Page 10 - Himalaya Labs White Paper 3 June
P. 10


            The  natural  quest  of  human  beings  to  improve  their  quality  of  life,  and  achieve
            economic freedom has not yet been fulfilled by the successive technological revolutions
            (the miniaturisation of computing, the Internet, smartphone, platforms such as Apple,
            Google,  Facebook),  the  recent  rise  of  fintech,  and  even  the  advent  of  bitcoin  and
            cryptocurrencies.  Inequalities  have  risen  worldwide,  and  democratic  principles  have
            eroded steadily, under the influence of greedy rulers, gatekeepers and policy makers in
            an  increasing  number  of  countries.  In  a  well-researched  conundrum  labelled  the
            “Allocation Puzzle” (Gourinchas and Jeanne (2013)), despite high savings rates and the
            high returns on capital in fast growing emerging economies, genuine small and medium
            enterprises in poorer economies have consistently failed to attract funding, grow, and
            prosper. The gatekeepers of capital markets are often to blame, with their propensity to
            extract high rents and their utter disregard for principles of capital  efficiency. These
            self-aggrandising actors stand at the precipices of moral hazard, having slung Wall Street
            and the world to the brink of an abyss in 2008, and having no qualms about continuing to
            press for regular bail-outs and bail-ins funded by the public exchequer while benefiting
            crony capitalists.

            The global financial system is characterised by substantial intermediation fees charged
            by  investment  banks  to  both  investors  and  investees  on  the  occasion  of  an  IPO;  this
            represents  a  frightful  misallocation  of  capital  that  hampers  productive  growth.  The
            humble  small  entrepreneur  finds  himself  dungeoned  by  this  heavily  guarded  and
            intermediated  world,  an  impediment  to  the  achievement  of  worldwide  equality,
            financial and social inclusion. Financial intermediaries who had acquired prominence on
            account of their multidimensional roles of trust-building,match-making, price-optimising
            and traversing the complex labyrinthine laws of the land throughout the past century,
            are no longer performing these functions fairly, and without fear or favour. They have
            become mere barriers to the new class of inventors disrupting status quo and mere costs
            to  be  added  to  simple  standardised  processes  of  fund  raising,  which  crowdfunding
            platforms  would  have  rendered  completely  irrelevant  by  now  but  for  regulation.  The
            resulting  misallocation  of  capital  on  account  of  perverse  incentives  of  these
            intermediaries  is  pervasive.  The  economic  consequences  of  sequestering  deserving
            entrepreneurs out of these guarded castles of capital are all too pernicious.
                                          Page 10
   5   6   7   8   9   10   11   12   13   14   15