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mrbluze writes:
"An interesting blog post by Charles Hugh Smith on Why Banks Are Doomed: Technology and Risk.:
The funny thing about technology is that those threatened by fundamental improvements in technology attempt to harness it to save their industry from extinction. For example, overpriced colleges now charge thousands of dollars for nearly costless massively open online courses (MOOCs) because they retain a monopoly on accreditation (diplomas). Once students are accredited directly--an advancement enabled by technology--colleges' monopoly disappears and so does their raison d'etre.
The same is true of banks. Now that accounting and risk assessment are automated, and borrowers and owners of capital can exchange funds in transparent digital marketplaces, there is no need for banks. But according to banks, only they have the expertise to create riskless debt.
...
One last happy thought: technology cannot be put back in the bottle. The financial/banking sector wants to use technology to increase its middleman skim, but the technology that is already out of the bottle will dismantle the sector as a function of what technology enables: faster, better, cheaper, with greater transparency, fairness and the proper distribution of risk.
There may well be a place for credit unions and community banks in the spectrum of exchanges, but these localized, decentralized enterprises would be unable to amass dangerous concentrations of risk and political influence in a truly transparent and decentralized system of exchanges.
It's still early days, but can new electronic currencies such as Bitcoin become mainstream without the assent of governments?"
(Score: 1) by Non Sequor on Tuesday February 25 2014, @12:58AM
You're on the right track.
For certain functions in society (accreditation and risk assessment), there is a credibility game that accompanies the function. If everyone who applies gets accredited or gets a loan, the accreditation becomes worthless or the loans end up defaulting. The game is that if the wheat is going to be separated from the chaff by some process, people want to bypass that process. There's an ongoing arms race between the function and the people the function is applied to.
Bypassing the function doesn't change the game, it just changes where the game is played.
i haven't looked at Kickstarter much to know the current state of affairs, but I suspect eventually there will be a demand for some form of credit ratings or for projects to be "cosigned" by people who have led successful projects before. As people get burned, the demands for more formalized vetting processes will grow.
At some point, an online accreditation program will pass someone who can demonstrate a strong knowledge of a single field but who has no functional skills in any other area. In response to this issue, committees will form to establish course requirements for different degrees and answer questions like if a massage class can be used as a humanities elective for an electrical engineer.