2018 CHAINSIGHTS | Marber Defines Blockchain as Socio-economic Accelerator

Abstract : Peter Marber, portfolio manager and founding member of Aperture Investors, said at 2018 CHAINSIGHTS that blockchain should not be thought of software coding, but a socio-economic accelerator in human history.


Oct 25

Peter Marber, portfolio manager and founding member of Aperture Investors, LLC, delivered a keynote speech titled “Blockchain and the Global Economy” at inaugural CHAINSIGHTS Blockchain Leadership Summit 2018 in New York, which is the highest-level industry conference in U.S. hosted by a Chinese company.

The following is the transcript of his speech:

“When I listen to a long bio, this’s made me feel old. And I look at her and I said: this is a really young crowd.

Seriously young. I mean I think I was sitting in my office and I had a mobile phone that's older than a lot of people in this room. That’s blockchain, right? New technology. So today we're gonna talk about the blockchain and the global economy. And really how I want you to think of it as not necessarily a software coding, but actually part of a much larger phenomenon. Because I'm going to sort of define blockchain. I want to define blockchain in a very broad sense, three certain, key ingredients.

Well, the first one is the peer-to-peer networking which connects participants to date in real time. The second piece of blockchain is the distributed data storage to provide a sort of shared view of data. And lastly it's the cryptography, right? The secure validation identity and permissions and transactions of data that's actually on these networks. I am using these very broad terms. Of course we've got lots of presentations and discussions today. They're gonna have much more specific usage for blockchain, but I really want to talk about it as a big sort of cosmic thing for these big mega trends. It's happening in the world because I really do believe that the blockchain should not be thought of as software but almost a socio-economic accelerator, something that can get economies going.

And uh, we're talking about something that will help not only developed markets, shared legacy structures reduce cost, but also help a lot of emerging markets around the world, uh, that don't even have these legacy issues that will allow them to kind of leapfrog and grow their economies even faster. So in this respect, I want you to think of blockchain as something that actually can speed up the economic metabolism of the country by reducing costs, by increasing the number of participants to help continue sort of the great advances that economies have been making.

And it's interesting is that we think about economic progress, probably in very small terms and what's been going on in the economy for the last month or the last quarter or last year. But the reality is we really need to think about it in much, much longer terms. You know, think about it this way. We forget the socio-economic progress is actually a relatively short phenomenon for Homo Sapiens. We really do forget Keynes was the first economist to point out almost 90 years ago.  He said from the earliest times of nutrient record back, say two thousand years before Christ, down to the beginning of the eighteenth century, there was nobody change in the standard life of the average man living in supply centers of the earth.

Ups and downs. Certainly visitation of plague found and more old intervals but no progressive violent change, the slowing of progress or lack of progress was due to two reasons: to the remarkable absence of technical improvements and the failure of capital to accumulate. It's really amazing that Keynes saw this just maybe 150 years after the Industrial Revolution that changed the world forever. And I think we just forget this fact. The humans have been roaming the Earth for roughly 200,000 years. It's only in the last couple of hundred years we actually figured out a way to end hunger to extend life, to feed people, uh, in ways that we've never been able to do before as a species. We forget that the global economy, up until a couple hundred years ago, only was growing 0.1 or 0.2 % a year.

Folks, at that rate, it takes over 500 years to double output. Our global economy today is probably growing at 3 or 4%. We've got some countries going at 10% a year. China grew over 10% a year for about 25 years.  At 10% a year, you double your output every seven years, you quadruple in 14 years. You can octuplet it in twenty one. It's amazing the miraculous growth that we actually witness. And things are still changing for many countries around the world. What's interesting too is that if you think about it, even just in the last 4,000 years, really we have essentially kind of flat-line growth.

Does everybody see that GDP per capita really just just inching up over thousands and thousands and thousands of years. And we forget that points we have very little population to even the fifteen hundred BC we had a hundred million people in the world and there wasn't very much technology at all. Maybe a little bit of surrounding metallurgy. It wasn't until about 100 BCE that we invented paper in China. China invented paper, but believe it or not, after that it was a long period before humans really had any meaningful progress.

It was really kind of the period human history, right? Plagues, famines and wars, everything. It actually took a long time to get any material changes in the world. It was until 1215 that we got the beginning of a kind of constitutional government, the Magna Carta. And after that we saw a string of other changes in the world that actually was the precursor for the great technological and sociological leap forawrd.  The printing press in fourteen forty, we have the Treaty of Westphalia in 1648, also beginning to readdress how countries were going to interact with each other going forward.

Interestingly enough, Adam Smith, Wealth of Nations. That's only a hundred years after that. And what else happened in 1776 for the Americans out there? The American Revolution, people starting to think how to organize the society a little bit different because the world is starting to change. Economies are starting to change. If we look just a couple of years later we have James Watt, Watt engine in 1781? We get the French Revolution. Just Watt engine is the beginning of the Industrial Revolution. I can of course like go on and on with thousands of different technologies and different inventions that come out over the next couple hundred years. But do you see that yellow line? And what happened to GDP after all these ideas of how to organize the society and technologies have one economy is all this stuff.

