Daily bits: trading, ethics and penguins – July 2, 2017

Happy July! And Happy Canada Day for my Canadian friends, and Happy 4th of July for my US buddies… 🙂

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This is huge: Delaware has passed a law that recognizes the right to trade securities on a blockchain platform. While this only applies to companies incorporated in Delaware, that is 2/3 of the Fortune 500!

I’ll talk about this more later (because the emergence of a new form of market is one of the blockchain applications I’m most excited about), but meanwhile, it’s worth thinking about how this will change market structures.

In chess, the winning strategy usually involves “occupying the middle”. In business, also. Those who control distribution, even today in this increasingly decentralized e-commerce world, can assign themselves a big slice of the market.

This also applies to stock and bond distribution, which is taking a bit hit with blockchain platforms. It’s happening today with initial coin offerings, and now it looks like it will happen soon with the issuance of shares.

Who will the new middlemen be? According to “blockchain philosophy”, there won’t be any. I don’t buy that. I do believe, however, that a new type of middleman will emerge. Most likely, the owners of the blockchain platforms that facilitate the trading will take away the crown.

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In his latest post on Medium, Nassim Taleb introduced me to the concept of Gharar, which has a wide range of definitions, depending on your source. According to Investopedia, it is associated with uncertainty, deception and risk. Islamic-finance.com explains it as “deceptive uncertainty”. Taleb takes the last definition even further, adding the qualification “inequality of uncertainty”:

“No person in a transaction should have certainty about the outcome while the other one has uncertainty.”

Taleb intriguingly points out that this interpretation might not meet the highest ethical standards, as it still leaves some room for deception. If I suspect that something might happen to weaken the deal for you, but I’m not certain, then according to Gharar principles, I don’t have to tell you. But ethically, I should.

His writing on the ethics of asymmetry left me wondering if new technologies will nudge us into a world in which markets are transparent. How would that change the behaviour of markets and their actors?

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There are benefits to going cashless, but there are negatives, too. One major disadvantage that I don’t hear anyone talk about is the impact on families that prefer cash because it helps them to stick within their budget. You can’t spend more cash than what’s in the jar.

So, the emphasis on “making it easier for people to buy things” is short-sighted. It shouldn’t be “easier for people to buy things”, if they can’t afford them. Helping them to rack up debt is not doing them any favours.

Perhaps slick apps that help with budgeting can smooth flows. But will that demographic use them? Should they be obligated to?

I’d like to see the conversation widen to include those for whom payment convenience is not a priority.

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Haruki Nakamura’s paper figures are captivating, charming and deceptively simple. (Via Colossal.)

Two of my favourites:

By Haruki Nakamura, via Colossal
By Haruki Nakamura, via Colossal

 

By Haruki Nakamura, via Colossal
By Haruki Nakamura, via Colossal

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