The defining feature of this decade has been institutional failure and disillusionment with the corporations and government bodies previously entrusted with our prosperity. What started with the housing bubble of 2008, continued with bank bailouts, quantitative easing, data breaches from major financial institutions, corporate fraud in Silicon Valley, distrust of mass media, political unrest, distrust of large tech companies from both sides of the political spectrum, government surveillance states, increasing inequality, absurd college costs, and a deep cynicism about the future.
While I don’t particularly agree with the cause of outrage against all of these issues, it’s clearly empathizable. Outside of the white collar elite bubble, the socioeconomic systems in the US seems to be breaking.
Systemic change is meant to happen. Besides what your economic 101 class in highschool led you to believe, systems are not meant to approach equilibrium and stay in a static state for the rest of time. Such a train of thought is appealing to the Marxist and Malthusian, but not indicative of reality.
It is incredibly important for participants in a system to recognize when it is not serving the majority of people, and for the unserved to seek reform. Within the immensely webbed mesh of private and public institutions, this essay will cover the three most fundamental and explore how they have begun to fail and what change may look like for them.
Money
Interest Rate: 1.75%
Inflation Rate: 1.8%
GDP Growth Rate: 2.3%
Nasdaq YTD: 27%
The purpose of these statistics is to illustrate an economy in which wealth is being redistributed from the savings of the middle and lower classes to the wealthy, often coastal, financial asset owners. The monetary story of the past decade is essentially the Federal Reserve buying junk assets off the balance sheets of big banks and keeping interest rates incredibly low in a desperate attempt to encourage them to lend and invest in order to push economic activity up. Investment managers are now so flooded with cash that they are literally willing to give money with the expectation that they get the same amount, or less, back. Sound crazy? Five central banks around the world now have negative interest rates.
Theoretically, cheap money should encourage economic investment and spending that increases GDP, but money is now chasing financial assets instead of capital ones. For example, major corporations are using access to cheap debt to buyback their own stock and raise the stock price instead of putting more money to work in terms of capital expenditures or investing in new projects. Why aren’t companies investing in their cash? Perhaps they don’t have any new ideas. Or perhaps they know that the economy isn’t all that strong and over investment in business lines or capital assets is going to bite them in the ass when this entire bubble bursts. Consider the radical asymmetry displayed in the chart below:
What’s the consequence of this? Those that hold financial assets are seeing their values get pumped up by all this free cash going around, and those that don’t are experiencing low wage growth and an eventual tax against their savings once all this free money printing catches up. Redistribution of wealth from the have nots to the haves. This isn’t a capitalist or anti-capitalist economic critique as all five of the current central banks that have negative interest rates are in “democratic socialist” countries. It’s a currency governance problem. There is a paradigm shift coming.
Countries can not keep a monopoly on currency. In a story so poetic that it almost reads like Neal Stephenson, a hedge against the traditional financial system was born out of the 2008 financial crisis and reckless monetary policy. Bitcoin. It was started by an anonymous developer, or a group of developers, grown and maintained by a fanatical group of early adopters with a die hard belief in software’s belief to bring upon self sovereignty - reminiscent of strong cypherpunk philosophies.
You may criticize Bitcoin’s price volatility, it’s over zealous fan base, or its ostensible complexity, but the aforementioned system would not be possible on a Bitcoin standard. To those unfamiliar with how Bitcoin works, just understand that control over it is decentralized among all network participants, and transactions through it cannot be censored. This is huge.
As a prerequisite for a free society, you need the ability to freely exchange monetary value with whoever you want. Historically, physical cash has served this purpose, but when currency becomes increasingly digital and banks operate as de facto government franchises, the government has the power to control:
- if you can access your money,
- how you access your money,
- and to whom you are allowed to send your money to.
Skeptics may look at China’s iron control over money flow, or here in the US, with payment processors blocking transactions to porn sites and cam girls.
Things get more interesting with the launch of Ethereum. Whereas Bitcoin constituted a monetary platform built on top of the blockchain, Ethereum aimed to build a generaziable computation platform. That means that you can get software to exist and compute independent of one centralized body and uncensorable to any coercive regime. Software that exists and runs autonomously.
