There are two ways to change what large groups of people value.
The first is to try to change their minds en masse. That’s incredibly costly, very time-consuming, usually requires force or compulsion, and is still unlikely to succeed. Unfortunately, we tend to spend most of our energy on this approach, which is why society is so contentious today.
The second is to find the deeper values that lies behind the values we want to change, and then provide an alternative and better way of fulfilling that deeper purpose. This approach can sometimes be far cheaper, easier, and faster. It's almost certain to succeed. And it promotes greater levels of social harmony.
Most Americans (and many others) clearly value government regulation of financial services, in large part to protect consumers from fraud and incompetence. So, we require financial institutions to be sufficiently capitalized and to be licensed. We require their senior officers and sometimes other representatives to be vetted by regulators (often even fingerprinted). We require them to undergo regulatory audits periodically and usually also CPA audits annually.
But it doesn’t stop there. To prevent corruption and incompetence among the regulators and auditors, we require the regulators themselves to be regulated (such as via legislative oversight and/or government accountability audits by agencies like the General Accountability Office). And we require the auditing CPAs to be subjected to periodic “peer reviews” intended to help ensure quality control.
These rules and regulations (and many others not chronicled) place enormous burdens and costs on the financial institutions and their customers. They come at the steep price of money, time, and freedom.
Some believe that many of these regulations do more harm than good—that their costs do not justify their benefits. These people would like to see many or most of the regs repealed or rolled back.
So… how to go about doing that? How do we convince people to no longer value these perceived consumer protections?
The first way is to try to persuade a sufficient number of people en masse to change their minds—that is, to value less regulation. But as noted above, that’s incredibly costly, very time-consuming, and ultimately likely to fail. People are normally pretty wedded to their values and changing them requires moving mountains.
The second way is to first identify the deeper value behind those regulations and then offer a better and cheaper way of expressing it. After all, few truly value regulation for regulation‘s sake. We’re not so stupid as to endure all those costs and burdens just because.
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So, what is the deeper value behind all these regs? What are these regulations intended in the public’s mind to accomplish?
As hinted above, it’s consumer protection. The public wants to be (or at least to feel) protected against financial institution fraud, incompetence, and collapse.
But what if there was a way to prevent fraud, incompetence, and collapse without the need for these regulations? What if, for example, we could replicate the services provided by the financial institutions (custody, transaction clearing, maintaining ownership records, etc.) within some structure or system where costs are much lower in large part because most common types of fraud and incompetence are rendered impossible or at least far more difficult and less likely?
And…voilà! Now we then have consensus for change.
Well, that’s exactly what blockchains do. Via blockchains, we can provide completely decentralized financial services—including custody services, transaction clearing services, and ownership records—for the first time. And via smart contracts (software programs) running on those blockchains, we can provide all of these services, and more, in ways that make the most common types of fraud (e.g., accounting fraud, embezzlement, failures to deliver, under-capitalization, etc.) and incompetence (e.g., counter-party risk, bankruptcy, etc.) all but impossible.
Time devoted to changing people’s minds about their values is rarely productive. Far better to spend that time figuring out the value that lies behind the value we want to be changed, and then delivering a better way of fulfilling it. Over time this renders the value we want to be changed irrelevant.
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