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Long Take: The absurdity of how the Internet is both beautiful and awful, and the memetic infection of Finance
Hi Fintech futurists --
First, a favor to ask you. If you haven't followed us on Twitter, please do by clicking here or below.
This week, we get philosophical and look at:
Embedded finance and how it will be woven into the fabric of the Internet
Applying the philosophies of existentialism, nihilism, and absurdism to Finance
Parsing symptoms in decentralized finance (Based Protocol) as artistic protest
Finding Dadaist beauty in chaos
Fool: If thou wert my fool, nuncle, I'ld have thee beaten for being old before thy time.
King Lear: How's that?
Fool: Thou shouldst not have been old till thou hadst been wise.
King Lear: O, let me not be mad, not mad, sweet heaven / Keep me in temper: I would not be mad!
Saying the Truth
In our mythology, there is a place for fools. As it was told by Shakespeare in the 1600s in King Lear, and as it is wielded today by comedians like Dave Chapelle, humor is a way to look at our social ugliness, and not look away. As tragedy unfolds, Lear's fool narrated to the King his fated fall. When perceived as a joke, the pain of truth has deniability -- maybe I am saying to you a joke, maybe I am just teasing, or maybe I am pointing out your lethal folly. Perhaps I won't get my neck cut for saying the wrong thing.
Humor can highlight dissonance, hypocrisy, and injustice.
What does this have to do with Finance? This all depends on where you sit. Some of you reading this are heads of innovation at investment banks, pushing forward institutional change. Some of you are working on building a new Fintech company, using the leverage of Silicon Valley to remake an economic order under new rules. Some are coding crypto projects, hoping to bypass the whole system entirely and make something new. Depending on what clothes you wear and what stories you tell (and listen to), perception of what is true and authentic is different. I hope in some way, my writing weaves together the threads that help you take seriously the language of the others.
Finance, as a systemic function of our society, is now increasingly becoming packaged as embedded finance. This is happening from two sides. Software companies are realizing that monetizing through financial products can double or triple their total addressable market. And banks and fintechs are realizing that packaging their products into APIs and opening up to digital brands is a life-saving growth strategy. The next two images are from two of the most powerful venture investors in Fintech -- Bain and Andreessen.
Another way to say it, which is obvious, is that value exchange is going where people and their tribes (i.e., corporations, companies, communities) are making markets for value exchange. If we are all on the Internet, then we will have payments and trading on the Internet. If we are all on our phones, then we will have banking and lending on our phones. And so the story of the Internet -- including its deep failures and successes -- will be the story of Finance in our coming decade.
Nihilism, Existentialism, and Absurdism
Here is the other half of the equation -- the Internet is awful. It is also beautiful, but it is largely awful. And this is part of our human condition, a symptom of being self-aware hominids with a taste for art, love, and greed. In melding our collective knowledge together into a global sludge of information, we have inadvertently bootstrapped into existence mass armies of trolls, conspiracy theorists, and propaganda robots. The trolls and propaganda bots are us. They are QAnon, whom we elect to the American Congress. They are our Mr. Hyde to our Dr. Jekyll.
The Internet exposes the misanthropic nature of the human animal. It amplifies it. It shows us the absurd. How can something so amazing and connecting be so good at robbing us of connection?
I think trolling is not just sadism. It is, in some sense, the search for truth performed by a jester. If you read the stories of the types of self-radicalization experienced by members of QAnon (a conspiracy theory community) in the pandemic, those who fall down the rabbit hole are looking to anchor to meaning in a swirling, crazy world. They find the wrong meaning. And when there is no clear path to power, one cheats to get it. One builds botnets, and misinformation campaigns, and undermines belief in science, rationality, and the ability to generate an objective truth.
This brings me to the philosophers. You can anchor all you want in rationality and Stoicism, valuing logic and determinism. We certainly do. But there is a moral problem that arises called Nihilism -- the discovery that there is no inherent meaning, which leads to the meandering relativism of post-modern thought. If nothing is meaningful, then what's the point? If you can say anything to anyone on the Internet without any consequence, what's the downside? If you can hack any blockchain project to steal their balances, why not do it? It is after all a dog-eat-dog world.
Nietzsche, the most famous existentialist, famously said "God is Dead" in articulating the decline of religion-based morality in Europe. We can similarly look at the decline in authority of the financial industry itself. The mantra of an omnipotent Federal Reserve, the importance of government institutions, the infallibility of the investment banks, these values have been under heavy attack for the last two decades by the 2008 financial crisis and the current response to COVID. Looking at the inequality and rage manifested in recent years by parts of Western societies against capitalist resource aggregation, we can't help but conclude that people have lost trust and belief in the incumbent. For many, wearing a suit and tie today is not a prestige -- it is a priesthood that connotes a world order. When billionaire Ray Dalio begins to promote the idea that capitalism needs to be reformed, it is time to listen.
