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Weekend tech diversions: “I’ve made it! I’ve made it! I’m an asset class!”

March 15th, 2014 |  Published in Weekend tech diversions

Human asset class

 How we have all become an asset class

Gregory P. Bufithis, Esq.

15 March 2014 – Over the last several months I have had the opportunity to read extensively about Bitcoin and to attend several webinars plus an in-house workshop on the subject. It’s an open secret that the Silicon Valley powers love Bitcoin and it’s only a matter of time before the titans of tech start pushing around their influential weight. Google, whose top engineers seem to be in every Bitcoin webinar and event, are probably way ahead of the pack which includes Facebook and Microsoft.

Why? Because new consumption technologies are not adopted because they are great but rather because a critical mass of influencers (who often stand to profit from the new tech) decide to make it so. And Bitcoin … call it a currency or call it a commodity or call it a technology, it really does not matter … has allowed the tech heavyweights a backdoor to the world of finance.

Step back and take a “forest for the trees” look.  The explosion of innovation and capitalism out on the West Coast over the last two decades has been fueled by the proliferation of smaller and more powerful computers connected by an ever-expanding network, the internet of course. Digital versions of mail and books shone a light on apparently archaic institutions like the postal service and the library while Jeff Bezos single-handedly made the shopping mall obsolete. Multiple tech bubbles and the businesses and services that emerged have forever transformed the way we eat, work, and play. But one industry remains indignantly undisrupted: finance. Until now.

Yes, yes. We have PayPal. But what is that? More Western Union than JPMorganChase.  Marc Andreessen, the man best known for making the web mainstream with the first widely used browser, Netscape, believes Bitcoin is the final missing puzzle piece, comparing the significance of the technology with the personal computer and the internet in an op-ed for the New York Times titled “Why Bitcoin Matters”:

“Bitcoin gives us, for the first time, a way for one Internet user to transfer a unique piece of digital property to another Internet user, such that the transfer is guaranteed to be safe and secure, everyone knows that the transfer has taken place, and nobody can challenge the legitimacy of the transfer. The consequences of this breakthrough are hard to overstate.”

For practical purposes, Bitcoin allows Silicon Valley entry into a party dominated by centuries-old banks that they were never invited to or put on the guest list. Leaving out pesky newcomers of course allows the financial sector to keep profits for themselves.  Andreessen’s venture capital firm Andreessen Horowitz has invested in countless Bitcoin startups including Ripple Labs and Coinbase.

Think about why you even need a bank in the first place. Its main purpose is to act as a credible middle man. When you need to withdraw money from an ATM or wire someone funds, all a bank does is confirm whether or not you actually have access to that money. Banks make the entire process convenient and secure. And Bitcoin (or its technology)? Alec Liu of Digital Trends explained it in a recent post:

“By solving the so-called Two General’s Problem, Bitcoin allows for cash like transactions on the internet—you don’t need a trustworthy middle man if you’re giving someone cash—by elegantly creating trust without the need for a central authority. If you think about it, the way we treat and view money hasn’t changed since, well forever, and part of the reason is a lack of competition. There’s little reason for banks to innovate if they hold all the cards. Suddenly, Bitcoin opens Pandora’s box. Now anyone can access bank-like services without actual banks.”

How best explained? Let’s use the technologies beyond MP3s.  When everyone still needed actual CDs to listen to music, the major labels still held all the cards. Once people could easily digest music in digital form, everything changed, not only how we purchased music but how we accessed it, shared it, and, from a profit perspective, how businesses could make money from it. The result is a steady stream of fresh industry entrants from Apple to Spotify.

And I am on the positive side in all this. While the whole Bitcoin process is difficult to wrap your mind around … and presently a little scary … I look at the future implications. What we do know is that when companies compete, the consumer usually wins. And as I said in the beginning, new consumption technologies are not adopted because they are great but because somebody has figured out how to make a profit.

And it should be no surprise that Google, whose futuristic vision involves cyber-contact lenses and an army of robots, is looking to get in on the action. They have a large payments team to figure out how to incorporate Bitcoin into various plans and products. Google has mastered the new model of data sets with enormous potential in both its reach and its speed. It looks to advanced, Web-based tools and large data sets as the key to solving problems … any problems … from how to target advertising to discovering the drugs to treat cancer. Using massive computing power to find patterns, to find solutions is now quick.

