” Sure, fine. The problem is that, unlike in the U.S., before you can get admitted you have to get a job – and get a law firm to commit to keeping you on its payroll for a fixed two year term up front – before you can practice.

When I moved to the United States to get my U.S. admissions in order, it was hard to get a big firm job because my qualifications were so nonstandard. I hung out a shingle, opened my own practice and built a book of business from scratch. Making the price of admission the passage of a bar exam allows this – it allows people to take and pass a test, and then get to work without anyone’s permission.

“Diploma Privilege Plus” takes that power away from test takers and gives it to law firms. Amid a worsening economic crisis it’s not hard to see why “diploma privilege plus” might be a bad idea. If you thought the bar exam was a barrier to entry, apprenticeship programs – properly, “training contracts” – are *way* worse. If the number of law students exceeds the number of places, it is a guarantee – an absolute certainty – that everyone who wants to become a lawyer won’t, even if they’re good enough, because a prerequisite to qualification is legal employment for a fixed term.

After a certain number of attempts, many people give up – law firms won’t hire someone whose degree has gone “stale.” Because of the two-to-three year time delay and the fact that trainee or pupil hiring, not bar passage, determines the supply of legal manpower for that cohort over that cohort’s entire lifetime, the supply of lawyers is generally constrained – in recessions capacity is cut, and in boom times it’s very difficult to bring new capacity online. As a result, in economic booms – particularly the late nineties boom which created financial services powerhouses like Clifford Chance and Allen & Overy – the larger firms had to resort to hiring and requalifying large numbers foreign-qualified lawyers from other common law countries when short-staffed, rather than growing their teams from a domestic pool of talent.

In fact, the apprenticeship model proved such an insurmountable barrier to entry to the profession that England and Wales decided to institute a bar exam – properly, the “Solicitors’ Qualifying Examination” – starting in September 2021 because the apprenticeship model was unable to provide enough jobs to law school graduates to permit them to proceed to admission.

The law grad/job availability ratio in the UK is something like 6:1 in any given year, 10:1 (or worse!) for barristers. I dread to think what it will look like in September 2021, after four admission cycles (two per annum) dealing with COVID-19.

So diploma privilege plus may look great in the eyes of a student who doesn’t want to take the bar exam (none of us wanted to, let’s be honest, but we did it anyway) or the dean of a crappy law school with a low bar passage rate. But law firms are not stupid, crappy law schools are still crappy, and in countries that have “diploma privilege plus” apprenticeship, access to the profession isn’t easier for the sort of candidates who couldn’t under any circumstances pass a bar exam, because (generally speaking) their college and law school transcripts are disqualifying. Failing a module, for example, is grounds at many firms for revocation of a training contract, even if the student passes an exam on a re-take and subsequently passes the course. A training contract revoked in this way is for all practical purposes impossible to replace.

In terms of conversion of successful law graduates into actual, practising (British spelling) solicitors and barristers, then, “diploma privilege plus” makes things considerably more difficult. This means there are significantly fewer lawyers: in the UK there are 140,000 solicitors and 13,000 barristers – you read that correctly, one hundred forty thousand and thirteen thousand – on a population base of 66 million, with private schools and elite universities heavily over-represented in that group.

In the U.S. there are approximately 1,338,000 lawyers – roughly 9 times as many lawyers – on a population base five times as large, all of whom have higher rights of audience (a right which, in England, is the exclusive preserve of the barristers and the occasional solicitor-advocate).

There are cultural reasons for this, as well as legal ones (e.g. the fact that England operates a loser-pays system for litigation costs). But there are also economic ones relating to hiring entry-level candidates. The apprenticeship requirement is one of them. I have a number of close personal friends who attended elite universities but tripped up on that final leg of the race to admission, and now work in legal-adjacent fields like risk and compliance – but who are not lawyers.

The reform which will achieve the most equitable results to the process of admitting lawyers to practice would be to abolish the law school attendance requirement

Some people aren’t cut out to be lawyers. Nobody disagrees there should be a barrier to entry to the legal profession. The question is what that barrier should be.

Personally, I would have preferred then, and still prefer now, having an objective, anonymously-graded test, lasting two days and costing $800, to be that barrier. If people are really interested in increasing access to the profession, they would propose abolishing $250,000 law school courses which are the single most time-consuming and expensive prerequisite for, and deterrent to, admission as a lawyer in the United States. 

The American first degree in law – the absurdly-named “Juris Doctor” – is not doctorate. It involves little to no advanced subject matter research. It requires little close supervision. It’s a survey course which prepares people to take the only test that matters – you guessed it! – the bar exam. Especially now that everyone has gone full-remote during COVID-19, there is absolutely no reason that law schools should cost what they cost; the books are the same at every school, the entire thing should be administrable as a MOOC and it should be optional. Abolishing law schools and making the bar exam harder to compensate would make admission to practice purely merit-based and capable of being accomplished by persons with very limited financial means.

