Forget Smart Tech — The Future is Wise Tech, from Davos, WEF22

Bloomberg`s article Forget Burning Man — Psychedelic Shamans Now Heading to Davos published the week before the WEF, is spot on.

As the resonance of numbers remains high, I will start my traditional `color from Davos` blog with some figures:

• Women’s participation at the official WEF events was 24% in 2020, which is relatively high compared to other leader-level events.
• 72% of global investments go to 31 cities!
• 52% of cultivated soil is degraded
• 2/3 of the Brazilian population uses PIX, the retail Real Fast payment system
• The number of internet deserts in the US remains high
• The rents in correspondent banking remain high

The WEF22 week, was my 4th participation in side-events at Davos during the WEF. The last pre-Covid WEF was Jan 2020. I usually give a talk or participate as a panelist or a moderator. This year I participated in two panels: (a) One discussing the Future of Capital Markets at the Blockchain Hub with a focus on digitizing and harmonizing all financial contracts to unlock the network effects of adopting a standard based on XBRL and Blockchain.[1] (b) The other at the GBBC center discussing Defi and innovations with a diverse mix of panelists from the custodian Copper, the Isreali Fintech Diversifi, and the head of digital assets at BTGPactual. [2]

You may have already read in the traditional media coverage that Crypto really made it into the WEF this year. Despite the price activity and the sizable market capitalization reduction in the cryptocurrency market, it is clear that a solid buy-in has happened.

The buy-in is about recognizing that Crypto has shown to the financial industry, to the regulators, and even to the G20 group that:

• There are `better` rails & UX for cross-border payments than the message-based cross-border payments currently used.
• The crypto infrastructure won’t go away and it will keep being developed. Let’s admit that this is the first such infrastructure that proved itself bottom-up and has allowed retail to participate early in the monetization potential (with that also come the scams, the risks etc.).
• Correspondent banking has now clearly a healthy competitor and regulators are well aware of this.
• Regulators are now knowledgeable about crypto. However, the innovation pace in the space is relentless and it is hard for them to keep up.
• There is a need to move from just enforcement to providing a regulatory framework in which to continue innovating. Switzerland is a model country in this respect and during this WEF at the House of Switzerland, they announced the `Home of Switzerland` ecosystem initiative (I will talk about this in more detail in a separate post)
• Even though regulators have provided licenses to crypto businesses overall, the industry now needs clarity from regulators and policymakers in much more nuanced ways.

The funny thing is that most are unclear who regulates cross-border payments. During a GBBC panel moderated by Currencies FT correspondent Eva Szalay, the panelists said that cross-border payments regulation is part of the G20 agenda and then of course, of the two or more domestic regulatory bodies involved in any cross-border transaction.

At the same time, we must admit that within the crypto ecosystem there is a significant degree of Tribalism between the different protocols or Decentralization versus centralization clans, which doesn’t help the lobbying, especially in the US.

All of the above and other discussions about CBCDs and the future of payments, reinforce the fact that we will continue to live in a hybrid world. A world with card networks processing payments and mobile wallet providers and privately issued stablecoins and CBDCs and cryptocurrencies. The mix will be changing continuously.

It is becoming clear to me that it is time now to innovate in a more wholistic way. We are already innovating by combining payments processing and digital marketing (adoption has just started). But going forward we need to enable bundled innovations that include the Supply Chain, the Logistics aspect, and the payment cycles. These three are similar to the legacy distinction we have had between back, middle, and front office. Time to get rid of this type of segregation.

As Rasmus Bergahausen, founder of Aquaquinta, said at an event in the LAN space in Davos during the WEF

`Quantity has nothing to do with Quality. Harmony comes from the interactions of components`

Bergahausen was talking about the Harmony of the Mind and scientific observations in nature. To me, this also applies to the ways we deploy tech innovations and is another way to talk about unlocking value via network effects with all the new technologies.

