An article published yesterday in Vox had me thinking about the reasons humans engage. Humans engage for the exchange of value. From what is described in the article, Mr Bankman-Fried was able to extract value in the form of fiat currency from investors while returning no value to these investors in the form of returns. Mr Bankman-Fried’s going concerns are bankrupt for this basic reason.
Where could Mr Bankman-Fried have extracted value for the purpose of processing and packaging value? From an underlying, networked society that adds value to his now worthless FTT coin. I am befuddled by the failure of investors to connect the value of currency to the value of an underlying infrastructure that supports the delivery of exclusive “stuff.” The more efficient the underlying infrastructure, the more valuable the currency. The more exclusive the “stuff” produced, transported, and consumed on the infrastructure, the more valuable the currency.
While I have ridden the light regulation bandwagon for a significant portion of my career, the purpose of markets is not to see who can play the better shell game. Mr Bankman-Fried’s distaste for regulation is clear in the Vox article. Mr Bankman-Fried disdain for regulation is likely based on his ignorance about regulation’s role. Exchange is optimal and efficient where there is transparency about cost, price, and information about what a product is. America’s economy is market-based and reliant on transactions. Rules of the game are necessary if traders are to remain confident that outcomes were fair and based on the highest level of available information.
Stories like the one that involves Mr Bankman-Fried are not complete without accountability from investors. It is 2022 and we live in a digital age where broadband connectivity provides access to lots of information and knowledge. Information and knowledge are increasingly commodified, but investors rather give those potential savings from garnering information on their own to scam artists.
17 November 2022
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