The “Diploma Privilege Plus” crowd would abandon the test, still require prospective entrants to our profession to debt-finance, with interest, hundreds of thousands of dollars to subsidize legal academics and university administrators, and when they’re done with that process of being robbed by a cartel of law professors for a survey course that could easily be done in one’s free time, then force new law grads to deal with hiring managers, professorial references, work visas and the labor market in a quest to secure a two-year, underpaid, apprenticeship which they may never obtain.

“Diploma Privilege” is a way of saying law school admission standards (however low), law school administrators (whatever their politics), and legal hiring managers (whatever their economics), not an objective standard, should decide who is qualified for admission.

No thanks.

Welcome to prepping, Bitcoiners

I’m a Bitcoiner, libertarian, and somewhat of a prepper. There’s a lot of overlap between the three communities. I’m not quite sure why.

Part of it might be down to the fact that these groups tend to look upon large-scale structural features of our societies, such as central banks or sovereign debt piles, with a considerable degree of suspicion, correctly identifying that debt is itself a form of political risk reallocation and, as with all risk, increasing the amount of risk in a system makes it vulnerable to stress.

With that in mind, I think it’s OK to now say that mild prepping is no longer some loony fringe hobby. As we see that the basic, “boomer” assumption that modern, technocratic government will always have the capability to handle a crisis is wrong, we also see that individual people and companies who were prepared for this crisis were in the best position to assist with ending it. See, e.g., MyPillow, GE, and GM at the corporate level, or people who got off of the streets and went into quarantine in the first week of March on a personal level.

Companies that carried large debt loads or frittered away their cash on stock buybacks appear fragile and brittle in the face of a 12-standard-deviation demand shock. This will likely set a new baseline across our society – both in business and personally – where savings, thrift, and resiliency, even if inefficient, become higher priorities among individuals, businesses, and governments.

Comprehensive risk management is, when applied to individual life, referred to as “prepping.” The benefits of “prepping” are that when a global disaster like Covid-19 strikes, the only errands you need to run are (1) to a low-tax liquor store on the Delaware state line and (2) to one’s local Staples to pick up printer ink, rather than joining the hordes of Americans fighting over the last boxes of rigatoni and minute rice.

On a personal level, I am sure – Twitter reveals all – that many of you in the Bitcoin world are now venturing into the preparedness universe for the first time.

Neeraj is the crypto meme master. He is not a farmer. And he’s totally into this.

Then there’s his colleague, Peter:

Originally I thought Peter was a neophyte to this but I’m now advised he’s been into permaculture for awhile.

This is awesome. People are getting into self-sufficiency and people who are into self-sufficiency are starting to talk about it more.

New people should be warned, however, that there is an entire industry dedicated to prepping and, more particularly, selling you a bunch of preparedness crap that you probably don’t need. In keeping with the financial preparedness piece of the equation, you shouldn’t spend a penny more than you need.

To paraphrase the Adam Smith Institute’s Madsen Pirie, before Covid-19, prepping was considered lunacy. In the future, it is likely to be policy, at all levels of society.

It’s something I’ve tried to apply in my personal life. Here’s how I went about it.

1) Eliminate debt loads.

 The best thing you can do from a preparedness perspective is to eliminate all debt, particularly if it carries a high rate of interest. This will allow you to save and invest.

2) Preparedness is a way of life, not a line-item.

 Until recently I ran a small law firm on my own. During that time I kept my burn rate very low by, e.g., setting up shop in Connecticut rather than New York. My aim was to always have several months’ worth of opex in bank so I could survive if the phone stopped ringing for a few months.

Fortunately, that never happened. At the outset of the Covid-19 crisis, I was a little shocked to learn how narrow other businesses’ margins were. (Although admittedly when I first started working for myself I wasn’t planning for demand shocks, either.) I learned the hard way that runway is life during (a) my days as a startup founder, where survival and successfully closing venture investments was highly correlated and (b) my days after running a startup when I had to stretch out my savings while requalifying as a lawyer in the United States and unable to work.

After realizing that whatever safety net you thought you had by virtue of living in a modern, Western country was a figment of your imagination, you’re never quite the same. You cannot fix this problem with a single transaction. You have to change the way you do business. All of American society is now experiencing austerità for arguably the first time in nearly 100 years, and realizing that it, too, under certain circumstances, has no safety net.

“Money printer go brrr” may be working this time, but it can’t work forever. It is not a sound basis for society-wide risk management. I predict that, once this crisis is over and people begin getting back to work, saving rates will soar. With good reason.

3) Start small by building an EDC loadout.

De-risking is the accumulation of many small decisions rather than a few big decisions. Like stacking sats, except you’re stacking stuff.

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This is a lot of work. Don’t try to do this overnight.

You have to be cheap enough, but not too cheap. There are limits to cheapness. When I was in London during the Great Recession of 2008-09, for example, one law firm was rumored to have decided to slash costs by sending all mail via Second Class post, which was not a good idea (this decision was, apparently, swiftly reversed when the firm realized that the postal/mailbox rule in England only applies to First Class post).

