DISINTERMEDIATION: FROM GAME A TO GAME B
EPISODE 17 MUSIC IN PHASE SPACE: PART 2 OF JORDAN GREENHALL’S GAME A + GAME B
It’s one of these weird things where you actually have to be able to grasp the complexity of the whole problem, and then, as a single movement, get the entire system beginning to shift very, very subtly, by the way, and notice which pieces are pulling, which pieces are pushing, modify here and there, until in fact you’ve engineered or developed, in fact in some sense nudged, the system into a new place. Then, when it’s in that new place, that new place is, in fact, stable, and it’ll hold in that location. You’re no longer worried about the ball rolling down the hill.
Jordan Greenhall
The Only Game In Town
An attractor’s basin of attraction is the region of the phase space, over which iterations are defined, such that any point (any initial condition) in that region will eventually be iterated into the attractor. For a stable linear system, every point in the phase space is in the basin of attraction.
It’s relatively well understood that GAME A has challenges. One of the things that many people who try to reform GAME A notice is that they have an experience a little bit like trying to push a heavy ball up a hill, where they get it, say, three quarters of the way up, but then, as soon as they let go, the ball rolls all the way back downhill. The reason for that, there’s actually a basin of attraction of a lot of different kinds of forces.
For example, in education, you have the linkage between what’s called credentialization … Let’s just say, for example, you go to school to get into college. You go to college to get a good degree. You get a degree, which is to say, you get a good credential, so that you can get a good job. You actually have this binding between the labor market and the education market, that actually makes it so that things that you do in education, if they actually show up as not improving people’s job prospects, won’t work. They’ll just be eroded away. They’re the rolling downhill of the ball in education.
We can actually identify other kinds of domains that reinforce each other in this fashion. What ends up happening is that, in many ways, Game A has evolved over time to be one gigantic self-reinforcing basin of attraction. Past certain minor limits, if you push really, really hard against something in one subdomain, again note, coming all the way back in medicine, you can make a lot of attraction in getting people to take insulin, but if you’re not dealing with things like, say for example, the media and advertising industry that is hitting everybody’s brain constantly saying, “Eat junk food,” or the junk food industry that is modifying the content of food, so as to maximally hijack the way that our brain interprets what is a good choice — Tristan Harris calls this hijacking evolution 1.0. You end up with a whole bunch of human beings, who are taking insulin, but are in fact eating food that’s bad for their bodies and being unable to make those choices.
Then there’s money.
MONEY
Money, get away
Get a good job with good pay and you’re okay
Money represents the ability of GAME A to abstract. It’s a store of value, a unit of account and a medium of exchange. It symbolizes the ability to take something which is a sign of something and replace it with the thing itself. As society grew in complexity, new frameworks that made it possible for values to be quantified and exchanged without going through the effort-reward conversion. The value of cucumbers changed when they became available in winter.
Also money is an allocation of the kinds of choice making that we’re investing in, in our economy, which is to say that every dollar you have is, in many ways, a vote in what the economy does, all right? If I really, really want to have nothing but Hip hop stars drinking Courvoisier, and you really want to have nothing but, say, Dad Rock, and I have all the money, then the economy is going to produce Hip Hop stars drinking Courvoisier and not Dad Rock. What ends up happening is that the way that finance allocates money also shows up as a way that our society allocates choice making, at least in the economic domain.
The problem is that this creates an interesting gap between the thing itself, the value, and the indicator, the sign of the value. What happens is that it’s not long before somebody realizes this and starts optimizing for money, completely regardless to the degree to which the money is related at all to an optimization of value.
If value can be exchanged, it can also be fabricated.
Fabrication does not need to be malicious, rather it can be understood as the creation of artifacts and services whose value cannot be traced back to material efforts. Currencies do not need material backing authorities either. All they require is an exchange system that guarantees the certainty of the transaction, and the order in which it was made.
The system is engineered so that there is a constant, slow, and predictable flow of artists from anonymity to fame.
We should distinguish the exchange value of music from its aesthetic value, if such a thing can be defined. It will therefore not come as a surprise if the value of music seem arbitrary, or if the music itself becomes a currency for the storage and transfer of value.
The two steps towards the fabrication of value
1) SCARCITY/COTROLLED EXTRACTION:
This effect is accomplished by GAME A entities who decide how much music is available by choosing which artists are given a platform. The aesthetic value of the music itself could be important, but only after factors including reputation, marketability, and critical reviews of past works. Above all, the system is engineered so that there is a constant, slow, and predictable flow of artists from anonymity to fame.
