Summary: The need for Democratization and Transparency is reshaping our societies.
Working extensively with startups yet at the same time for a larger corporation, a bank, makes one see things from a very different perspective. There are always things to settle, since the “world” view of those two worlds is somewhat different. It is intriguing to see how people put on their individual (startup, banking, consumer, spouse, parent or children) hat in a discussion that emerges. After all, we are all people, although many recent world event may point to other. Yet, in a rather homogenized world, such as the startup or banking worlds are separately, two major forces in the global perspective are driving an extensive change.
Those who adapt to these forces, will survive
These forces shape our behavior as consumers and citizens – and they require businesses around the globe to change their value propositions and offerings, however usually at a slower pace than the consumer desires. These forces are so powerful that those companies or politicians who do not realize what is shaping our world, will be left behind. Evidently, we will have all sorts of diversity, but let’s at least stick with the Western world for now.
These forces are democratization and transparency. Let me explain.
Democratization. For the past centuries, people have been used to giving central power to all kinds of entities in their lives. People put their faith in the hands of their church, votes and will to governments, and capital to financial institutions to name a few. These bodies therefore accumulate power from their constituents/clients and redistribute those powers in a manner that is usually hidden to the pool of those who supplied the power. The redistribution need not be malicious or ill intended, it is simply a system that has developed over time. The structure is not my point, but rather that, mostly due to enabling technology and global events since 2008, many people now have the need to choose for themselves to where their personal power is directed.
Transparency. See what you get and get what you see. Simple? Maybe not so much. Everyone has purchased something that wasn’t really what they expected. Say, a beautiful box of chocolates in aromatic, well-designed renewable paper packaging. Open the box and you get five small pieces of crappy chocolates. Or you’ve taken a short-term loan that in the end turned out to be 10-20% more expensive than what you read on the banner you clicked. Maybe you voted for a liberal-right party that supported all of the conservative-left party’s ideas on economic changes. The modern world needs, in plain words, more transparency with as little surprises as circumstances allow.
Real examples of a changed society
There are numerous examples, but here are a few.
a) Crowdsourcing / Crowdfunding / Peer-to-Peer funding
Rather than stacking your savings or fortune in one or few “black boxes”, people can now choose where they can have a direct impact. Through reward based crowdfunding platforms like Kickstarter or Indiegogo, people can support a single product by donating/pre-purchase a product. Or simply donate or lend a small amount to a school project in Mali. Technology can enable this by cutting out the middle man and send the money directly to where it is needed or asked for. Through P2P lending, individuals and SMEs can ask for loans from anyone logged on the particular platform like Lending Club or Kabbage. The lenders can also choose their borrower through measures of credit rating and nature of the loan. Investors suddenly have had a new asset class to invest in, namely Personal credit and Small business credit. The traditional way would be to invest in a debt fund and counting on the fund managers to redistribute the fund’s capital to the borrowers. Again, cutting out the middle man is of essence here. And, by the way, there are no hidden fees that come as a surprise.
b) Electing your municipality / government officials.
Who hasn’t been disappointed at his/her party half way through the term? Well, maybe it is has something to do with this “black box” idea. You invest your power as a citizen in a party that may sacrifice your vote on someone’s behalf, or they just said or did unfortunate things. We have all been there (Switzerland actually is one of few examples were referendums on not so major issues are in place counter-arguing my argument). An interesting thing has happened in Iceland, traditionally a four block political country (for simplification two left/center-left and two right / center-right). The dissatisfaction of the Icelandic voters with the power given to all those four parties, whether in power or in the opposition, that according to polls, the relatively new Pirate party, would get over 30% of the votes, if voted today. Why? Broadly speaking, not going into details and conflicting Icelandic politics, people are not getting what they heard was promised to them. I know this is nothing new, but…. once a voice with common sense like most voters have speaks out and suddenly openly supports ideas that the government is pushing through while not only criticizing others, but suggesting improvements, people start to listen. My point is that people suddenly have the perception that the Pirates are being open and transparent about their views, not bound to party politics or power blocks. There are obvious ambiguities in analyzing politics and these are simplifications, but the key point remains.
Democratization and transparency are a huge opportunity for entrepreneurs and startups. For financial institutions, like the one I work for, they may be threats, and those who will get it, will remain strong in their future challenging environment.
For all of us, may the force(s) be with you.