Fortunately,  you don’t need a ton of gadgets and junk to be ready for most situations. You should have some tools.

I recommend that folks who are totally new to this start with only a handful of things by building what I call an everyday carry, or EDC, loadout. This includes basic stuff like hex keys, a multitool, a flashlight and spare batteries, a utility knife if laws in your jurisdiction permit (in England or NYC, for example, this would not be a smart idea), a lighter or two, maybe something for water filtration, and a small case in which to keep these things.

If you’re not accustomed to having any of these things around, after doing this, what you’ll find is that situations start coming up where before you didn’t have the right tool but, suddenly, now you do.

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My typical EDC loadout. A flashlight identical to this one is on my person at all times. The rest of this stuff is usually nearby, either in a bag or the center console of my truck.

Keeping a toolbox in your car or office is also probably a good idea. Car kits can be built out with useful, but bulkier, things that you might not want to drop into a briefcase or backpack but would want nearby, like jumper cables, 12 volt DC-AC converters, spare battery packs, and small electric air compressors. You will wind up using them at some point.

To be perfectly frank, a multitool, a good set of allen wrenches, a flashlight, and a set of jumper cables was enough to handle virtually any real-world problem I had until Covid-19. My guess is that the same will be true for you.

4) US government guidance is woefully inadequate, and purveyors of survival kits, citing that guidance, will try to rip you off.

FEMA’s official guidance states that every person in the United States should keep at least 72 hours’ worth of non-perishable food and other necessities (batteries, etc.) for themselves and their families immediately available.

By implication FEMA also says that businesses should also be prepared for 72 hours’ worth of disruption. As the current crisis shows, however, 72 hours is simply not enough to deal with crises of the scale modern Americans may expect to face. From a business perspective, if you can’t cover your expenses for more than 72 hours, you need to cut expenditures somewhere or open up a revolving liquidity facility.

From an individual perspective, your first task on your prepping journey will be to assemble these supplies. One thing you may encounter as you embark on your preparedness journey is a concept known as a “bug-out bag” which holds 72 hours’ worth of stuff and a first-aid kit. You should have one.

In online prepper circles, bug-out bags are a serious topic of conversation, because these bags are regarded as the ultimate grab-and-go survival tool you’re able to have with you at all times. I keep mine in the back of my truck. Much digital ink has been spilled over what the exact contents of these bags should be, how much they should weigh, or even what they should look like, with some adherents preferring tacticool MOLLE bags and others preferring more subtle I’m-weekending-in-the-Hamptons-nothing-to-see-here duffels.

Some companies sell luxury 72-hour bug out bags full of generic crap for $500 or more.

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Overpriced

You do not need these expensive kits. You can build them on your own, with better equipment, for a fraction of the cost and with negligible effort using sites like Amazon.com (although I always recommend going to local shops first if you possibly can). Check out sites like The Prepared or graywolfsurvival to see how the prepper OGs developed their “bare minimum” supply lists. What works for them may not work for you. Decide what works for you.

FEMA’s 72-hour guidance is, very clearly, obsolete. That doesn’t mean you shouldn’t follow that advice as an absolute bare minimum level of personal risk management.

In my opinion you should probably keep enough on hand to survive for two weeks rather than 72 hours, and you should store it in a trunk rather than a bag.

Part of “bug-out bag” theory is that it’s supposed to be something you literally grab as you’re on the way out the door, fleeing a disaster. Unless your house is literally on fire, in the United States it is unlikely that a major crisis like Covid-19 will emerge so quickly that (a) you are unable to get to a vehicle and escape and (b) you’ll have no time to retrieve some belongings. Considering that grocery store supply chains are continuing to work even in the Covid-19 crisis, if you keep a bag in your car, and a trunk in your house or apartment, chances are pretty good you’ll be ready for most disasters life throws at you short of an asteroid strike or nuclear war.

More preparedness is better than less. My personal preference is to keep a bag in the car and few weeks’ worth of stuff in the house that I’ll actually eat, so nothing is wasted and it’s possible to rotate things out well before they expire.

5) Don’t over-prepare.

FEMA’s official guidance for the Pacific Northwest is beefier than its guidance for the rest of the country, recommending that all citizens there maintain a 2-week supply of life’s necessities. This is good advice and, in my view, a good objective for most Americans to have.

This determination was informed by a  2017 disaster preparedness exercise code-named “Cascadia Rising.” Cascadia Rising simulated the outcome of an extremely large, so-called “Megathrust” earthquake off the coast of Washington and Oregon. That earthquake – the occurrence of which, like a global pandemic, is an absolute certainty on a long enough timescale – is predicted to register an almost incomprehensibly large 9.0 on the Richter scale and is expected to completely destroy most of the PNW west of I-5.