In a previous essay on my blockchain investment thesis, I mention how most strong blockchain projects need to have a moral principle defining their reason to exist. Today, the big, intriguing disruptive trend in this space is around decentralized finance. Decentralized finance covers interesting new financial primitives built on top of Ethereum that anybody can create and innovate on, and nobody can own. Anybody who has built anything in Fintech could tell you how much of a pain in the ass is it is to build any innovation in such a tightly controlled, regulated space. But with decentralized finance, innovation is permissionless. You can build new types of derivative contracts, exotic markets of anything, new insurance models, global savings accounts, programmable interest rates, and even an autonomously functioning decentralized Federal Reserve!
Right now, innovation in decentralized finance hasn’t really created anything strictly new. But when we look to history, in the early days of the Internet, websites were digitized magazines, and Mark Cuban became a billionaire by putting the radio on the internet. Similarly, the early days of TV consisted solely of somebody looking into the camera and just talking. It’s hard to conceive what is possible when innovation blossoms over new platforms. Before the internet, the distribution of information occurred through tightly controlled systems of broadcast television or printing houses. By freeing this system, the way we publish and share information has been changed forever. It will be interesting to see this effect taken to finance.
Now I don’t think Bitcoin will be replacing all currency, nor will Ethereum be replacing all software. Countries don’t exist in vacuums and a national currency is a powerful geopolitical tool. But it needs competition. A hedge. Our current financial system is not well fit for the modern economy and over the next decade it will be interesting to see how it changes. Those interested must keep an eye on decentralized money and finance.
Governance
Does democracy scale? When you have at most two choices for the leader to run a nation of 330M, seemingly curated by those with money and media, and no matter who ends up winning, half the nation cries outrage and conspiracy - you can’t help but question the governance structures of our democracy. Our country has faced division in the past, but the consolidation of power by the Federal government has centralized it in DC. The American constitution is an amazing amalgamation of moral philosophy and game theory that has served us incredibly well since the birth of our nation. But even given the astounding prescience of our founding fathers, it could never have predicted the interconnectedness and technological advancement of the modern era.
It is not uncommon for people to call for the dismissal of the electoral college, restriction of free speech (even outside of social media), the abolishment of the second amendment, and for those that disagree, they disagree so vehemently as to label the opposition as criminals accuse the other side of treason. We aren’t listening to each other anymore.
Who really has any idea of what is going on in DC? Why does nobody besides grumpy old people give a shit about what happens at the local governance level? The one where we can make the most difference. How does every president, congress member, or regulatory enforcer, get stupidly rich after serving their term? Is “public servant” a misnomer? Why does our government, the same government that shocked the world with our Apollo program, now incapable of launching a healthcare website?
While I don’t think there is anything inherent to democracy to prevent it from functioning properly at scale, I do think the way power is distributed in a democracy is a question worth deeply exploring. If half the nation feels like the man or woman up top is going to destroy our future, perhaps it’s the case that the person up top wields far too much power. In the blackbox of Washington DC, lightly illuminated by C-SPAN, accountability to the electorate breaks down and the seeds of corruption begin to sprout.
What we tried to do at my last company, Heroic, is to provide a way for communities to form and self govern around issues that impact them best. We thought the best way to do it was by making people investable and thus circumventing the problem of asking people to pay for public goods. Our execution was lacking, it is an idea that is close to my heart. While we get lost in the moralistic, dramatic, toxic, zero-sum political games that happen at the national level for which we understand very little, we miss out on participating in everything that is happening right around us.
The key to the future of governance is enabling experiments to happen at the local scale between people that roughly know each other and have some level of accountability with each other. Because bodies with power are rarely willing to give it up, and violent revolution mutually agreed upon as an unsavory outcome, such experiments in governance are going to be enabled by private companies using technology to change the way in which we interact and provide value to one another. Perhaps such emergent self governance will happen in the physical world as Heroic aimed to do, but perhaps it could also get a little digital.