2) AGREEMENT:
The value of GAME A is reinforced by good criticism, and the value of critics and evaluators is validated by the presence of music they judge positively in the charts. This feedback loop causes agreement between GAME A and critics.
SIGNAL BUT NO VALUE: the gap between signal and the thing being signified
This fabrication of value produces lots and lots of things that generate lots of valid signs, lots of money, but in fact little or no value, in spite of the protestations of critics, pundits etc. This has similarities to the notion of debasing a currency. If I can counterfeit a bunch of money, I have generated lots and lots and lots of the sign, but I haven’t generated the value.
One of the signals you create in GAME A that the market can perceive is that now you’ve got a giant fucking building with marble columns and actually have trusted people wearing fancy suits.
But the gap between signal and the thing being signified is something the market has effectively no capacity to perceive at all, and that, then, becomes the game. When you move more and more and more power and choice making into the market, you end up basically creating a niche for gaming what the market can’t perceive and simulating what the market perceives as being a good answer. Then you’re on that slide, right? Do what is most profitable, highest money for money return. The market sees that as positive signal, and you’re riding the sleigh down the hill.
There’s no specific reason to believe that the people who are most capable of playing GAME A are also the most capable of making good choices in what things of value the economy should be producing. In fact, there’s very good reason to believe that’s not the case.
If people who are in control of the money supply printed all the money and gave it to themselves, the market would have absolutely no idea and no way of responding to that fact, right? The brain and heroin. By itself, the way the brain responds to simulated neurotransmitters, it has a really hard time being able to tell the difference internally. The only way you can respond to the notion of mass counterfeiting of money is through a completely different channel, not known as the market.
What ends up happening is the market collapses into a series of firms that are defined by a boundary where, on the inside of the boundary, you’ve got a whole bunch of agreements that solve the transaction cost problem, and a lot of people to coordinate in a very high velocity, low cost way. Then, those firms then do the market transactions back and forth between each other. Now, that obviously works. It built the 20th century and even earlier, but it runs into boundary condition problems, where, for example, information inside one of these envelopes can’t easily translate and connect to the information outside one of these envelopes.
Jordan Greenhall
DISINTERMEDIATION: FROM GAME A TO GAME B
Disintermediation is a process that provides a user or end consumer with direct access to a product, service or information that would otherwise require a mediator such as a wholesaler, lawyer or salesperson. The World Wide Web has often eliminated the need for a mediator. End consumers merely have to research the product, service or information for themselves, thus changing the relationship they have with the manufacturer or service provider. Disintermediation cuts out the middleman which is a significant factor in decreasing the cost of servicing customers.
Smaller Selectorate/Less distributed agency and power/dictatorship
Larger Selectorate/More distributed agency and power/democracy
Disintermediation distributes agency and power and enlarges the Selectorate.
We actually have to be really thinking about all of it, at once, and how they all fit together, if we want to make this transition from A to B happen.
selectorate
noun
1. a body of people responsible for making a selection, esp members of a political party who selectcandidates for an election
GAMES with larger selectorates are more democratic and GAMES with smaller ones are more despotic. These are not differences in kind, only in degree. As you increase the size of the selectorate (distributing power and agency), the system produces better outcomes.
The mechanism for increasing the size of the selectorate is disintermediation.
To the extent that the West is a better place now than it was five centuries ago, this is overwhelmingly due to the fact that one of the core properties of technologies is disintermediation.
Game B is substantially more dependent on what Jordan Greenhall calls sovereignty, the sovereignty of the individuals who are playing the game. We end up in a situation where, even if we’re reasonably effective in building out a lot of the other elements of Game B, say, for example, an alternative economic model, if the human beings who are coming out of Game A, don’t have the ability to play Game B, for whatever reason, then it’s a nonstarter.
ECONOMICS OF DISINTERMIDIATION
The economics of disintermediation are pretty easy. Retail is carrying the full burden and what we mean by that is that at the end of the day, the consumer is carrying the entire burden of the entire supply chain, including investors, and so, to the degree to which you can empower/give the authority to the consumer to create the capital structure that generates the innovation they’re ultimately consuming, either [they show up as the investor, in which case they just get the return of their own consumption, or prices go down. Either one is sort of equivalent and probably in between, because some consumers will not have been capital providers.
Disintermediation, in finance, is the withdrawal of funds from intermediary financial institutions, such as banks and savings and loan associations, to invest them directly. Generally, disintermediation is the process of removing the middleman or intermediary from future transactions.
Imagine all the money we are pouring into pharma. Imagine we could find a way to spending less money more effectively, which, if anything, any of the stories that we tell about capitalism are even vaguely true, then we should be doing that. If you can spend less money to be more effective, that is what you should do.
