Fintech on Benzinga: Expertise On Experts May Predict Your Next Year

Remember when every start-up was the Uber of _________? Increasingly, I’m getting the sense it’s becoming the democratization of ________. Insert the tech topic dejure. Democratization of data. Democratization of currency. Democratization of real estate investing. All interesting. All ambitious.
Democratizing is disruption.

For example, would decentralized finance (DeFi) be the epitome of democratizion?

Decentralized finance is one of the most disruptive forces in the economy right now. DeFi has different variations but ultimately is about global transparency, validated trust and low(er) barriers to entry. Some would define DeFi broadly as an overall trend, such as the way Robinhood has provided investing access to more people. Some would limit DeFi from a technical perspective to crypto, blockchain and tokenization platforms that require the interdependence and visibility of emerging tech.

However DeFi is defined, democratization in finance is increasingly putting pressure on expertise. As DeFi and fintech collide whether in competition or innovation, democratization not only challenges the need for experts but also lowers barriers making it easier for consumers to act with limited information.

To put it another way, who are the experts and how should we think about expertise moving forward?

It may seem like only an abstract question to you, but the reality is that people move markets. Previously experts moved markets as the source of closely-held information and the access point to the scale or credibility needed to buy or sell. Increasingly, influencers and influencers with the power of the crowd have the ability to move markets. Technology democratized information, operationalized communication, and enabled access points previously unavailable to most consumers. We saw it in the so-called meme stocks like GameStop ($GME), we saw it with DogeCoin ($DOGE) and we are starting to see it in how traditional banks and fintechs are moving toward crypto & DeFi.

The movement for traditional financial companies to join the DeFi ranks is validating in some ways and threatening in others. As DeFi threatens sovereign currencies, generally, policymakers and the power class will push back. In that transition, which has started to happen and is going to continue, there is opportunity. New financial products. Investment models. Growing audiences.

As this happens, the balance between seeking out experts, leveraging the growing online content to learn and using applications that guide your decisions is becoming more and complex. Is a Reddit thread expertise? It’s information. Is a non-fungible token (NFT) collector an expert? She’s a data point that sets market value. Is an algorithm considered expert? It’s a decision-making model at scale.

What credibility is required when technology is moving so fast it can be hard to establish a track record usually associated with expertise? When what’s new and what’s next is rapidly evolving, any participant may be considered an expert. To wit, almost every podcast host now says “this is not financial advice” at some point while describing what their financial advice would be if it were, in fact, financial advice.
Democratizing expertise is no longer expertise.

To put this another way – what’s the line between expert and influencer and peer? Or does it matter anymore?

I think your answer to this will alter the bets you place and investment strategy you deploy. If nothing else, it will absolutely alter your process to get to those decisions.

An example conversation from this week was around timing crypto investments. The standard upper class, mid-to-later in life professional – lawyer, doctor, engineer – has been reaching out to “their guy” probably for the last year or so, asking “should I be getting into crypto?” More and more the experts are looking at crypto. Many of these main street investors are putting a non-trivial but small bet on crypto. Almost everyone believes “it’s still early” in crypto.

Benzinga reported that SkyBridge’s Anthony Scaramucci is predicting when Bitcoin ($BIT) will reach $500,000. Similarly, established banks are now moving into the space. Other businesses, like MicroStrategy MSTR, are simply buying Bitcoin as an asset-accumulation strategy to increase the value of the business to as-of-yet unforeseen consequences.

These are the types of things that subtly alter decisions. Many Benzinga readers are far beyond the when-to-get-in-crypto analysis at this point, but the decision still flows to other choices. The value of companies, like Coinbase ($COIN), that depend on crypto. Who is positioned to win the war for the crypto wallet. How fast the ability to make purchases using crypto will expand.

Another example of DeFi that will determine the next few years of fintech bets is tokenization. Tokenizing income streams. Tokenizing debt. Fractionalizing physical assets, like homes. These potential products underscore the expectations financial services will face. Creating value in a NFT depends on trust not experts. Trust is no longer dependent on expertise.
When evaluating your bets on fintech and DeFi, the short term opportunities will not be based on experts but on the articulation of value. In the long term, expertise is likely to get even more specialized and specific – read, smaller. Niche expertise for smaller audiences of true believers will make or break certain products or markets but will not determine the outcome of entire platforms, entire currencies or even entire companies at this point.

Look for value in smaller, tighter knit communities as democratization requires trust in the source but not an expert to gain insight or access.