Enter gaming. Consider the once popular game Second Life:
*“Second Life is an online world in which residents create virtual representations of themselves, called avatars, and interact with other avatars, places or objects. Second Life isn't just a fancy chat room -- residents can do much more than communicate with one another. For one thing, they can contribute to the world around them, creating buildings, objects or even animations. Resident additions to the virtual world are called user-generated content, and this content is one of the factors that makes Second Life such a unique online environment. *
In Second Life, residents can go to social gatherings, live concerts, press conferences and even college classes. They can do a lot of things you can do in real life -- buy land, shop for clothes and gadgets or just visit with friends. They can also do things that are impossible in the real world -- avatars can fly or teleport to almost any location. Some residents design short programs, called scripts, which give avatars or objects new abilities, including special animations or the ability to generate copies of other objects.”
This literally feels like a second, digital world, structured and organized by code instead of violently enforced law. What is even more shocking is that this digital world was estimated to have a total GDP of $500 Million in 2015. People had virtual jobs in this virtual economy that they were getting paid to do with non-virtual cash.
Even now, we have these massive, sandbox virtual worlds like Minecraft that users devote weeks of their time to build experiences on top of for nothing else but the artistic and hobbystic value of doing so. A promising aspect of blockchain technology is the ability to create provable scarcity of virtual assets that is now being deeply explored as a way for gamers to monetize their commitment to their craft. As people get more and more engorged into these digital realms that carry the same emotional importance as physical ones, governance is going to become more and more of a pertinent question. Already different gaming clans have their devoted websites, forum pages, chat groups, and meetups within which they organize their communities.
New voting structures like quadratic voting, governance experiments like futarchy, organizational structures like decentralized autonomous organizations, are ideas that are hard to implement in the rigid world of atoms, but incredibly accessible in the fluid world of bits. Gaming is going to transform from a recreational pastime, to the digital Renaissance Rome of societal structure.
While radical ideas for the governance of the future will be tested in digital realms, there needs to be a tie in to the physical world. Massive opportunity exists for private companies willing to take on the gargantuan task of providing a digital interface within which we govern our own communities and interact with the ambient political system around us. What is currently being voted on in DC? How has this candidate voted in the past? Who donates the most amount of money to this candidate? Who are government contracts being given out to? How can I inform my representative how I would like them to vote? How can I pay for my parking ticket, renew my drivers license, and transfer my home title all online? The end state would look similar to competitive, extra-legal bodies, with their own capital and talent pool allocated through different governance structures and providing public-esque services. Citizenship-as-a-service.
Some countries like Estonia have already taken major steps into digitizing their government services. Others will follow. In the coming decade governance and govtech will be incredibly important problems to solve.
Social Media
In a lot of ways social media is the preeminent relationship we have with the internet. If you had to divy the time you spent on the internet, it would be a fair bet that the vast majority of it is spent digesting and sharing information discovered on social media. Whether it be LinkedIn to manage your professional sphere, Twitter to hear pundits pontificate, Instagram to feel insecure, or Reddit to waste time. What started of as an innocuous attempt at entertainment, soon became the defining use-case of the internet.
Innocent beginnings or not, social media is now anything but that. It calls into question not only our emotional health in the digital age, but also the health of our own democracy. Demonized like the hero that lived long enough to become the villain, algorithms that govern addiction now govern belief systems and exist secretly in their stoic intricacies behind by the Neverland facade of Silicon Valley tech companies. There are three primary ways in which I see the social media story playing out in the next decade
- Breaking down the closed source, monopolistic reach of social networks
- Narrow social networks
- Pseudonymous networks
Starting with the first point. Perhaps recommendation algorithms wouldn’t be viewed as so Machiavellan if we could actually understand how they worked and audit them for biases. Sacrificing the proprietary nature of the algorithm for the trust of the user. A trade that will most definitely not happen unless enforced by government. One weak way this would work is open sourcing the code for the recommendation algorithms, and promising that code to be the one that the company itself is running on its own servers. Like what Gab does, and also like Gab, not very reassuring. An alternative strong way this could work is by having information algorithms exist as unalterable and uncensorable smart contracts verifiable on the blockchain - provably executing in the fashion intended.
If this path is not taken, and social media platforms are still able to harness more reach and attention in their closed loop systems, politicians will take action. In no world will they allow the oracles of elections to be companies that exist unregulated. We see this line of thought already inching to the foreground of political dialogue with Elizabeth Warren calling for the breakup of big tech and Republican pundits decrying conservative thought censorship by tech companies existing in impenetrable liberal bastions.