IoT bad news

 

 

And the data sets, oh the data sets. We provide Google … and many other Silicon Valley companies … a trove of data about our most banal daily pursuits. And the kind of data that they gather will only grow more diverse, as the Faustian bargain that we first accepted in our browsers – letting strangers monitor what we do online in exchange for nominally free services – will be accepted in many other domains, especially as the rise of the “internet of things” makes daily interaction with sensors, screens and other data-capturing devices unavoidable.

And that’s the financial pull. Sensors and internet connectivity are also turning “dumb” gadgets into powerful vehicles of prediction and speculation. The data they capture can be integrated with data from other gadgets and databases to create new information commodities. There is always someone eager to pay for this. As we see almost every day this ubiquitous connectivity is creating instantaneous data markets.

Humans Personal data ecosystem

 

 

And Google? Google will be present in your car (thanks to its self-driving vehicles but also to the Android operating system that powers other models); in your bedroom (thanks to its acquisition of Nest, which manufactures smart thermostats and smoke detectors); in your pocket (through Android-powered smartphones); and in your entire visual field (via Google Glass, the wearable camera and screen). It will know your routes, your daily patterns and your contacts. And will have a far better picture of your risk profile than a bank or an insurance company.  Evgeny Morozov uses this example:

“Google could in the not unforseeable future compute the odds that you will have an accident or default on a mortgage – better than any insurance company or bank. And, in having unmediated access to you via your phone, Google can also sell you insurance or make you an offer for your personal data on the go, using a price point that you are most likely to accept. That the financial value of your personal data is unstable, fluctuating based on your location, health and social status, means the spirit of speculation will not just invade our everyday life but will also make self-surveillance of our “data portfolios” highly appealing. We will resemble the confused analysts of the US National Security Agency: unsure of the future value of the data we generate, we will opt to store them for posterity. And, unsure of how to maximise that value, we will keep adding data streams in the vain hope that the value of our data portfolio (the sum total of our life) will rise.”

Ah, the ultimate goal: making our lives tick in sync with the speculative logic of finance.

And privacy? As I have written before, kiss it good bye. That horse has left the barn, that train has left the station [insert your favorite analogy here]. Our runaway infatuation with the sleek toys produced by the likes of Apple and Samsung – allied to our apparently insatiable appetite for Facebook, Google and all those other companies that provide us with “free” services in exchange for the intimate details of our daily lives – have turned out to be as powerful a narcotic as soma was for the inhabitants of Brave New World.

But you still want privacy? No problem.  You can buy it. It is a commodity now, not a right. At the recently concluded Mobile World Congress there was absolute glee among vendors in the privacy industry over the Edward Snowden leaks … and the public push-back over the Silicon Valley commercial surveillance issues … that have helped kick-start a new privacy industry sector as companies and consumers rush to fulfill a rising demand for products that protect privacy. From messaging apps to a smartphone, via tools to control just what social networks know about you, start-ups and large companies are offering hundreds of ways to keep what is secret, secret – although not necessarily promising to prevent NSA snooping. There was the Blackphone, Wickr (a secure messaging app that keeps no data whatsoever), AVG (the antivirus software maker, now a “cybersecurity company”), and scores of companies offering a “privacy fix” tool that customers can use to see exactly what companies like Google and Facebook know about them.

But in the end, the dystopian message of Dave Eggar’s The Circle … in keeping with Aldous Huxley … comes shining through: we are willing to shed privacy in the name of digital connections and convenience. And there is gold in them thar hills.

Endnote:

Meet the seven people who hold the keys to worldwide internet security. There was an interesting piece in the Guardian last week. As the preface to the piece says “it sounds like the stuff of science fiction: seven keys, held by individuals from all over the world, that together control security at the core of the web. The reality is rather closer to The Office than The Matrix”. To read it click here.

 

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"The mind that lies fallow but a single day sprouts up follies that are only to be killed by a constant and assiduous culture."
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