We will always need to pay, save, borrow, trade, and invest.
But Finance is dead. Its shadow will be high tech.
We point then to Albert Camus, whose thinking is definitional to the meaning of the "Absurd" -- the recognition that we seek meaning and truth, while knowing there is no meaning or truth. From this contradiction, we have to create a set of values that makes it worthwhile to continue the pursuit. The answer that Camus provides is to know futility, but to rebel against it. To laugh at the human condition, and to walk with it side by side. To be clear about what you cannot know, and still enjoy the moment-to-moment feat of trying to figure it out.
The Internet manufactures this rebellion. While many of us walk unexamined, performing the functions demanded by the super-structures in which we participate, we are surrounded by the voice of the absurd. All we have to do is listen.
Financial Internet Memes
We have for a while been talking about Decentralized Finance. One of the most compelling attributes of the movement is its anchoring in a community of users and investors that has self-bootstrapped a new financial system. It is unabashedly part of the Internet. Whereas Fintech is a bridge -- trying to digitize and reformat old finance into a digital one -- DeFi is a new beginning. It is made for the Internet, from the Internet, by the Internet. Its logic is open source, its history is Napster, and it spreads like a software virus.
The thing itself is not that hard to understand, despite the plethora of in-group jargon that stands as a wall to adoption today. At the core, it is a giant open capital markets margin desk, which clears the demand for borrowing and lending various assets to buy or to sell. Unlike a trading desk at Goldman Sachs, DeFi doesn't set limits on leverage and allows volatile pockets of demand for leverage to create wild interest rates in shallow liquidity pools around emerging assets. The interest rate is just a proxy for the desire for trading, for leverage. And then the usual stuff around it begins to congeal -- structured product, derivatives, hedging, portfolio packaging, tranching, and so on.
We continue to be enamored with the technology's ability to create all this stuff on an open source chassis without any traditional financial technology. The money flows splashing hundreds of millions of cryptocurrency into barely functional protocols (and oftentimes, dysfunctional protocols) is not something to be mad about! It is community-based quality assurance with risk capital for our future financial system. Let the pioneers fight each other over requirements -- end of the day, it's their money. We will get the spoils later.
But what caught out attention recently and motivated this whole write-up is a project called Based Protocol. It is designed around a "vaporwave" aesthetic. This is how Gen Z interprets 1980s futurism, for example movies like Back to the Future, or shows like Knight Rider. It is an ironic desire for the naivete of earlier times which saw the year 2020 as a promise of something cool. Not the dystopian misinformation swirl of today.
Like King Lear's fool, it mocks itself and its participants. Its Twitter is full of surreal memes from Reddit. It calls DeFi investors degenerates. Its essence ridicules both the traditional finance world for trying to get into blockchain, and the Fintech bridges trying to create a path for regular people into the Internet of Finance. It is surreal and absurd, saying -- there is no meaning in money, it is all an economic game against each other. And if it is all just a game, let's at least be truthful about it.
Is this nihilism? Trolling? Modern existentialism? We don't know. We can trace the cultural roots of the movement to the Internet sub-culture forums of Something Awful and 4chan, to Reddit, and Weird Twitter. Wikipedia describes the "Weird Twitter" humorist movement as having a "dadaist sensibility". The Dadaists were artists defined by subverting expectations and disrespecting authority in response to the horrors of World War I. Most famous among them was Marcel Duchamp, who put the toilet on display as a piece of art, and drew a moustache on the Mona Lisa. By defacing history, he made history into art.
Takeaways for Finance
We've gone on a strange journey in this article. Starting with the fool, traveling through existentialism and absurdism, and landing on the artist. If culture, media, and finance collide in the way we observe, congealed together on the Internet by trillions of dollars of embedded finance and crypto value, then we have to understand and respect the jokers. They will put moustaches on our most sacred idols and jeer. But they will also call us out for being false and misleading -- a mistake we cannot afford to make in the current era.
They are wrong in many ways, of course. The Mona Lisa is more beautiful without the mustache. For the vast majority of people, finance is not a meta-joke but a day-to-day struggle to pay expenses, send their kids to school, and save for retirement. Such work is more important than whatever transient quip someone makes about it. Helping people live better financial lives is far more important than the price of any stock or cryptocurrency. But where there is struggle, there will be art.
Source: Dada artist Hannah Höch