Corn Fed Finance
From High Finance to Low Finance
In the lab and on spreadsheets, farms had a yield problem.
As a result, we engineered bigger, more durable crops and pesticides to kill all other crops. Larger corn stalks and less competition from other plants increased yield.
Modern farming is rife with lab solutions to field problems.
Solvers and Their Environment
In reality, the most qualified problem solvers are those facing the problems themselves.
The further the solution is from the problem, the more likely that problem space will find itself learning and relearning this truth.
The lure of that one genius insight keeps us cooped up in our own heads, behind our computers, or in our laboratories. We all want to be heroes without getting our hands dirty. Yet, these places lack the most critical resource for problem solving - real-world insights.
No solution is perfect, but the odds of a solution creating more problems than it solves decrease when the solution is born of the same environment as the problem itself. It is all about feedback loops. The closer you are to the problem, the tighter the feedback loop, the more accurate the solution.
Every startup wants to be a disruptor. Pivots are lauded as agile thinking and clever resilience. This non-attachment may be the ideal way to unlock revenue and growth, but it also results in a lot of problem solvers who are relative tourists in their problem space. They’re the new neighbors petitioning to cover graffiti with a mural, unaware of the graffiti’s beloved local status.
Our collective strife is born in this slippage between solvers and their environments. Whether you want to pick on Washington Elites, Wall Street Quants, or Startup Bros, they’re all the same critique - problem solvers from a distance. They are famous for creating more problems than solutions over the long term. This is how well-meaning, dedicated problem solvers find themselves as “perpetrators of the system.”
High Finance
High finance is peak “system.” A systems framework reveals this quickly, surfacing an organism that behaves like cancer. Once a few cells, or a few bankers, with a novel solution, now has the entire body working to feed and grow it. It centralizes resources and is ever increasing in size and complexity.
But bemoaning high finance will not solve anything.
Rather, let’s imagine the solution.
Instead of high finance, we need low finance.
Low Finance
Rather than incentives to grow, it preserves incentives to keep small.
It does not increase in complexity but refines towards simplicity.
It is not an industry of a few, but rather a decentralized function embedded into every organization.
For any financial innovation, the question is whether its unbounded success will lead to high finance or retain low finance. At the risk of reading like every other nonprofit website, finance needs grassroots solutions.
A graduate degree in finance is laughable to grassroots finance. Quants have exceptional skill, but they will need to refashion their trade in low finance. Increasing assets under management will only be prudent so long as it decentralizes asset managers. LPs with the ability to scale their operations down in check size and up in reach will far outperform.
Low finance is still finance, it just transforms from a cancer that exists to feed itself to a complex adaptive system. These types of systems are not new. We call them healthy ecosystems.
Wisdom On The Ground
The fancy, bigger, better corn fed us well.
Once we invented endless fields of mutant sized stalks and cobs, the problem shifted to how to use it all. We invented corn sugar, corn oil, and corn fuel. It is unfair to point the finger at just corn or corn farmers too. High finance deemed certain plants “commodities” and farmers did the rational thing - more corn!
Millions of acres of healthy ecosystem, formerly known as the American Prairie, got overtaken by industry.
Except this all started with a lab solution thrown at a field problem.
Ironically, yield problems are creeping back into our fields. As corn and other crops absorbed industries, they also absorbed our aquifers and soil nutrients too.
There was never a corn yield problem. There was simply the amount of corn the ecosystem could healthily produce. And our misunderstanding of this wisdom on the ground.
Innovative Finance Announcements