Still a draft;
Send Capitalism to Catch Capitalism
Unseating Governments. The Easier, Unstoppable Path to Decentralisation
I immediately switched from scrolling to thinking on reading ‘Bitcoin is primarily an economics/social project, rather than a software project.’ from Roger Ver’s twitter timeline. This retweet from the Dr. Peter Rizun Chief Scientist of Bitcoin Cash (BCH) took me on a research spree on how Bitcoin or crypto can fit into an access to micro credit and digital transformation for micro & small businesses social project I was bringing to life. The crypto community has for long focused more on the technical side. It is now time to focus on the social side, to increase crypto acceleration to the decentralized promised land.
Most cryptocurrencies’ storyline is reaching the 3 Billion unbanked poor but are yet to have a deliberate strategy to really serve the unbanked let alone having little or no input, actual experiences and concerns of the poor themselves. In fact in a heated debate about the value of bitcoin, it took Katie Haun (General Partner at a16z) fronting the plight of the unbanked 3 Billion to sever a point from Nobel Economist Paul Krugman. Krugman who wrote the skeptical “Bitcoin is Evil” said “that is the best defense for crypto I’ve heard”. Below are insights of a Ugandan – East Africa, working at the cross-section of access to credit for the poorest and digital transformation.
I just learned that software can OWN money – of course, am late to the party but for someone who has been grappling with a practical use-case for this concept, this gamechanger bends capitalism Down to offer a hand-up to the poor and Up again to make the ‘Haves’ happy. Here’s why;
Google made $136B in profits in 2018. Imagine google was 40% owned by individuals and 60% owned by an AI software called, say ‘#worldneeds’ running on Bitcoin or Ethereum. Now imagine there’re n such companies and ‘#worldneeds’ distributes/spends its wealth on the most urgent, neglected, & solvable social and environmental problems worldwide.
So that would be $81.6 Billion guaranteed to the #worldneeds robot who can spend it on Interest-Free Micro-Credit to millions of neglected (because they lack collateral and are high-risk) micro and small businesses to grow & employ more people, Investments to scale social enterprises and climate-smart innovations, Access to safe Water for neglected 600 Million, accelerate pro-social research & innovations, Emergency to the hungry and homeless, Neglected health, education issues, climate change & Biodiversity conservation, Etc. i.e. taking on neglected government services.
The individual owners of our fictional Google still keep $54 Billion to themselves, which is still good motivation to be a capitalist, individual prosperity, Individual investment interests like going to the moon, yachts, or Sex Robots 😊, Topping Forbes Richest, Showbiz, etc. I mean does Mark Zuckerberg for example need even $10 Billion all to himself because Facebook was intelligent enough to exploit the attention of a billion people.
There’s widespread concern over the trend of capitalism from renown economists, social activists, development organizations, thousands of individual bloggers, and even the ‘neglected’ and billionaires themselves. Solow’s paradox observes that you can see the computer age everywhere but in productivity statistics. Investments in technology have increased more than 20X in the last 20 years while GDP has barely increased 3X. You probably already know of the infamous inequality statistic of the top 1% controlling 40% of global wealth.
The effects of the current trend are not just worrisome but deadly. We see increasing tension between the left and the right, deadly immigration endeavors to unwelcoming European and North American authorities. Latest world-bank numbers say poverty is on the increase in Sub Saharan African and parts of the Middle East, climate change is displacing and forcing more and more people into hunger and this list of world challenges is becoming more urgent and more complex than ever before. – add numbers
Capitalism has definitely done more good than harm but it has also heralded upon us what economists call the “Tragedy of the Commons”. “A situation in a shared-resource system where individual users, acting independently according to their own self-interest, behave contrary to the common good of all users, by depleting or spoiling that resource through their collective action. “– Wikipedia
Since this is not the time for blame games, socialism has seen it’s fair share of positives and negatives. The failures of both capitalism and socialism are best summarized in a quote from billionaire Ray Dalio. “most capitalists don’t know how to divide the economic pie well and most socialists don’t know how to grow it well.”
Extractive Architecture of Capitalism
I’m no economist, but I understand capitalism to be supported by three pillars;
- Banks – that lend us to spend
- Advertising – that pushes or ‘manipulates’ us to spend
- Products & Services – on which we spend
In this architecture banks control the world economy largely through debt. Beyond “Occupy Wallstreet” this is empirically confirmed by a recent study at the Swiss Federal Institute of Technology that used complex systems theory to map ownership among transnational corporations.
