In a recent interview with Bloomberg, Marc Andreesen sounded off about the future of finance. Andreessen is the co-founder of the $4.2 billion venture capital company Andreessen Horowitz, backer of Twitter, Facebook, and AirBnB, to name just a few. The way he sees it, we are at the perfect historical moment to reconfigure how we determine creditworthiness and conduct the work of finance.
Out with the old and in with the new.
According to Andereesen, financial transactions are simply information transfers. The fact that you need Manhattan real estate, mainframe computers, and a cast of thousands is counter-intuitive. With new regulations hitting the big banks, there will be new, smaller, more adaptable financial start up coming in to fill the void. While Andereesen has no doubts that the the old institutions will fight back with their lobbying power against these startups, but says that it matters little because it is difficult to put innovation back into the box once it has been put into practice on the open market.
“There’s been a qualitative approach, and now, there’s a quantitative approach,” Andereesen says. “Everybody who grew up in the qualitative approach hates the quantitative approach and considers it a giant threat.”
Big Data and Cryptocurrencies
While regulation of the big banks may be fueling some of the innovation that is currently happening at financial startups, ultimately banking regulations tend to “backfire,” as Andereesen sees. What is going to help financial startups navigate regulation is the innovation in big data and cryptocurrencies. Big data allows for methods of determine creditworthiness that our faster and better predictors than what is used to create a FICO score, for example. Similarly, cryptocurrencies such as Bitcoin allow for the decentralization of the industry.
Read more on Andereesen’s views on finance at Bloomberg.