🛠️S3T July 19 - Beneath the headlines: the shift from theory driven to code driven economy

Ralph Perrine -

Welcome to S3T, the essential newsletter, podcast, and learning platform for change leaders. Every week we review the top developments and insights you need to stay ahead of the curve, build your ethics & leadership skills, and drive intentional beneficial innovation.

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In this edition of S3T:

  • 💡 How to talk with your family and teams during times of political division
  • 🛠️ Unseen beneath the political headlines there is serious work being done - to prepare this nation for its future.
  • 🌐 Why diverse perspectives help solve the complex "wicked problems" of our shifting global landscape and emerging technological challenges.
  • 📈 Impact of inflation on different economic groups, and why inflation measures need updating.
  • 💰 Evolution of financial systems towards code-driven and crypto-based models: Growing acceptance of Bitcoin and tokenization in traditional finance
  • 📱 "Sherlocking" risk for app developers in evolving ecosystems. Considerations for GenAI app development amid advancing AI assistants
  • 🌱 Emerging technologies in carbon removal and new adoption for cryptocurrency payments...plus a roundup of most significant developments this week.

Opinions expressed are those of the individuals and do not reflect the official positions of companies or organizations those individuals may be affiliated with. Not financial, investment or legal advice. Authors or guests may hold assets discussed.

This week, millions of Americans went back to work, wondering how to talk with their coworkers and teams about the events of the past weekend. And how to make sense of it all.

I am blessed to come from a diverse family. Together we cover a spectrum of origins, races, beliefs, identities, and of course politics. Some of us live in big cities, some in small towns. We are scattered across different parts of the work force and the economy.

But we cook together, hike together, travel together, and we're there for each other through life's ups and downs. We are probably a political statistician's worst nightmare. We don't fit neatly into categories.

Being in a very diverse family gives me a few thoughts to anchor on:

  • Everyone regardless of their politics should be able to attend a political rally without fear of violence. Election interference in any form is unacceptable.
  • We are more integrated than the headlines acknowledge. Regardless of your political views, you have family members with different views. Parents, children, cousins, in-laws. You likely have friends and neighbors with views that differ from yours. You also have co-workers with different views. You care about all of these people, and you do not want harm to come to any of them. Let's lean into that fact.
  • Yes, a few individuals are unstable, disconnected, probably hurting and not healthy, with potential to act out in extreme and violent ways - or at least talk like it. We don't have to allow the actions of the unstable to dictate what the rest of us do.
  • What happened in the last few days now sits alongside - and doesn't change - what happened in the last few years. Americans of every persuasion will have to consider what this means for their vote.

Unseen beneath the political headlines, the memes, and chaos there is serious work being done - to prepare this nation for its future.

The people engaged in this work will not be the ones you see on TV. They will not be roasting opponents in political attack ads, or starting meme storms on social media. They work across the political aisle on things that aren’t sensational enough to attract the attention of a broken news apparatus that now exists solely to serve up commercials.

If you want to find these people - and maybe even join them - you simply need to start viewing the world through the same lens they do - and here is what that lens shows them:

  • We in the US cannot continue to ride the uniquely advantageous position conferred on us in the aftermath of World War II. Or the dividends of the end of the Cold War. And we can't continue to play through the mistaken economic models that conventional wisdom thinks is "the only way."
  • The geopolitical landscape is changing, new technology capabilities are emerging faster than ever, and the financial architecture of the world is being completely reinvented.
  • The issues we face in the 21st century are complex, risk-laden, and accelerating. Many meet the full criteria of "wicked problems": issues that don't have predefined recipes for success, won't get solved by ideology, and will require multiple iterative attempts to resolve.
  • The first attempt at solving a complex problem rarely goes well - regardless of the ideology or views or the people attempting to solve it. The first attempt often changes our understanding of what the problem actually is.
  • Political operatives will seize upon setbacks and distract us with "told-you-so's" ...what we need in those moments is not division and distraction. We need focus and the capacity to adjust based on what we learned and try again. And we need each other's perspectives. All focused on solving the problems at hand...not just making sure the other side looks bad.
  • This challenging era we face - and the work we need to do together - is the strongest case for unity. We need to increase communication and knowledge sharing.

The individuals working in this manner recognize that navigating and solving complex issues successfully requires diverse perspectives and the blending of different kinds of expertise. This requires high degrees of trust and free and open communication.

It is easy to read this and think it's unrealistic. But it's far more unrealistic to think that pessimism is somehow the safer ground.

Across the panorama of history, mindsets that said "I doubt we can" never accomplished as much as mindsets that said "I believe we will". If you just can't bring yourself to say "I believe we will" then see if you can at least say "who knows? maybe we can, let's try."

The people who think like this are everywhere. Start watching and you’ll see them. You might even find one in the mirror.

