I’m not a big fan of governments, and I’m not really a fan of bloated bureaucracies. I take the controversial view that HR departments and administrator roles are negative for any organization: it’s rare to find an administrator who knows what they’re doing or an HR professional who adds value to their company.
Half or more of all new hires fail – something I would be terribly ashamed of as an interviewer or recruiter. Your ability to spot talent and match your team’s needs with the pool of interviewees is little better than a coin toss. (Some well-documented reasons: gut instinct is incorrect, the ability to get the job done is unrelated to the ability to deceive an interviewer or look impressive in artificial interview environments, the HR obsessed interviewer’s ability to work ability, too recognize is as good as nonexistent.).
The bureaucratic obstacles to the exchange of values
I recently tried to get paid by a client in the UK by university affiliation – these learned institutions of forward thinking. It turned out to be quite a hassle. In addition to my main customer, I counted seven different administrators who were involved in one phase or the other, as well as two other approvals for the approval of the funds. The process took four months, with many forms, documents, and emails being lost. Oops.
In the end, they still – mistakenly – withheld a fifth for taxes and social security contributions that I had to spend a few more hours figuring out how to reclaim through my own and UK tax office. Trouble, nonsense and useless transaction costs all around.
One thing that made the operation difficult was that I didn’t easily fit into the established boxes of established organizations that had been used for decades. There used to be domestic workers for whom employers pay social security contributions, pension contributions and wage tax deductions. Easy. I wasn’t an employee; I was a citizen of a foreign country, lived in another, and often nomadized through a third or fourth country; and it was completely unclear what social security contributions or other bribes the university had to pay the government in order to reward me for the value I had created for one of its employees.
What amazes me is not that the university administration is bloated, trapped, incompetent, and devious – all of which is well established – but that a large research university is so ill-equipped to work on atypical salaries.
Surely you would think that freelancing is so common these days that it takes some getting used to. Ancient rules – their internal or similarly incompetent governments imposed – based on people’s “residence” or “nationality” are in a world where the places we are born live, eat, work, and are play, are different, completely outdated. I understand that a single employer may be stuck in outdated government regulations forcing them to consider the physical location where their suppliers did the work (correct answer: none of your business), but that just proves what I mean : We run a 21st century economy on mid-20th century infrastructure. Try doing today’s job using computers or machines from the 1950s.
Fintech solving the problem?
After countless documents and email chains back and forth, it was time to pay. Upon processing, they found that the banking details I had given them were British – since Wise, a fintech unicorn, has a clearing account in the Bank of England’s settlement system, the first non-bank to do so. Of course, that didn’t correspond to the archaic rules, and one of those nice administrators asked me for international bank details instead.
“Hm,” I thought. “Let’s play with them.”
So I gave them payment details to another UK fintech, Revolut, which recently acquired a banking license in Lithuania (recently joined the European Exchange Rate Mechanism). [ERM] and introduced the euro). So it looked like the payment was going to a Lithuanian bank, enough to convince the manager that she was doing her duty.
The interesting thing is that Revolut, as a regulated emoney service provider rather than a bank, holds deposits in special accounts at custodian banks – in the case of Revolut, sterling deposits with British high street banks Barclays and Lloyds. This is similar to PayPal, which bundles customer funds in their accounts with regulated banks or in liquid government bonds. A user foregoes FDIC protection and interest payments in exchange for the convenience of working with PayPal or the Revolut interface.
What happened in my case was the university transferring funds from one pound sterling account in the UK banking system to another pound sterling account in the UK banking system, with an overseas registered entity in between, allowing the law abiding trustee to make claims could that they have not made a domestic transaction. Yes, the way legacy banks interact with outdated rules and regulations is as crazy as they sound.
How Bitcoin solves the payment bureaucracy
Few people understand international payment networks. That, I chuckle, quickly undermines a popular FUD accusation made against Bitcoin (“It’s too complicated to understand!”). Well, they understand the legacy system even less, but they still rely on it. Three quarters of Britons believe they have the funds in their bank accounts. 68 percent of the Austrian respondents are of the opinion that bank deposits and cash are backed by gold. Some four in seven Americans are considered “financially illiterate” on simple tests that usually involve calculating the land rate or understanding what inflation is doing to your spending power.
You imagine SWIFT, the messaging network banks use internationally to validate funds on correspondents’ accounts that works a bit like postcards or maybe emails. I hit send or pay for a stamp on the postcard before I put it in the mailbox and the e-mail service (digital) or the postman (analog) will bring the package to the recipient.
Banking has not worked that way for centuries, if at all. Instead, banks offset liabilities among themselves. Internationally, they hold accounts with each other and ensure global transactions by crediting or debiting their accounts while confirming the action through SWIFT. Money as we imagine it (the number you see in “your” account in the banking app) is usually not even money – it is claims against the bank (Chase, Barclays, etc.). Banks in turn maintain master accounts at the country’s central bank, on which settlement transactions between banks take place by clearing the respective liabilities.
Since no one understands this, we shouldn’t be surprised that they don’t see how different Bitcoin is.
Bitcoin works with a very different promise: assets instead of debt. Bitcoin is a monetary good with no counterparty risk. These are traceable and verifiable owner assets that do not correspond to any liability elsewhere in the system. It is said that gold is “the only financial asset that is not the liability of others”.
Bitcoin is sent around the world or into the living room and works like the email / postman model that we have on our minds. Behind it stands something other than the word of a government (the network effect of the use and energy consumption in its production). It’s not someone else’s debt.
A Bitcoin-ized world wouldn’t necessarily solve my recent bureaucracy problems – at least not as long as we still have big governments, high taxes, and individuals and companies who dutifully report their activities. In this world, I’d still get the value of my production minus what my governors think was their share, but instead to a Lightning Network channel or an on-chain address. This changes nothing. As a monetary technology, Bitcoin does not solve these institutional, economic, and social problems. What we need is the accompanying ethos of Bitcoin: taking responsibility for yourself, independence from cyber hornets, from f *** off, from extreme reluctance to let others plunder what is yours.
We need a radically new approach to how we do things where outdated hierarchies and organizational functions are out; Independence, responsibility and independence are in.
In other words, what we need is Bitcoin to usher in a society in which we do not have to rely on taxes and money printing in order to save for the future, to secure our access to services or to maintain various infrastructures. We need the bitcoin ethos much more than the technology, money or investment itself.
This is a guest post by Joakim Book. The opinions expressed are solely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
Comments are closed.