Ortega makes an odd reference to an article by J. Christopher Giancarlo, in the blog Observer: Business and Tech. If that name doesn’t ring a bell you should be aware that Mr. Giancarlo was nominated by President Obama on August 1, 2013, and was sworn in as a Commissioner of the U.S. Commodity Futures Trading Commission on June 16, 2014.
That’s important for two reasons. First the article by Giancarlo is about government approaching business innovation with a light touch, using the term the “do no harm” approach associated with the hands off regulatory environment practiced during the early days of the internet. He’s responding to the fears that some are expressing that new technologies in the finance sector, like blockchains and the smart contracts that are associated with several emerging blockchain environments including Ethereum, might lead to huge job losses in the finance sector. He’s expressing the potential impact of automation via new technologies like the blockchain on those “middle and back office staff entering countless offices to record, confirm and reconcile [New York and American Stock Exchanges and the NYMEX] floor trades.
This displacement he anticipates as a consequence of the impact technologies like smart contracts will likely have on the current workforce organized in supporting today’s stock and securities trading environment. He states bluntly
… the blockchain revolution will not come without adverse consequences, including a likely drop in the human capital that supports the recordkeeping and transaction processing of today’s financial markets. It is forecasted that retail banking automation including blockchain could spur a 30 percent loss of banking jobs across the U.S. and Europe over the next decade, the equivalent of eliminating nearly two million workers. For New York, it will be the end of another era in the evolution of its trading markets and the working life of this great city.
He points to what he believes is a more progressive and aggressive approach to fostering innovation found in the UK where the UK’s Financial Conduct Authority creates sandboxes for trying out new technologies to see how regulations need to be changed, added or dropped. An example of the FCA’s prototyping approach is the initiative called Project Innovate, which among other things features a ““Regulatory Sandbox” where firms test new technologies and business models without fear of regulatory fines and enforcement actions.“. In order to see the potential consequences of new technologies, this kind of experimentation is key.
FInTech companies will migrate to those locations and markets that support and encourage new developments. The US financial regulatory framework, in contrast, is
complex, conservative and, in some respects, opaque with limited regulatory initiatives directed towards FinTech. U.S. regulators too often say to innovators, “No, our rules do not let you do that. Change your business model.” Meanwhile, competing overseas regulators say, “Your innovation looks helpful to markets and market participants. Let’s see how our rules can be adapted and still achieve core policy goals.”
Giancarlo believes the private sector should be able to lead with governments and regulators should refrain from undue restrictions, and instead support predictable, consistent and simple legal frameworks that respect the “bottom-up” nature of the technology and its development in a global marketplace.
What is Ortega’s intent in bringing this to our attention? He starts the paragraph introducing his Twister use case by saying
The only thing I can think of is that Ortega is expressing a concern for the march of corporate technologies developing in the FinTech industries pushing the middle class into the unemployment line. This vignette may be a way to burnish his credentials as a voice of the proletariate and bring up the concern that has been a characteristic of technological innovations – they tend to disrupt existing social and financial patterns. Yet that concern is not lost on Giancarlo either, hence his urging to enable more experimentation to see what consequences might emerge from the sandboxes so that thoughtful responses might be developed.
Apologies for the length of this aside. I’m trying to understand the argument Ortega is building, but it’s amorphous, at least to me.