I guess you could call it finance 2.0. "Web finance," if you're not so into the whole 2.0 thing (I find the 2.0 thing to be kind of silly, but it instantly signals "hey, I'm talking about current Internet business stuff," so I use it.)
Anyway. Finance 2.0, which is essentially about radically altering the way firms are financed (and thus, how they are grown and managed), is not just going to magically arise out of thin air.
First, the old stuff -- corporate finance, Wall Street, London financiers, big centralized stock exchanges, finance 1.0 -- is going to collapse.
That's going to be very painful.
How's it going to happen, you ask?
I have to think the key catalyst will be the collapse of the US dollar. As history has shown us,
currency crises tend to spread -- they move like a virus through economies that are linked and countries that are trade dependent.
Lots of people think the US dollar is on the verge of collapse. Try the links below.
The last link is particularly disturbing, as it suggests the currency crisis will be intentionally engineered and allowed to happen by those seeking to shift economic power to supranational governmental organizations (which we discussed in
Part I of our series on Culture 2.0). Such a viewpoint posits that the dollar will be intentionally collapsed so as to create a problem (economic crisis) which leads to a mass reaction ("help!") which in turn allows for the pre-made solution to be delivered (economic integration across North America via the North American Union and a corresponding currency, the Amero).
Problem-reaction-solution.
To be fair, the doom and gloom dollar scenario has been around for some time;
Paul Krugman wrote his analysis back in 1999. We're still alive and everything's going reasonably well, right?
Maybe. The real issue is whether or not there will be a mass sell off, which will result in the dollar's value plummeting and debts being called.
And that still seems like a very real possibility.
The end result of that will be what happens in every recession: investors go cold, and it becomes tougher to get financing. Investment risks rise in an unstable economy (i.e. an economy without a stable currency), and hence financing risks rise.
What's This Mean for Web 2.0?
The whole angel-->VC-->IPO growth model is going to collapse.
VC's have known and commented that their industry is ripe for disruption. I believe that in true web 2.0 fashion, the web 2.0 VC will need to (1) make smaller investments; (2) exit investments more quickly (i.e. make more liquid investments); and (3) focus on adding "hub" value while devaluing their dependence on capital investments ("hub" value can simply be defined as "relationship" value; i.e. making introductions, helping with networking, tapping into the knowledge that comes from their experience, etc.).
Of course, a system is needed to facilitate this, and therein lies a remarkable opportunity for those looking to cash in on finance 2.0.
For entrepreneurs, the big idea is to build companies without a dependence on capital financing. The next big thing, as
stated by the venture capital firm Union Square Ventures, is in creating the "governance system that yields the most utility for the largest number of users with the least overhead." In other words, the next big thing is in innovations related to cost-savings. This cost-savings innovation will be closely related to the governance cost of community management.
Not only will this cost-savings innovation allow for faster growth and higher returns, but it will also eliminate the necessity for external capital financing.
I think this is an area that still needs a lot of exploration. From what I've seen and read as well as my own experiences, I'm inclined to think that a notion key to the next big governance system in web 2.0 is the concept of the edge owning the core, as well as the ability to institutionalize processes resulting in decentralization. See
our previous article on the intersection of management 2.0 and publishing 2.0.
The collapse of law and the collapse of traditional financing will essentially result in the collapse of the "mainstream" society. This leads us to our next topic, which is
the collapse of conformity in web 2.0.
Other Articles in this Series
The Collapse of Law in Culture 2.0
Culture 2.0 and the Collapse of Corporate Finance
Culture 2.0: Revenge of the Kook
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