Every pitch should answer three questions.
As far as the pitch goes, it doesn’t really matter if you’re right. That only matters for the outcome.
The goal of the pitch is action--ideally fast action. That means, the message needs to be simple and concise.
Anything else is fluff; friction that should be cut.
The Global Financial Crisis exposed how a sector meant to be a neutral utility for capital allocation can abuse its position with opacity and complexity.
The financial system exists to route financial capital towards value creating activities.
It fails when it exploits its privileged position to maximize profits for itself.
In a way, the financial system is a utility. It’s distributing a commodity.
Unlike a traditional utility, it doesn’t require a monopoly to be efficient.
Electricity is a commodity. Transmission of electricity is a natural monopoly. Building multiple transmission systems would be a massive waste of capital.
But money is more abstract, especially modern money that is basically digital entries on a ledger. It’s bits not atoms.
Moving money doesn’t require tightly controlled physical infrastructure connecting all the destinations in the real economy. Well, in theory.
In practice, much of modern finance relies on core systems (Fedwire, CHIPS, SWIFT, Visa) that are centralized. Some of these exploit their centralization, others are basically state-run. Stablecoins and other blockchain technologies might change all of this. We’ll see.
Financial institutions, particularly depositor banks, live and die by their reputation. The moment they forget that their power and profit comes from living up to that reputation, they lose everything.
Finance as a percent of GDP has grown from ~4% in the 1960s to ~7% in 2000. A lot of this has to do with globalization and the role of the US dollar as the global reserve currency.
After reading about opaque markets, I wonder how much of that growth is just extractive activities that should be decentralized, or at least much more transparent.
The temptation is too high to cheat the system otherwise.
The reason that American financial culture was so difficult to change--the reason the political process would prove so slow to force change upon it, even after the subprime mortgage catastrophe--was that it had taken so long to create, and its assumptions had become so deeply embedded. --The Big Short by Michael Lewis
It takes a long time to build a system.
It takes even longer to build a big, important system.
It’s much easier to tear a system down.
But the hardest thing to do, that takes the longest, is to restructure a system--to make it more robust and improve its potential to deliver its intended outcome.