In theory, it seems sensible to just order a ton of Mountain House freeze dried food, leave it in your closet and forget about it until disaster strikes. But this is expensive, and on Day 17 of lockdown, I have to say that the ability to eat real food – meat, vegetables, fruit – is really rather nice.

With this in mind, I don’t keep a ton of stuff stored 24/7/365. That would be a waste of effort and money. Instead, in the run-up to the U.S. outbreak I implemented what I referred to as a “ramp strategy” which, rather like the collateral management in finance, ramped up the level of security I had on hand as the risk of economic collapse increased.

To do this successfully you need to make information and time your allies. As long as you are a high-information citizen, you can spot threats ahead of time, and plan accordingly. As the risk of a catastrophe in the United States increased, my preparedness levels – which, admittedly, were somewhat higher than average – rose commensurate to the danger. When Wuhan was locked down, I prepared. When Venice was locked down, I prepared some more. When the U.S. crossed 100 cases, I prepared some more. As D.C. shut down, I added the finishing touches.

The following week, as America realized the jam it was in, I was fairly annoyed with the situation but was able to follow CDC guidance, stay home, and focus on work without needing to worry if I’d be short on crackers and tea.

The lesson from the Covid-19 crisis is not to run out and buy all the canned food in the world and allow it to languish in a pantry until the next disaster strikes. The lesson is to be flexible, which means clearing your debt load, living somewhat more frugally and to focus on tooling and capabilities (being able to filter and boil water, make a fire, charge a battery, change a tire) rather than stuff. Unless you’re trying to be 24/7/365 prepared for a surprise nuclear first strike which you expect to occur in the immediate future, keeping a permanent stock of food you’ll never eat isn’t a particularly smart idea.

If you’re smart, you’ll know ahead of time what you need to survive for [n] weeks and will be able to submit some very tailored orders via online shopping to address those needs before less-informed citizens begin to swarm grocery shelves. This should minimize the investment of time and the risks of unnecessary or wasted expenditures.

6) As bad as it is, Covid-19 is probably not “the big one.” It’s also probably the worst economic crisis you’ll ever experience.

As bad as this is, it could actually be worse. Covid-19 kills anywhere between 0.2% and 1% of those it infects. Contrast this with the plague, which kills 17% of those who contract it, or H5N1 influenza, which kills 56% of those infected. Ebola and Marburg viruses kill, in some settings, north of 80% of their victims.

That said, while being on Covid-19 lockdown is likely the worst thing anyone reading this blog post will ever have to experience, it almost certainly isn’t the last crisis we will ever experience – meaning we should take the opportunity to learn from it and build up resiliency in its wake.

A resilient society requires everyone to do their part to be personally prepared, so (a) you aren’t part of the problem when a crisis breaks out and (b) you have the means to remove others from the zone of danger when a crisis breaks out, both of which limit the burden on government and your reliance on government to continue carrying on your day to day life until normality is restored.

Brittle America vs. Resilient America: on Covid-19 emergency rule and the decentralization of emergency powers

I have had time to reflect, and have reflected, on a great many things while in quarantine.

Being a lawyer is useful for a wide array of life’s little obstacles, whether those obstacles be a recalcitrant landlord or an unreasonable commercial demand.

1) Brief thoughts on life under emergency rule

So too, being a lawyer is useful while under emergency rule. I was in the Deterrence Dispensed Keybase channel the other day when a number of the participants, in response to the mandatory business closure orders being handed down by state governors in New York, New Jersey and Connecticut, began clucking that this – combined with the imminent deployment of the National Guard – meant that the country would soon be under “martial law.”

I chimed in:

“The New York Army National Guard isn’t being brought in to enforce the law and it’s still under civilian authority, chiefly, the governor. This isn’t martial law.”

“Are there troops?” A user replied.

“Yes,” I said. “But unless a general is given primary responsibility for enforcing the law and civilian law hasn’t been suspended, that’s not martial law.”

“That’s martial law,” the user repeated. This went back and forth for a bit until finally I checked out, advised anyone getting too worked up over this to sit back, try to enjoy the extra time they were about to have, and relax, because we aren’t yet living under martial law and the Constitution has not been suspended.

If you need evidence of this, look no further than the Firearms Policy Coalition’s outstanding work over the weekend challenging state bans on gun store closures as impermissible under the Second Amendment, often causing local officials to reverse course:

States that did not reverse course got sued. This is the surest sign that civilian, and not military, rule is still alive and well.

Now, over the next couple of weeks, if mathematical models are any indication, the Covid-19 epidemic in the United States is going to get bad. And by bad I mean very, very bad, ICUs without beds bad, morgues overflowing bad. This will be substantially worse than what we have seen to date, with many thousands of American lives being lost.

Politicians have been advised of this, and we have seen a number of draconian and arguably unconstitutional measures undertaken contrary to, for example, the Privileges and Immunities Clause or the Dormant Commerce Clause and the Due Process Clause of the Fifth Amendment.

