Published on November 20th, 2022 📆 | 6527 Views ⚑0
After the revolution comes the great technology correction
The result of shrinking valuations is the first large-scale global layoffs of technology workers since the dotcom bubble burst late last century. Elon Musk’s engineering genius has helped Tesla’s electric car business grow into a decarbonising world’s most valuable company. But less than a month after the $US44 billion leveraged buyout of the world’s digital town square, Mr Musk’s “free the bird” mixing of business with libertarian politics to try to transform Twitter into a forum for free speech appears to be on the brink.
Meanwhile, the “crypto-winter” has become a blizzard following the spectacular collapse of the world’s third largest centralised cryptocurrency exchange. FTX’s implosion, amid allegations of financial crime – think Enron run by Millennials, for Millennials investors – vaporised $US32 billion of shareholder capital in just days.
Because there is no off switch on the internet, corporate leaders will continue to have to oversee digital transformations to compete in the online marketplace. This will require boards and managers with the know-how to successfully manage complex technology projects that are black boxes for the average CEO or director to stop them spiralling into financial and/or reputational black holes.
This is underlined by the Australian Securities Exchange’s writing off of its $250 million CHESS clearing and settlement replacement project, seven years after it began in 2015. That the board and executive of Australia’s monopoly equity markets operator lacked the technical skills to update the nation’s financial market software that was originally coded in the 1990s is an international embarrassment. It’s also a major debacle for the ASX’s twin regulators.
Both ASIC and the Reserve Bank sat on their hands despite our Chanticleer columnist repeatedly sounding the alarm over the past four years about the design and management problems in the troubled project (whose start date was postponed five times) and warning that trading houses were being forced to invest in the transition to a costly and complex new system that might never work. Hence, the class action lawyers are now circling.
Yet the story here might be about market failure as much as tech and governance failure. The CHESS replacement was reputed to be the world’s biggest blockchain technology project. That sounds like a worthy attempt to rise to the top of the technology stack.
Yet, rather than acting in the best interests of issuers and investors, the listed ASX’s motive behind utilising the distributed centralised ledger seems to have been about maintaining and expanding its fee-generating control over the post-trade clearing and settlement infrastructure.
Ironically, the ASX’s planned centralised ledger would have protected its monopoly at a time when the disruptive promise of DeFi – decentralised finance – blockchain technology is a new age of peer-to-peer transactions in real time.
It’s also the same technology, in essence, that allowed FTX founder Sam Bankman-Fried to allegedly steal billions of dollars from crypto-investors, which may not have been possible with a DeFi exchange.
The fundamental way technology has transformed life and commerce was always bound to create some crashes and craters along the way. But technology may still offer solutions to age-old problems, from avoiding financial crime to bypassing financial intermediaries.