Technology increases the size of these groups, moving us from autocracy towards democracy (broadly speaking). The printing press disinter-mediated the Pope and the Catholic Church at large, because suddenly people could read the Bible themselves. There weren’t enough books prior to the printing press for people to even learn to read.
Luther and the early members of the Protestant Church asked for the Catholic Church to change. It didn’t. The extent it did change was due to competitive pressure created by other Christian sects. The Enlightenment and its accompanying social technologies, including democracy and capitalism, distributed power from kings to bankers, CEOs and industrialists.
Even democracies have become more democratic. In the past century, women and non-whites have legitimately entered the influential and essential categories in the U.S. George III didn’t give in to the American colonists’ demands because they asked nicely, they disintermediated him to create a new nation-state under new terms which didn’t include a king sitting as an intermediary.
Disintermediation Theory
If you want to improve the outcome you’re getting, you don’t ask for people in power to be “nice” or “fair” or “just,” you disintermediate the people that have power and distribute it to more people. Don’t seek justice, seek disintermediation
There is no doubt that the power to disintermediate existing power structures is greater than it’s ever been and technology is increasing them. Why don’t more people that hate their jobs or bosses find ways to disintermediate them?Why do investors who continually get fleeced not disintermediate the people fleecing them?
The reason is because no one gets rich but you when you disintermediate them. Five hundred years ago in the West, only the Pope had any real agency. Then, the founding of Church of England moved it to Kings, then the rise of the Rothschilds to Bankers, then the rise of the Industrialists moved it to CEOs.
However, the Western middle class, which you’re probably a part of, just got their first real taste agency in mid to late 20th century, so a lot of people alive today had dramatically less agency when they were born.
The internet has accelerated disintermediation and increased agency more than any prior technology, but it’s only been commercially available for a couple of decades.
While the technology is now available, no one is incentivized to tell you to learn to grow, manage and invest your own money (or any other part of your life).
If you do, not a single person will get rich except you. Your certified financial planner won’t get his 2%. The Venture Capitalist and hedge fund manager won’t get his 2 and 20. The only person that gets rich is you.
However, if you sit around, blame the government, and watch Fox News or MSNBC, lots of people get rich. The people that own Fox News or MSNBC get rich. The people they interview often get rich.
WORKING AT CROSSED PURPOSES
For example, let’s say you had Apple and Google. Inside Apple there were three engineers who had developed something really interesting and important, and inside Google there were three engineers who developed something really interesting and important. In both cases, the missing piece was the opposite innovation, where if they’re able to connect those dots something 100 times more powerful would emerge, but because they’re inside those envelopes, not only is there no obvious way to make that connection happen, it’s in fact actively inhibited, in fact possibly even illegal for them to cross those boundaries.
PLAN B: FROM SCARCITY TO ABUNDANCE
how do I appropriately incentivize innovative people to create solutions to gigantic problems, but where scarcity, and therefore profit based upon scarcity, is not available as the right solution?
In the blockchain environment, we may be in a circumstance where, through automation of contracts, smart contracts — say, if we’re in Ethereum — we can radically reduce transaction costs by maybe a factor of 1000 and, as a consequence, collapse most of the economic utility associated with large-scale and long-enduring firms and therefore get a whole lot more of the surface area, this innovation, exposed to a broader shareable environment and, by the way, also do it in a way that enables, as you said earlier, sharing to make sense, meaning, on the one hand, recordkeeping is better. The innovators themselves are able to have high confidence that their value will actually loop back and connect. On the other hand, you have ways of wiring and incentive structures who could do things like actually consider the commons as a commons and build into code rather than build into, say, norms or law, ways of enforcing the commons against strategies of the commons and things like that.
Jordan Greenhall
Most of the thinking about economics that has been done thus far has been scarcity economics. We’re right now in the process of the obsolescence of that entire approach. Specifically, when you make money, solving a problem, the perverse incentive there, the scarcity-based incentive, can be that you’re now invested in that problem ongoing, so that you manage it, right? The military-industrial complex,
What is a ‘Blockchain’
Forgive me if I seem obvious. Originally developed as the accounting method for the virtual currency Bitcoin, blockchains — which use what’s known as distributed ledger technology (DLT) is a digitized, decentralized, public ledger of all transactions. Bitcoin isn’t regulated by a central authority. Instead, its users dictate and validate transactions when one person pays another for goods or services, eliminating the need for a third party to process or store payments. The completed transaction is publicly recorded into blocks and eventually into the blockchain, where it’s verified and relayed by other Bitcoin users. Each node (a computer connected to the network) gets a copy of the blockchain, which is downloaded automatically. Doing so creates an indelible record that cannot be changed; furthermore, the record’s authenticity can be verified by the entire community using the blockchain instead of a single centralized authority.
