David Friedberg on the rise & risk of decentralization

this is the most important learning from this experience forget about the fiduciary and the governance responsibility of these companies whether they were good or bad will be resolved over the next couple of weeks and months i'm sure as more information comes to light but what's super interesting about what happened this week and i think is the most impactful societally over time um is that we're seeing this phenomena where um individuals in aggregate can believe something to be true and make it true and um we saw this with tesla and i i don't think tesla got this level of notoriety because it was such a

a longer playout cycle but elon you know was not hitting numbers that people thought he was going to hit margins production volume etc people were shorting the stock but enough people believed in the story that elon told about what he wanted the future to look like that they bought the stock and that gave him the ability to do shelf offerings raise additional capital and ultimately build the business and make it manifest in reality that he said would happen and the same is true of bitcoin and the same is true of trump and the same is true of storming the capital in all of these cases

there was a belief in something and there was an aggregation of individuals using social media as a mechanism for sharing and talking and engaging and creating a collective outcome that wouldn't have happened through a centralized system or centralized process and wouldn't have happened in the traditional way where history defines the future and i think that is what's so powerful about what's happening right now um and we're seeing it in financial markets but we're also seeing it play out in politics and we're seeing it play out in the real world um in a remarkable way

and it goes back to this notion that like a stock is worth the underlying value of the company and that that's not true people can dream a stock to be anything as they did with tesla at the time that people were buying tesla stock the historical performance of that business was not what hedge funds considered to be a you know a profitable good business it shouldn't be worth anything but the belief in what it could be is what drove the value of that stock and ultimately that value enabled that business to become true um and it's just it's amazing to see it happening and i think

the counter which is really what makes this so striking is the centralized institutions that are trying to block this from happening and um the shutting down of parlor and the shutting down of robin hood trading are are equivalent from my point of view um or at least equivalent i think will be perceived to be equivalent broadly which is if a group of people get together and try and use an online service to make a change in the world by sharing and talking with one another and communicating a belief a collective belief and that gets yanked away from them the institution

that has the ability to yank it away from them is evil and it will force people to decentralize and it will enable new ways of trading new ways of communicating new ways of building um and and that's the profound change that i think this decade is going to realize and we're just seeing it start now we talked about decentralization and you know we all feel the emotional response to the little guy getting screwed by the big guy that controls the system and we want to fight the system that's the basis of every great movie it's worth highlighting

though that decentralization and what i would kind of characterize as swarming behavior uncontrolled swarming behavior can actually have negative consequences and there's a reason systems exist you know um when you put a bunch of people in a room let's say you put 100 people in a room and every time and someone says the word door and every time you hear the word door you're supposed to repeat it within 30 seconds the entire room will be like deafening with everyone's screaming door door and suddenly everyone will be screaming it that's a feedback loop that occurs

in an uncontrolled social system and that's what's occurred with gamestop and it's what occurred with with bitcoin so there are as we've seen remarkable outcomes when you allow systems to operate without centralized control and without centralized brake pads that that kind of slow them down or put in place some rules and some obligations to how that system operates the problem with decentralization and this swarming approach uh to to resolution where lots of people basically work together individually is you end up with things like cancel culture where um before a judge and jury

determines whether or not someone did something wrong the community decides that person should be punished and shuts them down in the real world and their career and their life is ended and ruined and we saw the same and we saw the same with the capital riots you know people basically died because of the swarm that occurred where this idea that the there was fraud in the election became an echoing deafening noise for these people and they swarmed and killed people and the system by which you can actually have vigorous debate and the system by which you can actually have controls

and processes and judges and juries and trials is what needs to be improved for this to work otherwise people will go to decentralization and you will have a lord of the flies moment that engulfs civil society because the tools are there today and so centralized systems can work but they have to adapt and adapt quickly to be fair and to enable and to not um discriminate uh otherwise we're gonna see lord of the flies and we're gonna see decentralization being the solution to getting out of the system that's inhibiting us and we're gonna end up having really [ __ ] ugly outcomes