- Why Dimon, Fink and Scharzman Threaten The Stability of the Financial System
- The Epic Question Facing All Investors
Last week I talked about an impending war and ideological struggle between two global superpowers…
On the one side, the Tech Titans— Page, Bezos, Zuckerberg, Jack Ma — who own huge and expanding datasets, develop and own the key algorithms, especially in machine learning, and have billions of users between them who live very largely within the ecological gardens these Titans own and nurture.
On the other, the institutions who remain in control of the global financial system, and who still exercise a still largely unrecognised degree of economic and political power.
If you doubt the latter, you need only reflect on the extent to which ‘Goldman Government’, as Goldman Sachs is often dubbed, forms the core of the Trump administration.
Or how the power of the bankers on the ‘inside’ of the financial system has actually increased since 2008, even if they are as confused as anybody about the increasingly fractious and untrusting ‘outside’ world breaking out around them.
Why the Superhubs are so dangerous
International finance expert Sandra Navidi, in her recent book, described this second group as “Superhubs”. She delivers a descriptive, unbiased as well as entertaining account lauded by ‘insiders’ and ‘outsiders’ alike of how the engine of the financialised global economy is regularly cranked and fuelled.
Here is a complex adaptive system prone to catastrophic breakdowns and rising inequality, which is controlled by a concentrated number of human beings — the Superhubs — whose resistance to constructive change now threatens the stability of the economic and political order.
In a series of profiles of such Superhubs as Jamie Dimon, Larry Fink and Steve Scharzman, Navidi draws a common threat together to explain their power.
Far from demonising them she cites their high degrees of education, emotional intelligence, resilience, care for others at a personal level, and their ability to forge deep and resilient networks.
At the same time, inevitably, she mentions their inflated egos, craving for power, workaholism, and monomaniacal focus on their goals. Naviti’s most important point is that this self-selected, self-perpetuating group is ‘’too homogenous.” Its members share the same education, the same information, think similarly and operate, interact with each other in echo chambers. So there’s a propensity to malfunction and when they don’t correct themselves, to fail, due to a lack of checks and balances.’’
Is this a million miles away from the situation of the Tech Titans who are suddenly learning that there is no longer ‘’power without responsibility”?
Are they too monochromatic?
Do they, too, operate in a global echo chamber?
The epic question facing all investors
The Tech Titans differ from the Superhubs in that they see themselves as ‘mission control’ to the future and the only possible saviours of a world currently and disastrously relying on debt, financial leverage and stressed, depressed, self-obsessed and overly emotional human beings.
The Superhubs have little interest in understanding or attending to the needs of the masses. There’s is a world “where money never sleeps.”
The Tech Titans aim to control a future where luckily for them ‘technology never sleeps’, constantly drawing data on daily habits, and increasingly steering younger generations towards financial services on their platforms — fast payments, loans, money market funds, wealth management tools, personal guidance from always improving artificial intelligence.
So the important question facing the world is this—who owns and has exclusive use the master algorithms?
And it’s too simplistic to answer – the Tech Titans.
The Superhubs are themselves creating whole new empires of early phase AI and fintech companies notably in China and India.
And they are powerful enough to make this a prolonged battle — whether its through buyouts, lobbying for anti-trust legislation, new tax treatment for tech profits, or whatever methods might halt the advance of the Tech Titans.
For now, the most impressive and increasingly trusted AI belong to the Tech Titans, and it is likely that they will use it to colonise and radically disrupt the small network of financial players clinging to a splintering and crazed financial system.
I’ve pointed to Alibaba in previous briefings.
This is also a story that, I believe, that now involves Amazon, Google, IBM, Tencent, Baidu and a clutch of AI companies who are looking to secure a financial system that is likely to skid and shut down at regular intervals over the next year.
I’ve been preparing a report on the opportunities, the new risks that follow from a financial system with Tech Titans at its core.
More to follow on that report and story in the coming week.
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