🏦 Understanding Financial Institutions

Arnold Kling has an interesting point this week in reference to decentralized finance. He argues that for DeFi to work, we need folks that understand the moving parts on two complex fronts: crypto and the financial system. Many folks on each side don’t deeply understand the other:

Marvin Ammori understands more than I ever will about decentralized finance (DeFi). Indeed, there are thousands of young techies who understand DeFi better than I do.

But I bet that in order for DeFi to work, you need an understanding of financial institutions in addition to an understanding of blockchain and the layers that have been added to it. I don’t think that young techies understand financial institutions as well as I do. And I think I have a better chance of explaining my knowledge of financial institutions to young techies than they have of explaining DeFi technology to me.

He includes a great reading list at the end, as well.

The web3 side of DeFi needs crypto/finance-bilingual product people that can bring some much-needed usability on-ramps into the system. What DeFi offers in theoretical accessibility to an open financial system is opposed by its practical inaccessibility. The process of getting familiar with wallets, Ethereum addresses, and passphrases is pretty impenetrable, even to the tech-savvy. This is an area where decentralization makes this a hard problem to improve. The best user experiences are on the centralized exchanges like Coinbase and Binance, but those don’t give you the access to the open market liquidity providers or DEXes like Curve or Uniswap.

🌍 Worldbuilding and Antifragility

Alex Danco builds on his excellent post on world-building, this time layering in why antifragility is important when rallying a community:

Here’s the thing, though: your world doesn’t exist in a vacuum; it’s subject to the volatility and unpredictability of the outside world. If you’re trying to create or accomplish anything complex and valuable, you know this lesson all too well: once you set off on a mission to get something done, there is no way you can predict what kind of plot twists or stressors you’ll encounter along the way. Your world is going to face shocks and surprises you can’t foresee.

🏋🏽 Harder Than It Looks, Not as Fun as It Seems

When you find yourself looking at what others are doing too enviously, it’s good to remember that things aren’t what they seem from the outside. Great piece from Morgan Housel last week:

But it’s always hard to know where anyone sits on that spectrum when they’ve carefully crafted an image of who they are. “The grass is always greener on the side that’s fertilized with bullshit,” the saying goes.