What happens to our population? Well, sure enough, we got to a billion by 1900. It took us 200,000 years right? To get a hundred million. And then it takes another was three thousand plus years to get ten. Go to the how long did it take us to get to the next billion?  very short period? In 100 years, we had 7 billion Homo Sapiens on the planet. Folks, that's tremendous progress. Just unbelievable. It's tough to imagine. It's just miraculous. What has actually transpired. So now Keynes, we know, told us a little bit about how this yellow line started to move up. He said, does anybody remember technical improvement? Right? Technology and capital?

So the thing that Keynes never answered was, well, how do we get technology? How do we get capital, right? So of course I had to write a book and tell the world about this because you have to think of all this progress and three components. The first productivity, right, human capital, educated, healthy, knowing how to apply technology. So we can produce more with less effort. Right? But it's more than just that. We also need a kind of market framework to organize the society. We need laws, institutions, incentive structure to help us harness the productivity and increase human capital and technology. Anybody remember the former Soviet Union?

They had the most educated population in the world. They had great technology. They were the first up in space with Sputnik. Remember all of this, but why couldn’t they keep going? No market framework, no laws, institutions, incentives for further technological development. Right? They also lacked one last thing. They lacked finance. They needed financial infrastructure, markets and systems that allow us to take the surplus or excess capital that we made from our market framework and efficiently redeploy. We’re here back to productivity. And so I want you to kind of think of this in some respects.  There we go.

Each of these like a year working in with each other, propelling the society forward with socio-economic advancement. This is the root of progress: productivity, market framework and finance. And how many of you out there think that the blockchain could help? Maybe one is about all three of these. Absolutely. Right? So blockchain has this potential speeding these years dramatically in ways that almost nothing else has been able to do, except for the internet. But we're talking about that kind of revolutionary potential that's out there.

The interesting thing is that I spent my last thirty years investing in emerging markets and developing countries. And I think the emerging market actually does have the best potential for adapting, adapting to blockchain technologies. One of my sociology heroes the great Hernando de Soto actually read them in a C class when I was a graduate student.  And interestingly he wrote over thirty years ago about how much debt assets were sitting in emerging markets. The fact that there was land that people owned and buildings they own but they didn't have deeds, they had no ownership so they couldn't actually borrow money against it. They could not create financial assets offer to invest and improve those assets.

I know a lot of us also know about leapfrogging. If you look at the emerging markets, some of these countries are the most advanced and things like mobile banking. And part of the reason is they didn't actually have to build bricks and mortar banks, right? To take deposits and make loans. They don’t have to build ATMs. They just have to put it on a cell phone. And I think that emerging markets is not shackled with all the legacy infrastructure. Uh, and protocols that developed markets are. As a result, they have the greatest potential for the blockchain.

If you really think about it, emerging markets are some of the most important economies in the world. Over the last 40 years, one of the things we've seen is a decline in advanced countries’ percentage of the global economy. If you look at the same period, you'll see emerging markets. Does everybody see that purple line? See if I can get here. The purple line is actually Purchase Power Parity output. Does everybody see? After lagging for decades, emerging markets finally crossed advanced economies in terms of a percentage of global. They are around 55% of the world's output now under Purchase Power Parity basis.

And they're so important. I think we fail to remember that emerging markets really drive the global economy. They are 85% percent of the world's population. They are about sixty three percent of the world's commodity production. We're talking about twenty five percent of the financial markets in the world, moving to about 50% by 2050. They occupy seventy seven percent of the world's landmass, and they're roughly two thirds of all the current growth in GDP in the world. And so I think that everybody should be very optimistic that emerging markets is a great place for you to sort of watch the experiment of blockchain and how blockchain shapes the socioeconomic trajectory of these countries.

And remember I told you the first big ingredient in those years for uh, for socio-economic advancement. It was productivity. Right? And if you look at what's happened just in the last 35 years.  Back in 1980s, what we see is that 82% of the workforce in emerging markets focused on resources, things like farming, fishing, mining, that kind of stuff. Right? But what would we get at 2015. Does everybody see the yellow and the green? That's medium tech like electronics or greenness is the high tech. That's the, uh, let's say the computer space. Now for 57% of emerging market work forces are in these higher tech sectors. The productivity is actually there and the incomes are actually there. This is a huge change. And keep in mind, there's over 2.5 billion people in emerging market work forces. There's only around 400 million in the G-7.

So I really do believe that the emerging markets are going to be a key to blockchain’s greater proliferation and adoption over time. You can help me with this next one. So I want you to actually sort of step back and think about blockchain almost the way I think of these low-tech containers. The intermodal container is a kind of unsung technology in the world. It's been around for, let's say, a hundred years. But it wasn't until the late sixties and early seventies when we standardized the size of these containers that we saw trade really start to take off. Why?