The People’s Republic of Rhode Island and Providence Plantations, for example (commonly known as “Rhode Island”) is arbitrarily stopping anyone with New York plates, forcing them to provide personal information, and enforcing a quarantine:

Or see, e.g., Texas Governor Greg Abbott sealing his border with Louisiana, or Florida Governor Ron DeSantis forcing air travelers from New York or Connecticut into mandatory quarantine upon arrival in Florida.

Perhaps realizing that discrimination against New Yorkers definitely offends the Constitution, Rhode Island decided to change it up a bit and apply the rule to anyone entering Rhode Island from out of state, presumably whether they are Rhode Island citizens or not. This is less likely to offend the Constitution:

As the crisis gets worse, however, we may expect the states to behave more and more poorly – the view presumably being that an unconstitutional threat or enforcement action will save lives now, even if the state winds up having to pay damages later.

See, for example, church/synagogue/mosque closures. Closing a house of worship during a quarantine is arguably constitutional provided that the closure satisfies the strict scrutiny standard for judicial review, i.e., the closure relates to a compelling government interest (in English = absolute prerequisite to secure the very existence of a free state) and it must be narrowly tailored, i.e. no wider than necessary, to achieve that interest.

Where First Amendment concerns are implicated, the courts take a very dim view of governments which target particular viewpoints or religions with ostensibly objective but in fact are designed to target religion generally or a religion specifically (see: Church of the Lukumi Babalu Aye v. City of Hialeah, 508 U.S. 520 (1993), where a city ordinance outlawing the ritual sacrifice of animals was found to be an impermissible targeting of the Santeria religion, and struck down).

Ordering all buildings in New York closed and banning all gatherings greater than [n] people, as New York has done, is a general ordinance of general application that does not target houses of worship. For the duration of the crisis such mandates are likely constitutional.

There is a limit to state power to legislate in this area. New York, cracking under the pressure of the worst Covid-19 outbreak in the United States, is beginning to exceed it. See, e.g., this from NYC Mayor Bill de Blasio:

Constitutionally this isn’t even close. De Blasio is absolutely, 100% in the wrong. A policy that says houses of worship which violate an ordinance will be closed permanently after the crisis has passed (a) is unconstitutional targeting of religion and (b) is not narrowly tailored.

I think we may expect to see similar behavior where desperate politicians threaten unconstitutional enforcement to frighten people into compliance with quarantine orders. Don’t get me wrong, we should all be sheltering in place, staying out of the way of the public health services and letting them do their jobs. This involves not going to church. If the Pope is cool with it, the rest of us should be also.

We should not tolerate unconstitutional edicts, not even for one second, during this emergency. Nor do we have to. Organizations like the Firearms Policy Coalition are the tip of the spear. They are helping citizens enforce their constitutional rights against the government, even now during this emergency. Lawyers and law firms should be prepared to step up and do the same if we are called to do so.

2) Brief thoughts on life after emergency rule

China, the country where this disaster started, is making a very big deal out of the fact that it appears to have its own Covid-19 outbreak under control.

It is also using its apparent success to advertise its particular system of “socialism with Chinese characteristics” (yes, that is what it is called) and extend its own influence in its great power competition with America.

America can and will beat this disease, as China has. Afterwards there will need to be a reckoning with the way in which the United States dealt with the crisis and in particular, how federal agencies – the FDA and the CDC in particular – struggled to adjust themselves to the speed of the crisis and provide even the most basic approvals or equipment to the States, like approving private sector tests, permitting the repurposing of non-medical-grade, but nonetheless effective, N95 masks for medical use, or permitting private companies to decontaminate large numbers of  very badly needed masks.

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In the absence of federal guidance, individual states like Connecticut, Massachusetts and New York didn’t wait for the slow federal apparatus to save them: undertook quarantine and business closure plans on their own.

Of course, this crisis is not over. It may not be over until a widely available vaccine comes into use in ~18 months. Once it is over, there will be calls to be more like China and centralize power in new or restructured federal agencies.

This would be a mistake. As I was running earlier today (backwoods roads, very social distancing compliant) I recalled a complaint I read in the Washington Post about President Trump’s proposal to draw a cordon sanitaire around the Tri-State area of NY, NJ, and Fairfield County:

Aides spent the day warning the president against it, explaining that it would be impossible to enforce and could create more complications, the officials said, who spoke on the condition of anonymity. (Emphasis added)

Well, of course it would be impossible. As far as I know, there isn’t a single person on the pandemic response team who is from Connecticut. These people don’t know where the roads are, which ones people usually take, or frankly anything else about our state. They’re federal bureaucrats.

As I ran, I wondered whether it would be possible to establish a cordon sanitaire around my town. After considering all possible points of entry and egress and natural and man-made obstacles (rivers, ridges, freeways) I quickly realized that of course it isn’t impossible. It’s actually fairly easy to do, and could be done with perhaps two dozen volunteers, vested with the appropriate legal authority.

