A Faustian Bargain

Decentralized finance (DeFi) can disrupt global finance — but only if Defi systems and central governments cooperate. Yes, sworn enemies cooperating for the greater good.

While each seems to be the sworn enemy of the other, ultimately, a cooperative relationship between decentralized and efficient (versus anachronistic and cumbersome) financial infrastructure and government central banks with stable currencies is absolutely necessary.

Defi transactions, to scale globally, require stable and predictable value. Government-issued currencies are the only reliable and foreseeable foundation. Cryptocurrencies, such as Bitcoin were never currencies. …

New technologies and unprecedented impact

Investors have been swept up in the notion of “philanthropic capitalism” and have targeted life-sciences as an avenue that can fulfill this benefit to society. While laudable in concept, this is non-scientific surrealism. “Hoped-for” is not a reliable business model, and most of the unrealistic goals would not be sustainable even if achieved. Real science and innovation are more impactful and substantial and make life sciences even more.

Life science innovation is compelling, laudable, and sustainable.

· Over two-thirds of all drugs in late-stage development have been developed by new biotech companies focused on innovative…

Noise and Unpredictability

Signal versus Noise

Distinguishing what’s happening in the market and the direction of important market metrics — the signal — from garbled, inconsistent, and mostly useless data — the noise — is extremely challenging today. Information is contradictory and transient making data and critical events more confusing and indistinguishable. Unusual circumstances brought about by the pandemic, subsequent supply chain interruptions, inconsistent production and demand, and unclear economic forecasts combined for almost unprecedented uncertainty and unpredictability.

Typically, near-term predictions are reasonable and reliable because we have immediately available and fairly accurate data making short-term predictions reasonably accurate. In…

Ptolemy was an ancient astronomer who is credited with designing the first model of the solar system with the earth as its immovable center. The Ptolemaic system was “improved” over time to explain how heavenly bodies moved. But, despite the genius of this structure, there was one fundamental flaw, which of course was the fact that the system assumed that the earth was at the center of the solar system. …

Policy and Unintended Consequences

Technology is facing a substantial crossroads as policy changes with global resonance, such as China’s new crackdown on the country’s big tech companies (such as Ant Financial and Didi Global), the rising resistance to social media behemoths like Facebook, and the need for governments, whether in the United States, Western Europe, or China, to manage and control technological development. Regardless of any good intentions, this will add friction, inefficiency, and underperformance to the most dynamic global industry. The best intentions usually bring disastrous consequences.

What’s Going On?

There seems to be a lot of talk about…

Separating signal versus noise is challenging these days because today’s signal is more muddled than ever. One of the more unusual circumstances, which I covered in more detail in the article “Important and Unknowable” is that the immediate past is telling us extraordinarily little about the near future. That is unusual because we can typically estimate the near-term by connecting the dots with reasonable depth and data from the recent past.

One of the reasons why people have inflation fears, currency tremors, market jitters, and emotional vacillation between joy and terror is that all these outcomes seem equally likely that…

The “Thucydides trap” is where a rising nation-state — for Thucydides it was Athens — must eventually have a violent confrontation with the existing dominant nation-state — Sparta in his time. It is a zero-sum game where there can be only one dominant nation-state as the eventual winner — and it is usually assumed to be the rising nation-state outdoing the dominant nation-state.

Today, many “experts” (and I have great disdain for self-proclaimed experts) believe this is the circumstance between the US and China. We are headed toward violent confrontation where there can be only one winner. I read the…

Inflation, Predictions, Disruptions, and Not Really Knowing Anything.

Economic predictions have always been highly variable and uncertain, and, for some reason, relied upon as if the future were a magical algorithm. Essentially, economists would make one fundamental mistake. They thought they were practicing a science. Data could be collected, inputted, and a predictive algorithm could be generated. Even Nobel Prize winners like Paul Samuelson believed that with enough data we could come to understand the economy and how it functioned.

This is nonsense. As Daniel Kahneman and Amos Tversky have shown us, human behavior and irrationality, combined with unpredictability and…

The digital age is here, and it takes a lot of work.

Digital currencies, crypto assets, digitized securities, and distributed ledgers require an enormous amount of power. While the combination of these assets is subject to tremendous hype, the environmental impact has been mostly ignored. However, this is changing because there has been increasing alarm about crypto’s carbon footprint and environmental impact.

An example of this growing alarm is in New York. Recently, lawmakers in New York have proposed a three-year moratorium on all cryptocurrency mining centers unless they undergo a full environmental impact review. It is likely that any…

Digital Assets, Distributed Ledgers, and the Future of Capital Markets

“Distributed ledger technology and digital assets have the potential to dramatically disrupt global equity and debt markets.” (World Economic Forum, May 2021)

Distributed ledger technology (DLT), otherwise known as Blockchain technology, will radically simplify financial markets and, more importantly, fundamentally change the market’s infrastructure. Specifically, distributed ledger technology decentralizes critical data and enables an entirely new financial system where capital flows without the need for traditional intermediaries.

While there are challenges and numerous detractors, DLT is an irreversible disruptive force transforming capital markets and the global financial system.

Regulators (a…

Nicholas Mitsakos

I am an investor, entrepreneur, writer, and lecturer.

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