April 2021 issue editorial by James Mawson, editor in chief, Global Corporate Venturing

If you can fill the unforgiving minute

With sixty seconds’ worth of distance run,  

Yours is the Earth and everything that’s in it

If— by Rudyard Kipling

To place one’s heart, ie to trust, is at the centre of the financial system.

The Latin credere – believe or trust – is the root for credit and hence much of finance.

After all, it is hard to lend money to someone if you are unsure if they will repay it.

Economist Adam Smith was talking about people’s values, beliefs and preferences in the Theory of Moral Sentiments in
the 18th century.

And modern economists are now returning to the subject, having spent the past 100 or so years focusing more narrowly on economic self-interest and only more recently on behavioural finance to unpick why people do or believe what they do.

As the Economist magazine notes in its review of Mark Carney and Minouche Shafik’s new books, Value(s) and What We Owe Each Other, respectively: “As money becomes the primary or sole measure of value, society loses the ability to distinguish between acts of wealth creation that deserve to be heralded and those that do not.”

At the other end, the inventors and entrepreneurs are grappling with similar issues. Massachusetts Institute of Technology’s latest bimonthly Technology Review (TR) looks back over the two decades since its first list of its top 10 breakthrough technologies and asked: “Have these technologies made our lives not just more convenient, but better in ways we care about?”

It uses an Ipsos Social Progress Imperative survey that asked people from 13 countries which they should prioritise more, social outcomes or economic growth, to uncover the generational gap between people. For those under 50, social outcomes were the majority preference. For those aged 50 or older, it was clearly economic growth.

MIT professor Scott Stern told the TR: “Very often the decisions about innovation and technology are about its economic impact. There is nothing wrong with that. But are we directing the economic rewards to areas that will advance social progress?”

Similar to Stern’s (and Harvard’s Michael Porter’s) Social Progress Index, University of Cambridge’s Diane Coyle analysis of the wealth economy effectively asks: “What is the technology doing for people?”

Amos Barshad’s excellent report, Inside Israel’s lucrative – and secretive – cybersurveillance industry, for Rest of World uncovers moral uncertainty how graduates from the Israel Defense Forces’ 8200 unit use their knowledge and skills to found cybersecurity companies that export their cyber weaponry worldwide (hat-tip Neeraj Kamdar).

The question is especially worth asking as the speed of innovation and funding for further research and development are increasing.

But getting the fruits of these advances into people’s hands more widely will be a political and social challenge.

To take one example, will everyone be able to capitalise on the longevity escape velocity that comes when advances in medical technology means a person’s life expectancy increases by more than a year for each year they live? Or will only the rich benefit?

They have already effectively neutralised one certainty, the requirement to pay taxes, but if the great leveller, death, also no longer applies then trust could quickly break down. And it leads to extreme, effectively nihilistic behaviours. This is already happening.

Felix Salmon in Wealthsimple magazine picks apart some of the generational angst now it seems “value in stocks, art, precious metals, whatever”, is no longer inextricably tied to “fundamentals”.

Salmon’s four-letter acronyms, YOLO, ZIRP, SWAG, identify how the internet is changing finance. Salmon’s thesis was formed in the era of zero interest rate policies (ZIRP) as “getting rich slowly became much harder after 2008 because the financial crisis effectively killed compound interest”.

YOLO – you only live once – as an attitude “out of Wall Street’s book, take big risks, and try to score that home run”, Salmon added.

Combined it means there is a desire for SWAG – silver, wine, art, gold – that could appreciate
or fall in value but generally bring no income, unlike bonds, equities or rent.

Salmon added: “SWAG of today is generally different: it is Bitcoin or non-fungible tokens (NFTs) like CryptoKitties or Hashmasks. It is Supreme skate decks or Yeezy sneakers. It is baseball or basketball cards, be they physical or virtual. It is prints from the hot Brooklyn artist Brian Donnelly, better known as KAWS, or rare bourbon or obscure vinyl.”

Or it is Mike Winkelmann, a graphic designer from Charleston, South Carolina, better known as Beeple. His sale of Everydays: The First 5,000 Days for $69.3m (using the Ether cryptocurrency) as an NFT of the digital collage of Beeple’s earlier art.

As Salmon noted: “The common denominator is artificial scarcity – with a lot of emphasis on the artificial since a lot of these things are easily re-producible except for their blockchain watermarks…

“If you want to understand the world we live in, look to the hypebeasts, not the Wall Street Journal.”

While the SWAG winners are mainly the market manipulators, it is for the YOLO crowd, as Salmon said: “A fun game to play, and it is a community. And especially now, in the middle of a pandemic, what else are you going to do?”

Focus on rebuilding trust is one answer. The generational conflict between so-called baby boomers born in the generation after the Second World War and those under 50 who face the consequences of the trillions of dollars in wealth transfer to older people underlies the concerns about ZIRP. Zero interest rates effectively increase current asset prices, benefiting those who already own them. Pension locks means retirees’ incomes go up
with inflation.

Massive debts do little beyond provide a short term, quarter or two, boost but will increase future tax rates over the next 20-plus years, noted economist Tyler Cowen. Throw in the chances that these rich, old people might never die or continue having kids and working and nihilism seems a suitable response for millennials and generation Z.

Apart from climate change. Boomers can look around them and see the world is less clement than in the 1960s. The latest measurement of atmospheric CO2 (on March 17 by Scripps Institution of Oceanography) is 416.94 ppm; 60 years ago it was 315 ppm. Pre-industrialisation, about 250 years ago, it was estimated at 250 ppm (though in ice ages it might have been as low as 160 ppm).

Tackling global warming is effectively a mission to help shift people’s mindsets from a zero-sum game – how do we grow at another’s expense – to a common challenge and find and scale up the technologies to help. It is clear that despite the rapid growth in renewable energies, such as wind and solar, over the past few decades and the exponential drop in costs there is still too much of the global economy emitting carbon and other greenhouse gases.

To limit temperature rises to less than 2ºCelsius, therefore, requires tools to remove carbon, capture and use it. Price mechanisms will help scale the innovations developed already and corporate venture capital can unlock and find new entrepreneurs to partner with.

The past year has seen the enormous progress that is possible when policymakers aligned with universities, entrepreneurs and corporations can achieve together to tackle other global challenges, such as covid-19.

Now is the time to scale up the old and new technologies.

Society does well when old people plant trees they know they will never sit under.

James Mawson

James Mawson is founder and chief executive of Global Venturing.