The data can be distributed, but not copied. Advantages of Blockchains
Efficiencies resulting from DLT can add up to some serious cost savings. DLT systems make it possible for businesses and banks to streamline internal operations, dramatically reducing the expense, mistakes, and delays caused by traditional methods for reconciliation of records.
The widespread adoption of DLT will bring enormous cost savings in three areas, advocates say:
- Electronic ledgers are much cheaper to maintain than traditional accounting systems; the employee headcount in back offices can be greatly reduced.
- Nearly fully automated DLT systems result in far fewer errors and the elimination of repetitive confirmation steps.
- Minimizing the processing delay also means less capital being held against the risks of pending transactions.
In addition, some smaller number of millions will be saved by shrinking the amount of capital that broker/dealers are required to put up to back unsettled, outstanding trades. Greater transparency and ease of auditing should lead to savings in anti-money laundering regulatory compliance costs, too.
SCHADENFREUDE
noun: schadenfreude
pleasure derived by someone from another person’s misfortune.
What happens to GAME A when all financial and economic data is being updated, automatically and indisputably in real time? What does that mean for a GAME built on the existing system of double-entry bookkeeping: accountants. It is clear that accounting as we know it — as a quarterly exercise in which teams of people review samples of past transactions to judge the integrity of past events — will become obsolete with a huge human impact.
The labor force disruption won’t stop with the accountants. The entire investment profession, which is structured around the delayed release of official, audited financial figures, is also very much at risk.
What happens to the people who lose their jobs? What happens to the work culture?
We’re talking about the biggest employment shakeup the world has ever seen. And this time, the most vulnerable jobs are not the usual suspects: the factory workers, the low-level clerks, or the retail store assistants. Now it’s the accountants, the bankers, the portfolio managers, the insurers, the title officers, the escrow agents, and the trustees — and, yes, even the lawyers.
The Truth Machine
Paul Vigna
WON’T GET FOOLED AGAIN?
MEET THE NEW BOSS SAME AS THE OLD BOSS
At least right now, even though blockchain is unfortunately rather characterized by concentrated wealth, it’s also characterized by concentrated wealth in the hands of a different set of choice makers, who at least so far have a higher degree of capacity to perceive real problems and compose real solutions. To put it a little bit prejudicially, these are the engineers from the movie Apollo 13, who know how to solve problems. That’s actually a much better place to put your choice making than in the hands of people who have optimized for manipulating and counterfeiting money.
Jordan Greenhall
There’s still a big difference between money, as we currently understand the abstraction. “Gold hath no smell,” meaning there’s no traceability to it. There’s not any real direct connection between fiat currency and records. Interestingly many other metals do, but it’s not the pure metals that have the smell, bit’s a terrific element to have around if you’re worried about corrosion ruining your investment over time.
Of course, what that does is it creates a great niche for exploiting that fact. All right, so if GAME A shows up with a million dollars in their bank account, and GAME B shows up with $100,000 in their pocket, GAME A gets much more power in the economy than GAME B, in spite of the fact that GAME A may be, for example, a criminal enterprise, who stole that money, is involved in the Industrial Military Complex. Laundering for the cartels. You don’t really know.
It has no smell. It has no ability to be traced; whereas, blockchain is all about durable records. It is. In fact, the whole point is that it is a ledger, decentralized ledger, that is as resilient as we can currently conceive against modifications of the records themselves. This, I think, is both true at a technical level and at an ethos level, but there’s something about the ethos of the blockchain community that thinks about keeping good records as being important.
Blockchain enables us to use money as a variable in a software systems code. What that does is allow us to actually be thoughtful about designing motivational, choice making infrastructure, so as to solve this problem of how do you actually move high variable, complex systems from one basin of attraction away from GAME A into another basin of attraction for GAME B.
There is a community of people who are moving away from GAME A and building a basin of attraction for GAME B constantly solving problems. The way they did that was by understanding that they were actually dealing with a complex system, and so they are designing a technical architecture that has a motivational infrastructure, so that individuals, coming from wherever they came from, would look at it, choose, as individuals, to make choices that were in their best interests.
The cryptoeconomics is the ability to have a more nuanced and complex incentive structure, because rather than just dollars that are going to be associated the same across the whole market as a decentralized incentive, you can have different types of tokens for different types of things, et cetera.
