As Software Eats the World: Who Wants Seconds?
After reading the infamous article from The Wall Street Journal, “ Why Software Is Eating The World.” by Marc Andreessen, I thought about what the next step in innovation would look like. Has it reached the pinnacle? or is this just the tip of the iceberg?
Andreessen’s article is now a decade old, written in 2011, and the amount of growth from these sectors was almost prophetic. Describing the future of industries and how daily internet users would reach 5 billion in a decade- the actual number is 4.72 billion- makes you wonder if this guy came from the future.
But…
From all of this disruption of traditional markets, what sector has come away unscathed? Banks
Yeah, I always rag on how terrible banks are. What’s new, right?
Here is what is new.
The May crypto crash was a 42% total loss of capitalization across all cryptocurrencies; Accounting for over 1 Trillion USD wiped off the table.
Every leveraged speculator was offset with a collateralized surplus. All of the popular DeFi applications had zero downtime. All stablecoins stayed pegged to a dollar while having billions in volume. There was no need for government regulation and no bailouts being paid for by the American people. All the overleveraged people lost money, and that’s it.
Let’s compare this to 2008.
The estimated cost of the 2008 mortgage crisis was 12.8 trillion to American taxpayers. This figure is a little under half of our current deficit of 28.2 trillion. The most considerable bailouts were given to banks, who were a significant cause of the entire problem.
Families began buying houses they couldn’t afford due to banks trying to secure more loans to use as derivative capital. The goal was not to make sure they were sound mortgages but to get as much capital to trade with. The revolving door of unsound mortgages used as capital slowly came to a stop as homeowners began missing payments on the overextended home they purchased or refinanced. After paying their CEOs and upper management millions of dollars in bonuses in 2007, nothing was left to cover the upcoming crash.
In 2006 Freddie Mac paid a $3.8 million civil penalty to the Federal Election Commission to settle charges. It had used corporate resources to stage 85 fundraising dinners that raised $1.7 million for candidates for federal office. These entities are supposed to foster a growing class of homeowners, not rake in profits for shareholders. The ripples of these actions by government-sponsored mortgage companies such and Fannie Mae and Freddie Mac are still felt in the current economy.
Nothing changed. The national average sale of a listed home in today’s market is 43 days and selling over the asking price by 11.2%.
We are losing trust in our system.
Defi software and contracts are eliminating this greed. They automate the financial market for a fair allocation of risk that is always over collateralized.
So, who else is on the menu? Banks have been out to pasture grazing on the American people, and this next decade, the software will eat them too.