I also attended a great breakfast organized by Axios on the topic of The Stakes for US crypto Adoption with my all-time favorite business journalist Felix Salmon, sponsored by Grayscale with fireside chats and Q&A with the FTX US president Brett Harrison and the Grayscale CEO Michael Sonnenshein. I learnt more about the strategic acquisitions of FTX — Blockfolio a customer acquisition investment, LedgerX a licensing transaction. Of course, FTX`s Robinhood stake was discussed, and I had the opportunity to ask Brett Harrison about how he thinks about Robinhood`s business mishaps and non-transparent business model of selling order flow, and his thoughts about the currently high margin crypto trading business (which sooner or later will also be commoditized) and how FTX will deal with this.

FTX has an application already to the CFTC for 24/7 clearing and settling crypto derivatives and their vision is to be able to offer stock trading with T+0 settlement and 24/7.

It used to be that only GBBC was in Davos during the WEF to represent the Blockchain ecosystem and shyly some other ecosystem hubs from CryptoValley. This year, the scaled-up presence was impressive. Not only GBBC and the Blockchain Hub was there but Polkadot, Circle, and Polygon had standalone spaces and events.

To me it is remarkable that we are now at the point where entities like the BIS, the large card network providers, the traditional exchanges, the large banks recognize that Crypto has offered them all, a good glimpse into how Capital markets and financial services will be changed at the infrastructure level. I even like to think of the change at the manufacturing level. Think of smart manufacturing of financial services.

A great example of the value creation potential from `smart manufacturing` in financial services, was discussed during the panel I moderated at the Blockchain Hub on the Future of Capital Markets with Auditchain, ACTUS, and Nucleus Finance participation.

Now allow me to transport you to another level or best said to a Meta-level. I had the great pleasure to attend one of the special events organized by the FinnishFlow. This was their first year participating in the side events of the WEF. Their big theme was The Future of Cities and some of the stats I share above are from their events. The special event I attended included a panel with Dr. Deepak Chopra, Sadhguru, and the indigenous Ecuadorean activist Helena Gualingua.

Deepak Chopra spoke about the Metaverse in his new book the MetaHuman which of course has nothing to do with Zuck`s Metaverse. One of his lines of thoughts that stayed with me and is very much related to all the topics we discuss in Tech innovation — i.e. Climate Risks, being one with nature and realizing that over 50% of the global GDP depends directly on nature, Smart Cities, Businesses with Purpose, Financial inclusion, Social issues from inequalities — is:

Biological uncertainty leads to Creativity. Otherwise, we would think of ourselves as mechanical robots and act as such.

Needless to say, that I immediately thought of Paolo Sironi and his books, as I took in this line of thinking.

Sadhguru spoke about the SaveTheSoil campaign he has embarked on and highlighted stats (some already shared above) that included the fact that 90% of our food has lost its nutrition and one orange 50yrs ago had the same nutrients as 8 oranges today.

Discussing with people involved directly in sustainability, impact and environmental projects and initiatives at different levels (industry and government) it is reassuring that the awareness has gone right up to the Board rooms and the governments. They get it now that all the risks that were treated as `exogenous` before are actually, business and financial risks.

Again more than 50% of global GDP is based on natural resources. Hello! Private Equity and financial institutions (insurance companies and banks) are working on this. Data, tech, and strategic coordination to measure and manage these risks, is on the rise.

Sadhguru suggests that we can’t continue living in these megacities and away from nature. Lagos, Nigeria is projected to have 80 million people by 2100, according to Dr. Anino Amuwa who spoke at a panel that evening.

Our shared vision should be to make it attractive to live next to the land. Can we use technology to make this happen? Can we start thinking of Wise Cities rather than just Smart Cities.

Let’s reflect and incorporate all this into the way we lead and act. Stay tuned until the next WEF in Jan 2023 during which we can take stock of what was built and adopted from all that was discussed!

Wise adoptions of smart technologies are more important than ever because they will inherently last longer and manage better the complex social and environmental issues that we are faced with. The current heightened uncertainty is a great opportunity to create wise solutions with the smart tools at hands.

Previous WEF blogs

Feb 2020 — Celebrating the WEF 50th anniversary with 50 bytes from Davos 2020

Feb 2019 — The Leading Artisans of Today, from Davos, WEF 2019 — Business Yoda and Rock`Roll Plato

[1] Some picks from the panel discussion here.

[2] Recordings of all panels will be available on the GBBC site over the next two weeks.

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