This architecture of capitalism has evolved to be more extractive than distributive, with each pillar employing extractive mechanisms to make it stronger to live on longer; see graphic on the left.
With advancement in technology banks are now conniving with advertisers to continuously perfect their manipulation game with pinpoint accuracy. In this post, Alex Gladstein shares how he received a dog-food twitter advert just a few minutes after using his credit card to buy dog-food. He argues this could have happened only if his bank ‘Chase’ shared transaction data with twitter. Bizarre, right.
Banks take predatory interest rates – of course this is more pronounced in developing countries where interest rates are over the roof with banks and microfinance institutions charging upto 95% in some countries. While market-researching on a peer-to-peer credit solution, I interviewed a microfinance staff operating in Uganda with roots in USA and they took pride in lending micro-businesses at 75% interest! This keeps millions of households in a never-ending poverty loop because they work for these credit predators. We need more support to ethical financing initiatives.
Advertising: is big business, apart from monetizing our data, privacy and attention reducing our productivity, digital advertising for example is becoming more expensive by the day. Businesses spend $1 to make $2 in revenue.
Products & Services: heart diseases, and cancers are the leading causes of death, ads push us to foods and lifestyles that make manufacturers billionaires but make us obese, sicker yet we can’t access the need medicare. Further, heavy manufacturing increases carbon and global warming, increasing hurricanes, species extinction, and little is done to offset this burden. Corporations are also more focused on shareholders profits and pay peanuts to employees furthering inequality.
Decentralizing CSR & Philanthropy
It is true that pro-social mechanisms like taxes and corporate social responsibility (CSR), and philanthropy are used for redistribution purposes, but if they were working well, we probably would have a less urgent and less complex burden of global challenges.
While governments are ideally responsible for addressing most of the challenges faced by citizens, most of them would rather feed the most cake to themselves insidiously focusing most resources on creating and managing conflicts, fortifying their grip on power, corruption etc.
This leaves the redistribution burden to CSR and philanthropy.
But CSR and giving or philanthropy which thrives on compassion haven’t experienced innovative disruption since their inception. As a result, for example US giving has stagnated at 2% of GDP for over 2 decades, while GDP has more than doubled in the same period.
The current model of CSR, and philanthropy operates mostly at the discretion of the capitalists – shareholders decide what, when, who, why and how much to give not market forces. Yet as Noam Chomsky says “… modern state capitalism is that costs and risks are socialized to the extent possible, while profit is privatized.” So, what if we socialized profits too by subjecting them to market competition?
Capitalism has excelled at growing the pie largely thanks to the magic of “competition”. The same competition-magic can drive distribution of the pie faster if we can recalibrate competition to include’ #worldneeds’ into the market economy through altruism advertising.
But to avoid socialism’s failure of not growing the pie, the redistribution should mostly focus on more pro-poor production than pro-poor consumption. To fix the inequality failures of capitalism, we need more distributive competition not more regulation. More taxes and other regulations will still always lockup most wealth at the top with only peanuts getting to the bottom of the pyramid.
Circular Capitalism –
There have been several suggestions to the now violent tide of inequality. Increasing taxes, better salaries, minimum wages, trade restrictions, protectionism, immigration bans – yes, e.g Trump believes preventing more people into US means Americans won’t have to share the pie with more taste buds, among others. The main shortcoming of these interventions is that most wealth is still clogged in the top and middle classes.
Capitalism creates prosperity by entrepreneurs fronting several alternative solutions to a problem and the best ones are naturally scaled due to consumer demand. This project explores another easy to implement, more distributive, more productive, multi-sectoral, less oligarchic, and more competitive approach to economic inequality. It’s a classic example of send a thief to catch a thief – send capitalism to catch capitalism’s inequality. Because the thief knows the tricks, hideouts, and other details, you will catch the thief faster, we need to address #worldneeds, inequalities faster than all current interventions are running.
