As with most years, I started 2020 with a sense of optimism, looking forward to another productive year at work and doing the Appetite for Disruption podcast with my co-host Troy Paredes. In fact, he and I wrote an article discussing 2019 that focused more on whether Fintech was in for its version of the Roaring 20s than on the lessons of the year gone by. But 2020 soon devolved into the year of the Coronavirus pandemic when everyone knew Covid-19, lockdowns, and, all too often, economic hardship. I counted my lucky stars and kept finding and interviewing some of the people who continued to dream about and work for improvements in the world. They reaffirmed why I love doing Appetite for Disruption alongside my day job.
The initial guest for the year (Professor Melanie Mitchell) explained that the biggest challenge faced by AI [artificial intelligence] is its lack of common sense. There is no doubt that AI is already intelligent in certain ways, depending on how you define intelligence. It’s just not very sensible, so humans must be part of the decision-making equation to draw inferences, make associations and do the hard work of figuring out what is right from a human perspective. Although at times the rest of the world left me wondering whether humans really do have common sense, I understood the core idea that AI is only narrowly intelligent.
There is no doubt that 2020 challenged the world in ways too numerous to list. Whether the burdens were personal, organizational, business-related or psychological, people persevered and occasionally triumphed. Appetite for Disruption guests created better data solutions (Brad Schneider, no relation), fought for trust and safety on the internet (Clara Tsao), and started or moved forward blockchain-related businesses even in the face of the pandemic (John Mizzi, entrepreneurs roundtable, Digital Dollar Project, Sunayna Tuteja). Several regulators (Melissa Netram, Hester Peirce, Haime Workie) talked about how they approach their jobs both in normal times and during stressful moments, reminding us that a steady hand on the wheel is just as important as the explorer or trailblazer. I learned about the power of narrative and message (James Robert Lay) and how a collaborative vision for a city (Sacramento) can work to benefit the many rather than just the few.
Perhaps the most interesting insights came from the Covid-19 series where a small group of guests (Mike Novogratz, Prof. Sylvester Johnson, Brad Schneider, Samantha Radocchia, Balaji Srinivasan) talked about the impacts they were seeing during the early part of the pandemic. The varied answers and visions they described confirmed that diversity of views never ceases and always makes for better information. Now, with the first vaccines being administered, hopefully, 2021 will see an end, or at least cessation, to this terrible event in human history.
As Troy and I noted in a short article in the midst of the early part of the pandemic, innovation can bring solutions. While perhaps small comfort in the middle of a crisis, the idea is powerful and was born out with the mRNA vaccines from several different makers. Later in the year, we wrote about how access to capital and closing the digital divide could help improve economic inclusion. In the spirit of those two articles, here are five Fintech-related areas I think are ripe for innovations that will help drive commerce and the economy and, by extension, bring about broader prosperity.
Improved digital infrastructure on a more distributed basis.
A great place to start is providing access to high-speed internet to everyone who wants it. As more and more of commerce, communications and recreation rely heavily on first-class connection to the internet, the speed of that access also gains in importance. One illustrative case has been the equity trading industry, where for many years now firms have kept developing new technologies to link themselves to markets and market data faster and more efficiently, all in the name of better execution quality. The lessons for hardware and software from these activities should translate more broadly and result in better internet for everyone. The public and private sectors need to recognize high-speed internet access as table stakes for the future of innovation and economic growth as well as important connections for all of humanity.
Interoperable and programmable money.
Money is the foundational layer of any economy. It provides a common means for payments, store of value and unit of account. These features allow all manner of transactions to take place and commercial activity to thrive. Money also underpins the ability to have financial instruments and financial services, including payment systems, lending and borrowing, and a fulsome capital stack, as well as insurance and derivatives. The ethos of Fintech is built on making all of these products and services more readily and easily available through technology. Money is the core technology here and it is ready for an upgrade so that it can operate directly on multiple platforms (interoperability) and become automated to a user’s specifications (programmability). As the many recent reports on central bank digital currencies (CBDCs) and stablecoins show, the capability to make interoperable and programmable money exists. There are of course many important issues to sort out, such as who controls the platform and how, what digital financial privacy looks like, whether monetary and fiscal policy will change, and whether to restructure payments and banking architecture. Nevertheless, the time for this evolution of money is now.
Rethinking market structure.
In the pre-digital world, different items traded on different venues. Stocks traded on a stock exchange, metals on a metal exchange, agricultural goods in local spot markets, commodity futures on a commodity futures exchange. Humanity has entered the digital age but continues to separate asset trading along these traditional lines. The linkages that the internet creates and the digital representation of assets have changed both the need for and desirability of distinct trading venues. As the ability to intermingle trading of various asset classes on a single electronic venue becomes more pronounced, market structure will change before everyone’s eyes. Policymakers need to understand that this shift is already happening (DeFi is one obvious expression) and work to rationalize rules that protect market participants while recognizing how innovation is driving these new capabilities to simplify access, improve commerce and provide greater opportunities.
Developing principles for autonomous technologies.
Whether it is drones or robots, AI or blockchains, smart homes or self-driving cars, humanity appears to be moving inexorably towards a future with autonomous technologies. These self-directed technologies function on their own in the wild and even will be created or upgraded without human assistance or intervention. They will not have a human supervisor, a central controller, or even a human programmer. An interconnected world is the foundation for these advances. Algorithms, software programming, and sensors that provide physical world data also make them possible. Humans should want human values, legal systems, and regulatory structures to apply because each of these technologies are here for their benefit. The discussions about these issues remain nascent and often occur on a technology-specific and jurisdiction-specific basis. The time is ripe, perhaps overdue, to move to a more expansive, multi-disciplinary approach.
Giving a human voice to numbers.
Mathematics sits at the heart of many if not all recent technological and financial services developments. There is great temptation to rely solely on the numerical outcomes when making decisions, whether it is humans or machines that make those decisions. We must resist this temptation, perhaps especially when the numbers make the decisions seem easy, because humans are at the heart of what Fintech (indeed, all technologies) is trying to accomplish. Considering humanity in decision making is always a good idea.
Appetite for Disruption has taught me many things in the last four years, not least is the high degree of optimism our guests express about making the world better, whether dramatically or incrementally. Even in this time of pandemic and uncertainty, people kept moving forward and seeking progress. A focus on the items discussed above will keep that momentum on a positive trajectory.
With best wishes for a healthy, happy, and successful 2021, Appetite for Disruption will continue to bring you insights from people contributing their piece to the world.
Lee A. Schneider is General Counsel at Block.one, one of the world’s largest blockchain companies and creator of the EOSIO blockchain protocol. In that role, Schneider is responsible for various aspects of the legal function as well as the company’s government affairs initiatives. He joined Block.one after leading the blockchain, Fintech, and broker-dealer practices at two major international firms. Lee has been recognized as one of the leading voices in blockchain-related regulation and compliance and has played a role in structuring several of the largest and most successful blockchain-related projects. Schneider co-hosts the Appetite for Disruption podcast with Troy Paredes and is the contributing editor for the Chambers and Partners Fintech Practice Guide. He is the contributing editor of the Chambers and Partners 2019 Fintech Practice Guide. All views expressed are in his personal capacity and reflect only his personal views and not those of Troy, Chambers, or block.one or its directors, officers or employees. His views do not constitute legal, investment or any other type of advice.