1/21/18

Human greed: The adoption curve for crypto

Cryptocurrencies like Bitcoin have been all over the news. There are some who are quick to judge it as a fraud, while others are bullish on the potential for the currency to break the monopoly on money / traditional fiat.

While too early to judge which way it will go, a significant wildcard as to whether it swings one way vs the other rests with a relatively new and unproven adoption mechanism inherent to cryptocurrencies.

Those that have been following the crypto-currency space, and in particular ICOs, have pointed out that cryptos provide a unique mechanism to drive adoption / scale up marketplaces.

In simple terms, it works as follows: through the issuance of tokens specific to a protocol/application, "potential" future value generated by the marketplace is brought forward in time, and given to early adopters willing to fund the risk. If the marketplace proves to provide real value to people, it will grow. Early adopters then can sell their tokens to future users - thus compensating them for the risk they took.

The structuring of tokens in this way creates powerful incentives that could drive unexpected human behaviors. While many have been quick to list the pathways in which Bitcoin could fail, it may be worth considering the flip-side. Human greed is a powerful mechanism which could drive adoption in unexpected ways. Consider this story:

1. Bitcoin created as a hedge against risks inherent to fiat currencies
2. Early adopters fund this experiment
3. By design, there is a fixed supply, which paired with increased demand, drives prices higher
4. This incites greed in non-early adopters  to "look into" Bitcoin
5. Some people buy the bigger vision, others buy the hype
6. Regardless, this creates an unintended consequence of accelerating adoption as more people now own it
7. As more people own Bitcoin, they want to find ways to spend it, as well as institute stronger governance
8. This drives new innovations and even further mass adoption.

If this adoption path is plausible, then provides a watch points for evaluating the maturity stage and risks of a crypto-based global currencies. More importantly, it provides a framework for managing/mitigating risk and optimizing for the upside.

1/8/18

Note to self: 2017 edition

This past year was one where my personal life took a front-seat to work. A lot was packed into these 12 months, the most significant of which was getting engaged and married. I'm grateful everyday that I got the chance to marry my best friend, and equally important, gain a whole new set of family. If marriage is one of the main sub-plots on this journey called life, then I couldn't be more excited to explore it with my wife and partner-in-crime — figuratively speaking of course!

Going home
Last year I wrote about being nostalgic of places. A big change this year was the decision to move to Asia, and Hong Kong specifically. While my heritage is rooted in Hong Kong, I spent the majority of my life experiencing this heritage second-hand, while growing up in Canada. Of the many reasons that we decided to move, it felt important to connect with our roots. Half a year in, and it definitely feels like this was the right move.

Asia has over a third of the global population and is the engine for global growth. It seems as if things are happening faster here than anywhere else. Not understanding how this side of the world works would be like reading a novel to the mid-way point and stopping. On a related note, having grown up in a largely non-Asian workforce, its been a real confidence boost to see and work with Asians that are in leadership roles.

Coming full circle at work
At work, I've continued to piece together my understanding of how the financial system works today. In the first half of the year,  I spent my time focused on Bank Resolution Planning — or, "how to shut down a bank in an orderly way". I learned more than I ever wanted to know about bank liquidity and drivers of financial stability.

This in many ways, brought me back full circle to why I joined the Financial Services consulting industry in the first place. I got in because of my curiosity with the 2008 financial crisis. Fast forward 10 years, and it felt like I was finally getting a chance to build some of the defense mechanisms to lessen the impact of the next.

On cryptocurrencies
As a result of the Resolution Planning work, I became interested in learning more about macroeconomics and currencies. This coincided with the news cycles starting to cover the rise of cryptocurrencies. Like anyone who has gotten into crypto, I went down the proverbial rabbit hole. I read everything I could find on the history of money , monetary policy, and even pulled up my notes from my ECON 101/102 school courses.

Beyond the hype of Bitcoin, I found the most interesting part of cryptocurrencies to be the numerous real-time natural economic experiments being run. Though nothing is certain, its hard to imagine that cryptocurrencies and decentralized economic systems won't become a bigger point of debate in an increasingly globalized economy. Having spent years looking at systems that should probably be more decentralized (e.g. science funding) this will continue to be an area of focus.

Onward to 2018
My goal this year is to find better balance between work and life. To help with this, there are important lessons learnt from this year worth documenting and remembering. To "future Andrew", if you live by the following rules of thumb, you'll probably do alright.
Life's rules of thumb: 
1. Take every chance you get to enjoy good food, with good drinks, around good people. 
2. Be humbled by the fact that the more you learn, the less you'll probably know.
3. Always make time for family. Otherwise, what's it all for anyways?

1/2/17

A Note-To-Self: 2016 Edition

Most of us experience nostalgia in some way, shape or form. For me, I'm nostalgic for places. In particular, cities I've lived in are cemented in my memories as snapshots of who I was and how I felt at specific points in time. New York was always a place of inspiration for me, and I was glad to have the opportunity of returning in 2016.

Landing back in New York, back in a corporate setting, I had reservations about the fulfillment I'd find in my work, and my personal growth.  After all, everyone around me was heading towards the very things I had just left behind — an office in a garage, sunnier shores of Cali, and this notion of doing "impactful" work. A year wiser, I've come to appreciate that fulfillment, growth, and "impact" (whatever that means) are all relative to something more important: your attitude.

I approached 2016 with a positive attitude and tried to view everything as an opportunity to learn something that I didn't know. This helped me to appreciate that there was always a bigger and more interesting question to ask — if you're willing to put in the time to look. 

Here are some of the topics, I found myself spending time on:

Market failures
Through the course of the year, I found myself increasingly interested in questions relating to market failures — e.g. conditions in which free market capitalism may not result in the most efficient allocation of capital to achieve positive outcomes.

This tied closely to learning as much as I could, through my work and other research, around how different types of institutions allocate capital (both public and private), as well as their failure modes.
 
Books I read, that I'd recommend:
 
How Markets Fail (history of economic theory), Capital Across Borders (history of wealth management), More Money Than God (history of hedge funds), King of Capital (history of private equity)

Investing in science and technology
Much of the lessons learnt on market failures has also been applied to Boundary Impact Ventures — the platform I started in 2015 to personally invest in deep science and technology ventures.

www.boundaryiv.org

The initial intent was to operationalize Boundary through a donor advised fund (DAF), but that was put on hold in favor of leveraging the equity crowdfunding infrastructure that went live in 2016. Platforms like WeFunder ("VC-as-a-Service") have democratized the fund management industry by lowering the barriers of entry for new fund managers.

I don't think people have yet realized how revolutionary this will be — in particular, for deep science and technology investing.

Nonprofit efficiency
In my day job, I spent a good chunk of time looking at the U.S. non-profit sector. Picking up Python in the process to crunch the numbers, I helped to lead the analytical component of this report on non-profit efficiency.

http://seachangecap.org/wp-content/uploads/2016/12/Overhead-for-Trustees.pdf

This topic hit particularly close to home for me, as I spent a lot of my time at Experiment.com thinking about how to efficiently fund social projects (in that situation, scientific research). Funding overhead at non-profits is complex - and this report helps to shed some light on the questions one should be asking.

Outside of professional life
I was fortunate in 2016 to have had the chance to do a bit of traveling. I spent extended periods of time in New York, Boston, Toronto, Stockholm, Copenhagen, London, and Zurich. On many of these trips I was reminded of how life exists outside of my e-mail inbox, social media feed and constant career goal setting.

Perhaps this was the most important lesson of the year.

Onward to 2017
Here's to another year of learning and approaching life as one giant amazing opportunity. Thank you to all that have played an important role in helping to guide me along the way.