It’s a reconfigured architecture of the pillars of capitalism, i.e. from
Banks that control the economy >
Advertising that manipulates consumers to irrational choices >
Products & Services that are properties,
Consumers that facilitate
Altruism Advertising that facilitates Individual Profits & #worldneeds
Banking that facilitates
In this new architecture, Consumers run the economy by consciously purchasing products & services that directly and actively support specific social and environmental causes at the grassroots. i.e. profits are directly shared with #worldneeds through a commission from altruism advertising.
Fortune and BCG studies respectively say ‘two thirds’ and 67% of “millennials believe that working for causes is an integral part of life, and they’re drawn to big issues. Instead of making one-off donations, they’re more likely to integrate their causes into daily life by buying products that support social or environmental causes.” BCG – The Millennial Consumer 2012.
“76% agreed that businesses focus on their own agendas rather than considering wider society, 91% would switch brands for one championing a cause. “Deloitte Global Millennial Survey 2019
“Seven out of ten willing to pay more for a product with a conscience.” Cone Communication 2015
This data suggests that beyond primary consumer demands of quality, delivery time, customer care, etc. there’s a fast-growing secondary consumer demand that brands aren’t competing against. i.e. millennials & gen-z’s insatiable desire for a more equitable society, to make the world better for everything on it.
Altruism Advertising: this is the gist of this project. It’s the source of the envisaged funds. Competition lubricates capitalism but advertising lubricates competition. Disruptive innovation is about reducing the cost so that the masses can access a product or service. This model reduces the cost of sacrifice to zero so that millions of people can now be philanthropists donating not money but purchase decisions, buying products and services from merchants willing to offer a percentage of the sale to social-environmental needs.
This ‘Collaborative Competition’ precipitated by millennials & Gen-Z, biosphere consciousness and relentless desire to fix social-environmental problems fuels pro-poor wealth creation and access to more of life’s basics. Capitalism has a big hand in most social-environmental issues and it can be recalibrated to quickly fix these challenges without waiting for bureaucratic inefficiencies of governments.
This altruism advantage/force-multiplier does five things;
- Reduces the cost of sacrifice: to zero so millions of altruist consumers act on causes they care about.
- Reduces cost of conversion for online sellers: as customers are energized to buy by the need to save a life not by ads.
- Quickly Fixes a World Need: a child with a curable malignant cancer tumor or heart-disease won’t have to endure another year of pain, suffering and stigma, will go to school, and won’t go hungry another day, since their mum has enough income to provide these basics.
- Increases Happiness: studies show that altruistic actions reduce stress and improve mental health.
- Increases awareness of global challenges and effectively rallies the world in solidarity against them.
Conventional advertising thrives largely on manipulation to influence consumers to make irrational product/service choices. Altruism advantage is based on the fact that everything someone purchases/consumes has an impact on ‘the individual’, ‘society’ and the ‘environment’. As such relevant information is provided for consumers to make rational choices. French economist Gerard Debreu argued that, that everyone’s welfare is maximized, if markets are competitive and people are rational and have good information.
Another concerned billionaire Nick Hanauer says, “Businesses and the rich do not create jobs. Jobs are created by a feedback loop between customers and businesses that is set in motion by consumers increasing their demand.”
There are widespread concerns of the current digital marketing players exploiting our privacy, transaction data and auctioning our attention to biggest bidder. This architecture changes this to instead extract our compassion which is the commonest human identity according to several studies.
At the core of this new architecture is a new ownership model.
What is the bestest intervention to activate this demand?
Urgent, Neglected, & Solvable is a framework developed by Oxford University Philosopher and co-founder of Centre for Effective Altruism & Global Priorities Institute to decide on which global problems to donate to. However the model relies on individual donations which make limited impact.
On a practical level I would add sustainable; non-bureaucratic; and scalable to the framework. Giving the poor a hand-up is more sustainable than giving them handouts. Luckily, the poorest work hardest, but the system limits their productivity. If we extended unsecured, interest-free credit to their micro/small businesses, their productivity and household wealth increases. When they repay, the money is lent to others and the cycle continues at scale.
The poor live a subsistence life, most times having to choose only one or two of life’s basics but not all; food, health, education, shelter, clothing, water etc. I know women using mosquito nets provided free by The Global Fund not to protect themselves against malaria but to make passion fruit juice, mushroom growing and other small income generating activities.
With transparent use of data and follow-ups to show the life-changing impact of these microloans ($1,000 – $5,000) to mostly women, more brands will offer more to ‘#worldneeds’ and more consumers will habitually buy for ‘#worldneeds’.