The economy's performance since 2000

Every year the Bureau of Labor Statistics updates its view of cumulative price changes over time. The chart illustrates the argument that S3T editions have made repeatedly - that there is a form of perennial inflation that spans no single presidential administration can take the blame for. Here's the latest:

Notice which prices increased the most. Thanks to Anthony Pompliamo for sharing this.

Poorer Americans have been disproportionately impacted by inflation, because the lowest priced goods appear to have had the steepest increases, per new findings in this NBER paper by Alberto Cavallo and Oliksiy Kryvtsov (PDF).

Across the board, a sense that "this can't continue" is setting in, and a new financial architecture is inevitable

Recent developments continue to sketch out how the next financial architecture of the world will look.

This week BlackRock CEO Larry Fink said he has converted from crypto skeptic to "major believer" - saying there is a place for Bitcoin in portfolios of those worried about government deficits.

Larry Fink has also described tokenization as "the next generation" for markets. Goldman Sachs plans 3 tokenization projects in remainder of 2024. Tokenization in general means creating a digital representation of something you can own, or own a part of - like shares in a company. Tokenization in the context of crypto or blockchain systems refers to the process of creating digital representation of an asset (real estate, businesses etc) and using that to track ownership and transactions on a blockchain. Chainalysis has one of the best definitions:

Asset tokenization refers to the process of recording the rights to a given asset into a digital token that can be held, sold, and traded on a blockchain. The resulting tokens represent a stake of ownership in the underlying asset.

Financial Times economist Tej Parikh who worries economists are overly reliant on rules, argued in a recent FT piece that the Fed needs to change how it targets inflation. Its current measures are skewed by use of a proxy for how much homeowners would pay for the shelter of their home, known as “owner equivalent rents." Elsewhere there are recurring questions and debates about the relationship of inflation and employment. Deeper Dive: Is it time to rethink the Phillips Curve? (Scroll to bottom for content links) and The Phillips curve in Covid Times.

Where this is headed

For a glimpse of the longer term evolution, NLW of the Breakdown shared two excellent reads this past week on the role of crypto in the future of government

I don't recommend buying into everything these pieces assert, but these individuals are watching the horizon, and how they describe what they see is worth factoring into the views of mainstream folk like Larry Fink, Tej Parish as well as the economists of the NBER.

Together these developments hint that we are moving from a global economy driven by theory and vague governmental measures to one driven by code, where assets like bitcoin - programmed to resist inflation - provide a new layer from which empowered owners can opt in or opt out of old world assets depending on their performance. It will be an exciting era of financial innovation yes. But one with gritty issues and problems work through.

Gain all the expertise you can. We're going to need it.

If you are build or invest in GenAI apps: the new Sherlocking risk

Sherlocking refers to the tendency of platform or ecosystem owners to offer capabilities that may compete with, and even obsolete third party apps. One of the biggest recent examples comes out of Apple's "App Store" where 3rd party developers have sometimes had their marketshare ruined when Apple added new capabilities to IOS, the core operating system of iPhones.

Astropad published this 2021 case study in Sherlocking from their own first hand experience - well documented, good need-to-know detail.

Possible Sherlocking risks in GenAI and who can be impacted

Savvy development teams in the GenAI space are keeping an eye on the accelerating capabilities of public GenAI assistants like ChatGPT, Google Gemini, Microsoft CoPilot, Anthropic's Claude and other peers.

If you are thinking of developing a GenAI app, it's best to see how these public GenAI assistants handle your use case, so you can think clearly about whether you want to actually develop a GenAI assistant that competes with them or whether you want to develop a set of prompts (or other capabilities) that leverages these public GenAI assistants.

If you are already prototyping a GenAI app, you should consider the following steps before investing too much more time/$:

  • compare its performance against the performance of leading GenAI assistants ChatGPT's latest, Claude, Gemini, when you use a well-formed prompt (it may take some experimentation to find out what that is).
  • then consider how your app will perform against them 6 or 12 months from now when they will be much more advanced.

Public GenAI assistants + Well-formed prompts will outperform many new app ideas right now. If your new ideas fall into this category, don't create a new app for your customers, just show them how to write better prompts.

Public GenAI assistants 6 months from now + Well-formed prompts will likely outperform any new app ideas UNLESS the following are true:

  • You have data that is not available to Public GenAI assistants.
  • You and your customers need to operate inside a security perimeter that Public GenAI assistants cannot access.

A good way to summarize this: Build beyond the platform, not just on the platform. Some general best practices for managing this risk:

  • Be aware of the ecosystem or platform roadmap and potential future features
  • Focus on unique value propositions that are not easily replicated
  • Continuously innovate to stay ahead of potential platform integrations
  • Diversify your offerings to reduce dependency on a single feature or platform

By following these principles, developers and investors can partner to create more resilient apps and businesses that are less likely to be made obsolete by platform evolution.

Notable developments this week:

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