Because factories all around the world could begin to package goods in cartons to make the most efficient use of a standard-sized container. Trucking companies could in turn, build trucks that took the standard sized containers, taking into railroads that have cars that have adapted for the standard size of the containers. Right? They get taken to ports that pickup. They have all sorts of lists that take care of the standard sized containers that allow stacks of seven, eight, nine ten of these. We put on boats and ships all around the world.

The intermodal container is one of these great inventions that by standardizing a practice enable dozens of industries to actually scale up dramatically all because of something goofy like this little metal box at a standard size. So if you think about blockchain, It's just in getting people to adhere to a certain kind of behavior, a certain standardization of whatever the industry is. You can imagine the scale of the potential could be enormous. And the interesting thing is, if we look at what's happened to global trade, and I don't know if it's a 100% how to this intermodal container, maybe you can help me put over please. What you see in the last few years, everybody see this? This is the growth of trade from 1500 to 2011. And one of the things that we actually see is this enormous burst towards the end here. You see that? That's all after World War II.  But do you see this really big burst here at the end? That's just the last 30 years.

And part of that is linked to the interval container making trade so much easier. It also has to do with tariffs and a variety of other technologies that came into the world. So I overplayed intermodal container, but absolutely help contribute to much greater economic activity around the world. And that's actually what I think blockchain is going to do. It's going to have a similar kind of impact. It's going to revolutionize so many industries and as I mention particularly outside of advancement, this I think emerging markets hold some of the greatest potential.

So if you think about, I think you've already got the supply chains, how all industries can kind of streamline documentation and finance, you can help me out again, finance and banking. I think they're gonna be a lot of presentations today talking about how to store records, how to transfer money and assets much more efficiently in the space of the government. It's really amazing. We can produce enormous amounts of red tape and cost structure and increase security efficiency, voter registration and participation, greater transparency, maybe greater trust in our governments. The blockchain actually has the potential for doing that. It also has the potential of helping us improve human health care, standardizing records, transferring information regardless of doctors or insurance systems, or even countries. This kind of thing can save lives and extend life expectancy over uh uh, coming years. And I think it's already starting to be rolled out in several countries.

If we can scroll to the next page, you'll see other industries too.  Real estate is one of those arenas that I think has great potential because a lot of ownership, uh, is still very paper-intensive. And so the ability to simplify ownership allows us to simplify funding, reduce costs, and maybe even increase liquidity to the point where houses or apartments could maybe even trade not that differently from stocks or bonds. Of course there are other sectors like the law. I think we also have it. You can just tell me work through these next couple of things asset sharing, so many sectors around world would be displaced by peer- to-peer networks that allow us to rent and share assets. And I'm not talking about AirBNB. I'm talking about everything from like dump trucks to airplanes, just so much to be actually be attractive with an asset sharing blockchain as well as education which over time the verification of educational credentials, transfer credits, all of this is that could be blockchained will actually allow people to take their credentials all around the world and we can move people more efficiently to where opportunities are and where their skill sets can best be informed.

So I wanna just sort of finish up and remind everybody that when you have all of your presentations today in your mind, think of it, not so much is about all this great coding that's going on in the world, but more about how market can be a great socio-economic accelerator. Thanks so much for having me. Good luck I'm sure it would be a great day.”


Peter Marber’s bio was given by Moderator Robin J. Lewis, former Associate Dean of SIPA at Columbia University:

“Peter has professionally invested billions of dollars for many of the world's largest corporations and financial groups. He's currently portfolio manager and founding member of Aperture Investors, LLC, which is based in New York. He's previously headed emerging market businesses for Loomis, Sayles & Company and HSBC Global Asset Management. He was a partner and president of the emerging market subsidiaries at Wasserstein, Perella & Co. 

Peter is a thought leader on globalization and he’s talked at Columbia, Johns Hopkins, Harvard and NYU.  He has lectured dozens of international conferences and has been a market commentator for CNN, Financial Times, CNBC, Barron’s, NPR, Bloomberg, Reuters and The Wall Street Journal.

He has served on various boards for New America, for St. John's College,for the World Policy Institute, Columbia University and the Emerging Markets Traders Association. And he is a Fellow of the RSA in London. He is also the author of more than 100 articles and columns on international finance and globalization.  He has published six books.

 He has a Bachelor’s degree from Johns Hopkins, a Master's degree from Columbia, and a P.hd. from Cambridge.”

CHAINSIGHTS Blockchain Leadership Summit 2018 is the first ever CHAINSIGHTS conference and the highest level industry conference in U.S. hosted by a Chinese comany. Many high profile experts of regulation, academy, finance, technology and media were invited to share their in-depth insights into the future trends of blockchain. As the summit organizer, ChainDD will continue to build the best global platform for industry leaders to exchange ideas, and get connected with each other. 

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