Bill Gates once said, “Banking is necessary, banks are not”. The main role of this pillar in the new architecture is facilitating the “poor” to access the capital and product/service innovation to be more productive, to sell more to classes above them, create employment and increase wealth & prosperity. This should actually be called Pro-Poor Banking.
Pro-Poor Banking is particularly important because;
- It cushions this new architecture from Dalio’s Dilemma of capitalists not distributing the economic pie well but socialists not grow the pie well either.
- Micro & small businesses are naturally neglected by the current capitalism architecture. World Bank says to stem poverty micro, small & medium enterprises (MSMEs) – which employ 4 in 5 people, need to access credit and markets to grow to employ more people and pay better salaries. 200-245 million (46-56% women-owned) informal and formal MSMEs in developing economies are either unserved or underserved by credit institutions. The value of this credit gap is $2.1–2.6 trillion; and for at least one female owner it’s $750– 920 billion.
De-risk; the problem with the current financial credit system is that banks don’t care whether you make loss or profit. For many small businesses this is a no go as they fear losing the little, they have. It’s also important to note that there is no shortage of money to fill the SME $2.6 Trillion credit-gap, but micro and small businesses are just too risky for lenders. Therefore, using the collected #worldneeds commission money as risk capital to micro and small businesses helps them graduate into the existing financial credit system.
Interest Free: because they are high-risk, micro and small businesses are subjected to abnormal interest rates that keep (for the lucky few that get credit) small businesses and employees in a never-ending loop of poverty. A small fixed service fee may be charged.
Collateral Free: This credit should be collateral free; the poor are usually poor because they have little or nothing to stake. Collateral free micro credit ensures more small business owners are not excluded and their potential given due chance. Yes, there will be failures and defaulters, but this is what capitalism is about. Venture Capitalists invest in 100 startups but only a handful stand a chance. This failure rate is far less with ordinary small businesses.
Basic Product/Service Innovation:
Capitalism thrives on innovation. What makes micro and small businesses high-risk is largely their failure to innovate their products/services, processes, cultures to serve more customers. This is because most of them have basic education, limited exposure, and many hardly think beyond subsistence.
Helping micro and small businesses innovate, even the most basic of innovations is very important here, because, several studies show that microfinance hasn’t achieved its promised objectives of lifting people out of power. This is because of the high-interest rates but also because, like banks, microfinance institutions don’t care about the borrower’s business, little advice is given to them to improve quality, productize, and target more customers.
If the poor create and gain more wealth, they are also in position to consume hitherto unaffordable products/services from the classes above them. So, the upper classes become richer and happier for having helped lift people out of poverty and the cycle continues.
Crowd-Innovation. One of the features in this project is to allow individuals with different backgrounds from anywhere in the world to read uploaded micro/small business projects and offer innovative advice to improve the product/service for the business to grow. This can be scientific, product, market, culture, and business model innovation, it can be at a small scale but when scaled horizontally to other small businesses creates massive impact.
Prospects for Bitcoin Adoption.
Am using bitcoin to represent cryptocurrencies in general. There are short, mid and long -term prospects for bitcoin from this project.
Proof of concept for leaner government: This doesn’t even need using bitcoin. If we can build a sustainable model to serve and uplift the people and other things in the biosphere that are neglected by ‘the system’ then governments can as well return some of our power and taxes. 😊
“I believe that a lot of things that governments do around the world today, if you privatize or even partially privatize those things, the world will be much more efficient, because seven fiercely competitive companies will always achieve the result much better than one bureaucratic fat government institution.” Murad Mahmudov – Bitcoin Maximalist
- Take on banks
Capitalism and Socialism have only gone so far sometimes astray in making the world better for current & future generations largely because they are centralized and with centralization cronyism, gross abuse, fraud, and neglect are inevitable. Since we (millennials & Gen Z) have given these systems their fair share to make things better for all of us and – it’s fair to say they have failed, we need to take matters in our hands.
The only way we can steer the ship away from an eminent rock-wreck is by hacking the frail captain and his assistant’s main controls – this is what we do best, right, before we are driven into a chain reaction of uncontrollable catastrophic events some of which are already happening now. We can change the ship’s direction faster by hacking socialism’s compassion into capitalism’s consumerism.