Farley on Nostr: Without fiat currency and its expansionary effects, entities like BlackRock would ...
Without fiat currency and its expansionary effects, entities like BlackRock would likely shrink over time, as their core model—relying on managing other people’s assets in a system of infinite liquidity and leverage—would no longer be viable. In a system built around real, finite assets, BlackRock’s growth potential would face natural limits. Here’s how that might unfold:
1. **Shift from Asset Accumulation to Custodial Role**: BlackRock would likely transition into more of a custodial or advisory entity, focusing on preserving and managing wealth rather than aggressively expanding assets under management. Without fiat’s inflationary backing, people would favor holding their assets directly, reducing reliance on intermediaries. BlackRock’s role would shift from “growing” wealth to safeguarding it.
2. **Reduction of Asset Dependence**: With fewer people and institutions trusting centralized asset managers, more investors might turn to decentralized alternatives. Blockchain and other digital ledger technologies could allow individuals to manage their own assets securely, limiting the need for large custodians like BlackRock. This would lead to a natural reduction in the firm’s scale and influence.
3. **Decline of Leverage and Fee-Based Revenue**: BlackRock’s current revenue model is deeply tied to management fees, which are viable only with high asset inflows and leveraged returns. In a non-fiat system, where credit and debt-based investments dwindle, fees would need to drop, especially as decentralized finance (DeFi) provides low-fee alternatives. This would reduce BlackRock’s revenue streams, shrinking its size over time.
4. **Localized and Decentralized Asset Ownership**: Without fiat currency’s global dominance, local economies could become more self-sufficient and decentralized, with individuals and communities taking direct control of assets rather than funneling them into large, centralized managers. BlackRock’s role would shrink as local asset management and decentralized solutions become more accessible and trustworthy.
5. **Greater Competition from Smaller, Specialized Firms**: In a finite-resource economy, smaller asset managers focused on niche markets or specific real assets might outperform a large, centralized entity like BlackRock. This would diversify the financial landscape, drawing assets away from behemoths and contributing to BlackRock’s gradual contraction.
6. **Erosion of Trust in Centralized Custodians**: The rise of decentralized finance and the desire for true financial sovereignty might weaken people’s trust in centralized custodians. Individuals would have stronger incentives to control their own wealth directly, whether in digital assets like Bitcoin or physical assets, further reducing BlackRock’s scope and asset base.
In essence, a world without fiat would force BlackRock to operate within real-world constraints of value and productivity, making endless growth unsustainable. It would have to evolve into a smaller, more specialized, and custodial-focused entity, possibly even relegated to a role in the background of a decentralized financial system. As people and communities reclaim direct control of their assets, entities like BlackRock would likely shrink, their influence gradually fading in favor of decentralized alternatives.
1. **Shift from Asset Accumulation to Custodial Role**: BlackRock would likely transition into more of a custodial or advisory entity, focusing on preserving and managing wealth rather than aggressively expanding assets under management. Without fiat’s inflationary backing, people would favor holding their assets directly, reducing reliance on intermediaries. BlackRock’s role would shift from “growing” wealth to safeguarding it.
2. **Reduction of Asset Dependence**: With fewer people and institutions trusting centralized asset managers, more investors might turn to decentralized alternatives. Blockchain and other digital ledger technologies could allow individuals to manage their own assets securely, limiting the need for large custodians like BlackRock. This would lead to a natural reduction in the firm’s scale and influence.
3. **Decline of Leverage and Fee-Based Revenue**: BlackRock’s current revenue model is deeply tied to management fees, which are viable only with high asset inflows and leveraged returns. In a non-fiat system, where credit and debt-based investments dwindle, fees would need to drop, especially as decentralized finance (DeFi) provides low-fee alternatives. This would reduce BlackRock’s revenue streams, shrinking its size over time.
4. **Localized and Decentralized Asset Ownership**: Without fiat currency’s global dominance, local economies could become more self-sufficient and decentralized, with individuals and communities taking direct control of assets rather than funneling them into large, centralized managers. BlackRock’s role would shrink as local asset management and decentralized solutions become more accessible and trustworthy.
5. **Greater Competition from Smaller, Specialized Firms**: In a finite-resource economy, smaller asset managers focused on niche markets or specific real assets might outperform a large, centralized entity like BlackRock. This would diversify the financial landscape, drawing assets away from behemoths and contributing to BlackRock’s gradual contraction.
6. **Erosion of Trust in Centralized Custodians**: The rise of decentralized finance and the desire for true financial sovereignty might weaken people’s trust in centralized custodians. Individuals would have stronger incentives to control their own wealth directly, whether in digital assets like Bitcoin or physical assets, further reducing BlackRock’s scope and asset base.
In essence, a world without fiat would force BlackRock to operate within real-world constraints of value and productivity, making endless growth unsustainable. It would have to evolve into a smaller, more specialized, and custodial-focused entity, possibly even relegated to a role in the background of a decentralized financial system. As people and communities reclaim direct control of their assets, entities like BlackRock would likely shrink, their influence gradually fading in favor of decentralized alternatives.