Of course, this legal authority is not given to towns or counties, but to the States, and the States look to the federal government for support in times of crisis. As a result, no town could decide to do this on its own, nor would it make sense to develop that local capability.

I don’t say this to suggest that a cordon sanitaire is an effective or prudent strategy for combating disease; I’m an attorney, not an epidemiologist. I say this because the federal government is visibly struggling to get this crisis under control, while town officials are on lockdown and doing virtually nothing.

When this is over and done with, corporate media and politicians in Washington will have endless debates about how to restructure FEMA, Homeland Security and the FDA to deal with the next big crisis.

This would be a mistake. What is needed is a deeply engrained resiliency at all levels of government, starting with individuals, moving up to towns and counties, moving its way up to the States, and then a small, nimble, and flexible federal apparatus that focuses on data collection and procurement assistance rather than as the sole emergency quarterback for the entire country.

The sense I get – and this is a feeling, rather than direct knowledge – is that throughout this crisis, nobody has really had any idea who, exactly, is supposed in charge. The creation of the sprawling federal bureaucracies has led the States and localities to expect that, in the event of a crisis, the sprawling bureaucracy – the cavalry – will always come riding to their rescue.

Where the crisis is everywhere, however, the cavalry is spread too thin. It never comes. Out here in rural towns with small hospitals, we do not expect the cavalry to ever arrive. We’re on our own, and we know it. We hope that our remoteness and low population density, combined with social distancing, will keep us alive.

“The Cavalry Will Never Arrive” should be the basic operating assumption of all disaster planning everywhere from now on. The result would be a more resilient America.

In a more resilient America, the City of New York would have been able to convert the Javits Center and several downtown hotels without the assistance of the State of New York, let alone requiring input from the Feds and the Army Corps of Engineers.

In a more resilient America, each town would have a dedicated volunteer team of disaster operations managers with a well-rehearsed playbook on how to secure their local area and roll out testing to their friends and neighbors.

In a more resilient America, a governor could draw a line on a map and local emergency management teams, properly equipped and empowered and possessing local knowledge, would be able to carry out those orders. The “impossible” would become possible, because we pushed down responsibility from Washington-based bureaucracies – which, for many parts of America including my own, are farther away than the nearest international boundary – to the localities that know their own terrain backwards and forwards.

In a more resilient America, without the federal bottlenecks around testing and supply shortages created by overstretched offshore supply chains for critical gear, this disaster might have played out very differently.

I should greatly prefer to live in a resilient America.

 

Not Legal Advice, 11 March 2020 – How to ensure your startup survives the Coronavirus

As seen on CoinDesk, welcome back to another edition of Not Legal Advice.

This week, we take a slight detour from securities regulation and statutory interpretation into the nitty-gritty of running a company in the middle of a global crisis, something which – fundamentally – involves thorny legal problems.

What everyone needs to remember is that the coronavirus outbreak is not the end of the world. It sucks, but when it burns out – as it surely must – life will return to normal and all of the assets will be very, very cheap.

See also: The Markets Were Already Vulnerable, Then Came Coronavirus

This isn’t the world’s first recession and it won’t be the last. It’s not the world’s first pandemic and it won’t be the last. The key for entrepreneurs is to keep a cool head about you, don’t do anything stupid (if you have never used firearms, for example, now isn’t the time to acquire one and start carrying it while wearing a gas mask on city streets), and adopt a war footing while you steer your companies through choppy waters for 12-18 months.

While the crisis persists, your company will have obligations it is expected to perform. When the crisis recedes and the courts reopen, your company will need to provide an accounting of its obligations and answer for any it has fallen short on in the meantime.

Here’s how:

1. Protect your employees.

In my opinion, the first job of early-stage founders isn’t to protect their investors, but rather their employees.

Cognizant that the formal legal duty of an officer of a company is to promote the success of the company for the benefit of its members, early-stage firms usually fall into one of two buckets – founder-owned, or founder-and-VC-owned – and the identity of the shareholders changes a lot about where a company’s business priorities tend to lie.

In my experience, purely founder-owned companies tend to view their closest staff – who help the company make money – as assets, and regard VCs as a distraction.

Founder-and-VC-owned companies, on the other hand, tend to regard their investors and investor relationships as a major asset of the company, at least until they manage to get the business moving under its own power. Investors’ interests tend to take precedence in such businesses.

There’s nothing wrong with either approach; sometimes the tech you’re building is so early stage that you have no choice but to accept investor funds if you want to spin up a business. However, keep in mind that (a) venture investment accepts a high degree of failure as inevitable and (b) failing to keep your employees safe from an epidemic may result in the sickness or death of the employee, possible onward transmission to third parties and adverse health consequences for you, your business, and society at large.

Put another way, the venture investors can afford to lose a little money. Your employees can’t afford to get sick. Now, not next week, not tomorrow, but today, is the time to write up and plan to implement policies around halting staff travel, staggered off-peak commuting, modified paid sick leave and disability cover, and working from home.

