Back in 2019,
wanted to promote a new digital currency, Libra, to customers around the globe, many of them young people entering the cash economy for the first time through their smartphones. It seemed then a promising innovation and still does now.
The proposal sadly landed at a moment when the tech giants were coming under political assault. A spirit of “let’s stop trying new things” was invading both political parties. CEO
quickly retreated when he might have put Libra out there in defiance of the politicians to let a global public decide if it was useful.
“You believe you’re above the law,” ranted liberal Democratic Rep.
Maxine Waters
in a hearing in which, for once, she was seconded by moderate and even conservative colleagues.
Result: Libra was stillborn for two years and essentially abandoned by Facebook. Other experiments such as bitcoin have continued, of course, serving, like porn in the 1990s, as a test bed for new enabling technologies. But none have caught on as a truly popular medium of exchange and store of value: too volatile, too esoteric, more like a tulip bulb you might buy hoping it will go up for no good reason.
The rise and fall of
Sam Bankman-Fried
and his FTX exchange may be the biggest news in cryptocurrency, but it has done nothing to answer basic questions. Will cryptocurrencies ever be useful? Is blockchain an important innovation?
The episode does say something that hardly needed saying about depositories or other businesses that promise to keep your assets safe and don’t. If Mr. Bankman-Fried sold you a bike lock and later was stealing your bike and getting in accidents with it, you’d have the same grievance that customers of his now-bankrupt cryptocurrency exchange have.
The rest of the story doesn’t ring any bells for novelty or originality either—the superficial fascination with a young face and his short-lived, overnight wealth based on gee-whizzery that nobody really could explain.
Yawn.
The irony that strikes me as interesting is the way Mr. Zuckerberg was treated vs. the way Mr. Bankman-Fried was treated.
When Mr. Zuckerberg attempted to launch his cryptocurrency, he placed his valuable, established, heavily scrutinized company behind it, deployed armies of lawyers and had every corporate and personal incentive to do a responsible job, if only to protect his own reputation and billions worth of Facebook shares.
He sought the permission of the permissioncrats, was eager to address their complaints, seek their input. In an amusing account, the Financial Times describes
Janet Yellen
and
Jay Powell,
over breakfast, asking themselves “What’s in it for us?” and putting the final stake in Libra on June 24, 2021.
To this day, because it meets their needs, many still believe an infinitesimal driplet of Russian Facebook ads elected
Of the cause célèbre of 2018, the Facebook-Cambridge Analytica scandal, who stuck around through the legal process that revealed it to be a nothing-burger?
It didn’t help that Mr. Zuckerberg had been the villain of a Hollywood movie before his still-thriving company even IPOed, whereas the inevitable
or Hulu series on SBF will arrive long after the fact.
In interview after interview, Mr. Bankman-Fried now berates himself for not instituting sufficient controls to stop customer money from somehow being used to make proprietary crypto bets that all have gone south. “I ask myself a lot how I made a series of mistakes,” he moaned to this newspaper.
The answer is easy. He didn’t institute controls because he didn’t need any, because customer money came anyway on a crest of bought-and-paid-for credibility from politicians, celebrity endorsers, sports teams wearing his logo, media cheerleaders, sponsored industry confabs in which his pronouncements were accorded gospel status.
From the episode you might deduce why caveat emptor is the worst regulator except all the others, and why authority figures are often better at looking out for their own interests than yours.
Joe Biden,
say, decides what he should do about a pending rail strike by asking what best serves the political interests of Joe Biden. More often than not, of course, this provides a workable way forward and is why democracy remains the least terrible form of government.
But it also produces its haywire moments. One came when the political establishment banded together to crush Mr. Zuckerberg’s conscientious attempt at a cryptocurrency experiment. Another came when the same establishment helped fan Mr. Bankman-Fried’s hollow simulation of a responsible business until it relieved its trusting customers of an estimated $51 billion in personal wealth.
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