What will the rising individual financial risk mean for people

Power to impact markets has typically been held by governments, but big tech corporates and billionaires could be changing the landscape of power, but what will this mean for individuals?

In Life.io’s latest podcast, the company’s co-founder Jon Cooper speaks to Ramsey Smith, the founder and CEO of Alex.fyi, which helps people make more informed financial decisions.

To begin the discussion, Cooper mentions a book he recently finished that predicted what the future would look like for large companies, governments and individuals. In the book, it predicted the information age will transpose power from the big corporates and governments and give it to the people.

For example, entrepreneurs could begin to move countries if a government tries to tax them too much. Cooper explained how cryptocurrencies are also potentially helping to bring more power to the people.

Cooper sees this as the road the world is going. The threats from Anonymous to Elon Musk for tweeting about bitcoin are signs of the direction. Musk’s tweets on bitcoin have had profound impacts on the value of the cryptocurrency, with some dropping the value of the currency by as much as 30%. Cooper stated the story shows how tech billionaires can easily move markets with little effort, while an elite group of hackers can threaten these same people and make their own effects on the market.

Responding to this idea, Smith agreed there is a rise in individual responsibility and risk, but this is not a good thing. He said, “When you’re a gig worker, you don’t have defined benefit pension plans, or a DC plan, and you don’t have the benefit of your corporate health plan, instead you’ve got to do something on the ACA. These may well be better than what would exist for gig workers without the ACA, but I can tell you, it doesn’t compare to any of the corporate health plans.” This is a big problem for a lot of people. Not everyone will be equipped to manage the risk, leading to a lot of problems, he explained.

Further to that, he stated there is actually more power being centralised than before and not being given to the people. The change that is happening is that power is just relocating to a few big corporate companies, like Google, Facebook, Apple and others. He added, “the reality is that that more and more powers is being centralised in fewer devices and in fewer company. So, I actually think that centralisation is increasing and it’s supranational.”

Even bitcoin, which is often seen as the currency to give people more power, Smith sees the winners being some of the existing billionaires. Michael Saylor, an American entrepreneur, has bought up around $5.1bn in in the cryptocurrency and is just one example of many rich people buying masses of the coin. If the currency multiplies by 10x in the future, these will still have the biggest power.

“I’m not saying that as a particular criticism, I’m just trying to being clear eyed that I think there will still be some degree of centralisation, whether it’s the same people that managed to rollover, or if there are new players, but I think I would be wary of overplaying the future hegemony of the individual,” Smith said.

If there is a shift in power from governments to billionaires and large corporates, Cooper asked Smith where the insurance industry sits in this. To which, Smith stated that at the moment the value of insurance companies is based on the value of their balance sheet; however, if you break the company down to component parts there is a lot of value in their intangible assets, such as IP data.

He said, “The question I have is, if you sort of separated those pieces out, and you just had the IP part and let’s say software companies trade at multiples of revenue. Well, what if you could believably recast the IP portion of an insurance company as a software-as-a-software play, what would the multiple be on that? What would the relative value be of that versus the balance sheet? The problem is, when you value based on balance sheet, it doesn’t matter what you put in there as it’s always a multiple of that. You could put something like the next bitcoin in there and the whole market would value it as multiple balance sheet.”

He also stated that technology has a big role to play in changing customer service in the coming years. This might be more solutions to help customers make choices on what to buy and how to manage future decisions.

In a previous podcast with Life.io, Smith explained how getting company stocks early in life led him on a path to become a FinTech founder.

Listen to the full podcast here.

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