How Web3 Fabric Could Let You Build Financial Products
Why have we gone 100 years with only Wall Street bankers building financial products?
What do they know about our needs?
Imagine: Anyone -- no matter their race, gender, education, surname, place of origin -- anyone could build financial instruments, something that for over 100 years was only possible from the gatekeeper of Wall Street. Now, in Web3, we have the potential for true financial inclusion.
Inclusion is personal for me.
In 1991, my mother, Carol Sobieski, became the youngest person and first woman to win the Laurel Award for Lifetime Achievement in Television Writing.
Her trailblazing ways in a male-dominated industry rubbed off on me. When I was 10, she said that male executives were talking over her in meetings, not listening to her. I asked her:
“What if you whispered?”
She did and the room stopped to listen.
I grew up seeing her succeed using her own unique skills. It’s not a surprise that I chose the field I was most interested in. It never occurred to me to question whether I would be welcomed.
My dad tried to warn me… that very few women “broke in” to Wall Street.
Ahh, youth! I did the opposite of my dad’s advice. I chose technology investing, and for 25 years was among the 4% of women analysts and portfolio managers in the field (women controlling the money decisions in professional tech investing).
In many ways, being in the extreme minority was a benefit. Short bathroom lines. Everyone knew us by our first names, kind of like Prince or Madonna.
And the best benefit was being underestimated so I could fly under the radar.
For you optimistic readers, no the needle hasn’t moved much in 25 years. Still at 4%.
My own experience led me to wonder:
What if anyone…everyone… could create financial products?
Before you say “that’s crazy”... three things:
Inclusion means everyone can contribute ideas.
Every new innovation first seems crazy and impossible
There are many forms of financial products...not all are complex securities
There are three levels of financial inclusion:
Access to the same financial choices (savings, stocks, bonds, privates)
Having diverse people (women, people of color, etc) managing our money.
Empowering people to design financial products to suit their needs and imagination.
A (quick) tour of these levels:
Financial inclusion starts with access to the same loans and investments.
In the 1980s, rampant “redlining” of parts of cities (banks avoiding giving out loans based on lower-income geographies), increased the opportunity gap across the nation. Although gamification may not benefit investors, apps like Robinhood bring investing to everyone. Even if you have $10 you can invest in a fraction of Berkshire Hathaway and benefit from Warren Buffett’s wisdom.
Instead of Warren Buffett, maybe you want someone similar to you to manage your money.
Financial inclusion continues with having diverse representation, ie diverse people managing your money.
For general portfolio management, only 11.8% of professional portfolio managers are women, (even less are people of color) and most of the increase over the last decade has been by adding women to teams (“mixed teams”) instead of more solo women decision-makers.
True inclusion starts at the source.
Not rich investment bankers finding a way to package their wares in smaller fractions, enabling people to buy fractional shares and options on Robinhood (whileRobinhood sells the order flows to hedge funds who can see investors’ orders and trade ahead of them).
Not large pension funds allocating slightly more assets to experienced female portfolio managers who went to Harvard.
The answer to true inclusion, to breaking the 100-year pattern of Wall Street bankers creating all the financial products, starts in Web3
Web 3 flourished under the ethos of people across the globe contributing ideas.
Distributed teams working together, experimenting on governance and incentive structures, organizing themselves in different ways, and redesigning our accepted economic mechanisms (smart contracts, royalties, payments). Web3 innovations have driven those in “traditional” companies to respond with better offerings, modernized ways of doing things, and more distributed decision making.
Diverse views build more resilient organizations and economies. We don’t need to be financial wizards to know what we want. Why do we have so few contributing ideas to the creation of new financial products?
Every new innovation seems crazy at the start. By definition it’s not the way things are done. Individuals designing financial products via Web3 is no exception, but it’s also not the first “crazy” idea.
Mail before phones.
Wired before wireless.
Horse & buggy before cars.
Gas cars before electric cars.
Why have we gone 100 years with only Wall Street bankers building financial products?
Too complex?
People aren’t interested?
Too many laws and regulations?
Look at the proliferation of online traders, the power of crowds in meme stocks and the millions of crypto wallets and projects. Complexity and interest aren’t stopping anyone!
There are two missing pieces to allow for true financial inclusion:
A system to simplify regulatory compliance
An easier way to ideate what you’d like to create.
A Compliance Fabric could sense what you were creating and warn you if you were creating a security, guide you to alternative options, or let you create that security and go through the correct regulations.
A Web3 Fabric could enable true financial inclusion by enabling diverse minds to create, manage and invest as they wish.
Now it’s in our hands!