Communicate these policies to your employees. See e.g. Coinbase’s contingency plan as an example of best practice. These things may result in a slight reduction of productivity or less “face time” in the office, but they will save lives and they will protect your workforce. People who you will have to work with again, face to face, once the epidemic subsides.

2. Cut your burn rate. Now.

When the Saudis dropped the OPEC equivalent of a nuclear weapon on the markets, tanking the price of a barrel of Brent crude to $30, it became clear that the coronavirus crash was going to have some wider consequences for the U.S. economy – chiefly, the bankruptcies of many middle American shale oil firms.

These companies will be among the casualties of the coming recession. If you don’t want to be a statistic, you absolutely must plan for at least a year of highly adverse business conditions.

Don’t wait for things to turn around or hope that the markets will turn; previous globe-spanning epidemics have taken 12-18 months to fully shake out and, absent a pharmacological intervention which renders the Coronavirus epidemic an unpleasant but nonlethal illness, you should plan for the next year to be a very bumpy ride. Expensive office space, dead weight on the team – all of it needs to go, now. Don’t be afraid to make hard calls.

3. Whatever the deal is, close it. Now.

To quote Ryan Selkis, “The startup fundraising market just got absolutely f*cking walloped. Sequoia’s ‘Black Swan’ post will spook dealmakers, and lead to recut deals, startup layoffs, and distressed M&A.”

Following the above, if there’s a deal on the table – either an acquisition or a venture financing – on less than optimal but nonetheless acceptable terms, take it. Now is the time to go on offense in terms of closing any commercial transaction that will facilitate your business’ short-term survival or any return of capital for yourself or your investors.

See also: Bitcoiners in Europe Reflect on Economic Shocks as Coronavirus Spreads

The same applies to closing new customers. If you’ve only got 12-18 months of runway, start grinding on revenue – now.

VC investors are herd animals. Right now that herd is living out the conspiratorial prepper fantasy we in the tech crowd have entertained for years: hoarding freeze dried food, buying crossbows (most VCs live in San Francisco or New York, so they can’t own firearms) and preparing to hole up in bunkers or Bay Area apartments for the long haul. Your startup is not at the top of their list.

4. Review your insurance.

If you’re looking to get insurance coverage for the coronavirus and related business interruptions, I have bad news – there probably isn’t a prospective fix here, and it’s possible that a lot of markets that did cover this type of risk might go out of business.

This doesn’t mean that you’re not covered at all or that you shouldn’t put certain types of cover in place. If you’re a very early stage company, you’ll probably want to put basic coverage in place for e.g. general liability that some of your contracts and leases will require you to have.

If you already have insurance in place, review your policies. It’s possible to find coverage in surprising places – and the assistance of counsel can help you uncover it. If you manage to uncover a policy which happens to cover a Coronavirus-related loss, before filing a claim, make sure you reach out to counsel before you submit it to increase the likelihood of its success.

5. Review and restructure your contracts.

As part of your burn rate review, look at your supplier agreements, lease agreements, and other agreements that are costing you a lot of money and which you might do better without. If there’s a force majeure clause that permits you to terminate the agreement, consider whether doing so might not be a bad idea.

If the coronavirus has interfered with the contract such that performing it has been rendered essentially impossible, there may also be common law remedies like frustration or impossibility which you can invoke. There may even be express early termination provisions that are directly on point. If you know what the terms of your contracts are, this will help you to know which ones you can jettison.

Even if you think you can’t jettison them, it might be worth approaching your counter-parties to try to restructure the deal. You won’t get an abatement in your rent or released from a fixed term agreement if you don’t ask for it. A mutually agreed negotiation ahead of time is nearly always preferable to acrimonious litigation after the fact.

6. Put in place a succession plan.

In the eyes of a virus, a CEO and an intern are exactly the same; indeed, if the CEO is older, the CEO is likely more vulnerable to the virus than more junior members of staff.

Don’t, like Quadriga, give one person the keys to the entire kingdom. Have disaster recovery plans in place and a chain of command so that if one member of staff is taken ill or dies, the company can continue operating as a going concern. Back up your data in multiple geographic locales.

Stay safe out there.

Not Legal Advice, 2 March 2020 – The States Can’t Blockchain

As seen on CoinDesk, welcome back to another edition of Not Legal Advice.

I’ll let everyone reading this column in on a little secret: The definitions of “blockchain tech” used by various state legislatures to look technologically astute are something of a running joke among the hardcore crypto-lawyer set.

One exception to this is the definition used by Vermont and California, the least-bad definition of a chain I’ve read so far. Those laws refer to “a mathematically secured, chronological, and decentralized ledger or database.”

Simple, straight, to the point. I give California and Vermont a solid C-minus: the definition hits the high notes, but it also probably captures an instance of Postgres-XL that stores passwords as MD5 hashes. This is quite obviously not what the definition is supposed to do, but because it’s poorly drafted, that’s what it does.