On to number two. “Hello, World” is probably the first piece of code you learn to program in any intro to computer science course, and as a whole is emblematic of the first age of the internet. The desire to broadcast your thoughts to the whole world that was eventually productized by Facebook, Twitter, and other social media conglomerates. Now we feel the hangover of toxic interconnected exuberance. Whether it is trolls, to accusations of election manipulation, to toxic tribalistic groups eschewing real dialogue, more of us are retreating into more intimate social structures where communication and expression of thought are still greatly enabled by technology.
I find Reddit to incredibly fascinating and underrated, for one key reason: subreddits. For those that don’t know, subreddits follow the same UI and UX as normal Reddit but are focused around curation and conversation of interest based topics. There exists subreddits for cyclists, audiophiles, economists, and The Office enthusiasts. What's so magical about subreddits is their ability to bring together specifically passionate people from all around the world and provide them an environment to collaborate, curate, and create. Because the community is much smaller than a traditional social network would be, those that invest time in the subreddit community are often recognized by the regulars and allowed to accrue social status. It is so much more positive sum than Facebook could ever be. This exists in the digital world, but entrepreneurs are actively working on the task of bridging it to the physical and providing a clean interface for positive connection to occur between both.
Finally we get to the topic of pseudonymity. A strange topic to be considering as a key aspect of the future because it was the first digital primitive of the past. When the web launched into infancy, defacto online chat rooms and message boards consisted of pseudonymous usernames communicating in a principally unmoderated fashion. Perhaps it was the longing for intimacy and an anthropomorphization of digital identity that caused an exodus from these early internet structures and towards networks representing real identities and people. Whatever the case, they took over. While Reddit still preserves the pseudonymity aspect, most other networks like Facebook, Instagram, Tik Tok, and Twitter are based around real people.
At least that has been true until now. Among the newer wave of social media participants, we see an increasing desire to go back to a divorce of digital identity and real identity. Be it through anonymous theme based Twitter profiles, virtual character based Instagram accounts, or even online games that use pseudonymous identity around shared experiences to cultivate social connections. Another reason for this trend could be the explosion of cancel culture, where not only the expression of the slightest socially unapproved belief could cause viral castigation and harm someone's career trajectory, but the very evidence of it ever occurring throughout your entire internet history is enough to destroy you. It’s virtue signaling hysteria. People don’t want such risk in their physical, personal, and professional life.
There are infinite ways and permutations by which entrepreneurs may take the trends expressed above to create social media networks of the future. Who knows if the precise future is gaming like Andreessen Horowitz claim, or if it is further decreasing the barriers to creation like Tik Tok is enabling, but no matter the medium of expression used, the channels to build such will do so on the emotional and human principles described above. The next big wave of social media will look more like a subreddit, and less like a timeline.
Conclusion
This essay isn’t to say that radical technological improvements in artificial intelligence, robotics, pharmacology, transportation, and biology won’t massively affect our society in the next decade. There are some fascinating innovations happening in each of the above that have the potential to axiomatically reshape humanity. However, the lack of the above is only an ancillary reason why the institutions upon which we depend on today are failing. Self driving cars won’t solve governance, faster commercial ships won’t change the way by which we interact with each other, and new drugs won’t solve the issue of storing and transmitting value.
As a lover of humans, societies, and structures, I find money, governance, and social to be among the most basic building blocks of humanity. It is such institutions that encourage technological and cultural innovations in the first place and making them work for everybody is key to keeping society cohesive.
While these issues are great and in some way require changing the way we interact with government, perhaps the most depressing, yet critical, of all institutions mentioned above, I am incredibly optimistic. I love that more and more people are waking up to the order around them and asking some of the most fundamental questions about humanity and society. Even if it has sowed hatred and division among different tribes, human ingenuity will overcome. Our new institutions will unlock human potential and enable us to once again do what we didn’t think possible.
If you like my writing and would like to be kept up to date with more, I’m starting a newsletter and eventually a website where you can subscribe to! I will be publishing more essays and hopefully a little fiction as well. Anybody interested in talking more about these ideas, my Twitter DM’s are open!