Other states are far, far worse. Take, for example, Arizona’s definition, which says “blockchain technology” is

“a distributed, decentralized, shared and replicated ledger, which may be public or private, permissioned or permissionless, or driven by tokenized crypto economics or tokenless… protected with cryptography, is immutable and auditable and provides an uncensored truth.” 

“Uncensored truth.” What the hell does that even mean? Anyone who has a passing familiarity with blockchains will know that blockchains can’t guarantee an “uncensored truth” as they only show the transactions that validators committed to the chain. If censorship happened, we’re not going to find out about it, because it isn’t going to be there. “Tamper-evident” would be a more accurate description.

Furthermore, not all blockchains are ledgers, just as not all databases are ledgers.

D minus, Arizona. See me after class.

Then there’s Colorado, which doesn’t define “blockchains” but, in a bill about state records, just refers to them in plain English. Simple, and, if put in front of a judge, it probably works. Colorado also gets points for the zany title of its blockchain-aware legislation: “an Act Concerning the use of Cyber Coding Cryptology.”

Fabulous. A+.

THE FACT THAT CONNECTICUT LEGISLATORS FELT THE NEED TO COPY-PASTE OTHER STATES’ TERRIBLE DEFINITIONS REVEALS ONLY THAT THEY AND LEGISLATORS OF OTHER STATES HAVE ABSOLUTELY NO CLUE WHAT THEY’RE DOING. 

Connecticut — my home state — gets a solid F for its latest effort. The short story here is that someone managed to convince a member of the state house to introduce a bill that would abolish non-compete clauses in employment contracts where a “blockchain” company was one of the counterparties.

If you wish to see my testimony on the bill you may find it in full here. Apart from being very anti-business, the bill also proposes a definition of “blockchain” so broad that it would capture practically any contract with any employee of any company that employs distributed software architecture of any kind.

It defines “Blockchain Technology” as a

“distributed ledger technology that uses a distributed, decentralized, shared and replicated ledger that may be public or private, permissioned or permissionless and that may include the use of electronic currencies or electronic tokens as a medium of electronic exchange”. 

If you recognize this, it’s because you have seen something very close to it before in Arizona (and Rhode Island, New York, Tennessee and Michigan, among others). The fact that this definition is the law in Arizona doesn’t mean it’s correct.

A blockchain, as any informed person will tell you, is a hash-linked chain of blocks. If we wanted to be a little more specific, we might say “a hash linked chain of blocks that usually (a) uses digital signatures to authenticate transactions, (b) P2P networking protocols to communicate those transactions and (c) Merkle trees to render the transaction log tamper-evident.”

The Connecticut bill doesn’t do this. It continues by defining “Distributed Ledger Technology” as a critter which

may include supporting infrastructure, including blockchain technology, that uses a distributed, decentralized, shared and replicated ledger, whether public or private, permissioned or permissionless, and that may include the use of electronic currencies or electronic tokens as a medium of electronic storage.”

This definition is both duplicative and incorrect.

Not all distributed databases are distributed ledgers, despite the fact that this bill treats them as one and the same on a plain English reading. Not all distributed systems are “decentralized,” either, despite the fact that the bill defines a blockchain system as “distributed and decentralized.” Similarly, not all blockchain systems are decentralized.

The term “decentralized” itself lacks a uniform and concrete definition in both (a) industry and (b) under any law in any jurisdiction of these United States or indeed the world. “Decentralized” is an adjective, like “fluffy” or “happy,” and the word has no place in laws deciding what software should or should not be regulated by the government.

“Why should we care?” I hear you ask.

Well, the problem with a sloppy and overbroad definition is that sloppy definitions lead to sloppy and overbroad application on businesses that the drafters didn’t intend to capture.

Second, the fact that Connecticut legislators felt the need to copy-paste other states’ terrible definitions reveals only that they and legislators of other states have absolutely no clue what they’re doing. It’s like stealing an answer key to a test, only stealing the wrong key: if everyone makes the same mistakes, everyone’s probably cheating.

Third and finally, banning non-compete clauses in employment contracts for software firms is a great way to ensure that software firms stay out of your state, and Connecticut needs all the jobs it can get.

Summing up, state legislatures have proved only one thing with bills that define “blockchain” incorrectly: that they don’t understand the technology. Accordingly they shouldn’t be writing laws that regulate it.

Legislators passing “blockchain” laws should keep it simple in the operative text, add necessary context in the preamble, rely on the Golden Rule of statutory interpretation — that is, follow the literal meaning of the words in a statute, except where the result would be absurd — in case of disputes and leave it at that.

If states want to promote the use of blockchain tech, they need to be advised by people who possess a solid technical understanding of what they’re trying to legislate, the commercial issues involved in deploying that technology, how to speak clearly about both of those things, and who are independent and disinterested.

If the current laws on the books are any indication, the states have a lot of work to do.