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Programme and Speakers Notes from the 2012 event.

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Welcome to the Liquidity: The Summit on New Finance project notes

We're using wiki collaboration to build the themes and interaction for the Summit, and you can contribute notes, discussions and more in each of the Summit's main topic folders.

Digital Payments - Who will flourish in the world of digital exchange, and what are the scenarios for success?

Pat Carroll, Validsoft

Peter Van de Auwera, SWIFT

Session notes and findings: virtual currencies should hit the mainstream in 2-5 years, mobile allows fast scaling - for example new mobile startups have gone from 0 to 12 Billion transactions in as little as two hears.  Augmented reality filters are comng. There's a shift of power underway from vendors to consumers.  Digital payment growht is coming from mobile, and next generation banks like Fidor and Bank Simple are poised to transform the customer banking experience. meta currency is a form of "current seas" mapping flow of value. Digital Asset Grids will emerge from centralized to nodal systems, creating groups with exchange mechanisms - powered by a Mesh of humans, corporations, and devices.  Nodal explosion = catostrophic complexity. banks will become data service providers, not just exchange providers. personal data lockers are on the way.  Security - brick and mortar ID doesn't work on the internet, and we need new forms of biometric and relational ID.  A 'spectrum' of Idenity will emerge, and our wallet will be not just $$ but all digital assets related to our profile.

Private Equity - How is the big shift toward private equity changing the game, are PE shops predators or producers?

Jeremy Coller, Coller Capital

Robin Saunders, Clearbrook Capital

Session notes: PE is only 20 years old, first Ltd commpany 150 years old, first pension plans 80 years old.  PE represents the democratization of wealth by creating intermediaries between Pension Funds (masses) and invested assets.  PE is essentially a vehicle for pension fund investments, and PE is aligned with both the interest of shareholders and the company, because PE takes actual risk in the companies, unlike banks or management. PE backed companies at acquisition tend to lose jobs, but over time gain jobs as company performance improves. "It's about growing companies". Management buyouts vs PE: governance by investors make a huge difference in outcomes through better diligence.  Ultimate goal of a PE firm is to buy into a company for a focus on growing returns. Next 5 yrs? Contraction, and pressure on the 2/20 management fee structure. Pension funds demand performance, and only good performers can thus survive.

Alternatives - from contemporary art to carbon credits, What new forms of value are setting the agenda for 21st century finance? 

Jason Mitchell, GLG Partners

Whitney Hinz, Hiscox

Session Notes: Two forms of alt investments include carbon (volatile but developing) and art (appreciative over time, with returns greater than the market as a longer term investment).  Coming soon: branded retail funds (think WWF Fund, Oxfam Fund) that create investment returns related to cause or social responsibility. New emerging alternates include healthcare and public services - especially water and waste.  "Water is fundamentally underpriced". Austerity is putting carbon prices in line with costs/returns - carbon markets are as much as $15B out of whack - so watch for continual decline in prices - $15 to $8 to settle at $3-6.  Art on the other hand continues to appreciate - secret to success? Buy unique, buy what you love, hold it" Art as a commodity? Frowns: "prickly"

Venture Capital - Where is the smart money going now?

Josh Bell, Dawn Capital and Wonga

Fred Hines, Patron Capital

Session Notes: Two perspectives here: asset heavy (real estate) and asset light (web/tech) both are bullish on the future of VC in general but recognize that capital needs are changing - role of angels and super angels becoming ever more important. Dawn Capital builds success by "building profit around some form of perpetual competitive advantage" a trait sorely lacking in most pitches they see. Where banks exist to manage cash flow, VCs invest to build - very different functions. Biggest victims of the credit crunch: SMEs - Patron sees expectations adjusting to realities - banks and asset holders more willing to sell assets (Real Estate etc) in line with fundamental realities. Wonga - surprisingly wide demographic for use - 4 million loans with 80% decline rate. Who are the top 5 VC funded plays in Europe? Generator (says Patron)  Rovio, Mind Candy, Wonga, Mimecast, JustEat (says Dawn) of which all will have $1B valuations.

Alt Finance - Are localized economies, credit unions, crowdfunding and more the wave of the future... or a tidal wave?

Josh Ryan-Collins, Brixton Pound, New Economics Foundation

Matt Heiman, Just Giving

Session Notes: Looking at localized currencies as a tool for liquidity. big companies increasingly looking at local currencies like Brixton £.  For ever £ spent in a big business, only .10 stays in the local economy. Difference between money and currency are differences in language - but money has truly become increasingly delinked from real world assets.  Tech offers the greatest opportunity to scale alt finance and to truly decentralize finance. Emerging markets offer weakest structures for regulation and therefore the easiest ways to scale new models quickly - ie mPesa, Vodafone, Africa, QQ

 P2P Money - What is it? Who runs it? How can you benefit from it?

Jordan MacLeod, The New Currency Foundation

Indy Johar, The Hub 

Session Notes: alt infrastructures will enable complex collaboration, and currency as a rule is needed for such complex collaboration or transactions. therefore currency, and liquidity are necessary for high level work and collaboration.  demurrage can work as an incentive for increased velocity flows in a currency.  P2P currencies can work in conjunction with state system if transparency is included - ideally to allow for taxation structures that legitimize the currency or allow for exchange in real time back to traditional state currencies.

Big Data Big Chat

A group conversation with Stan Stalnaker

Session Notes: What are the implications of big data? a combination of interplay between massive information and massive context - success in this sector requires the ability to analyze and make sense of big streams of data. most companies and organizations, FinServ or otherwise, don't have a handle on their data, and can't interpret the explosion of data into useful intelligence.  Multiple, unlinked data sources prevent referencing, and the development of Singular Intelligence within an organization.  Eventually, as the data becomes linked, it should be possible to find and map asymetric events, in an effort to identify black swans in progress.  Role of sensors in the data stream are crucial.  Balanced by the emergence of 'small data' personalized information @me - could be a potential balance to the overreaching shadow of big data, but may at the same time just be a stream component of the aggregated data flow.   Big data enabled financial institutes may feature the following:  real time risk management, shift from regulated institutions to emergent models (evolution), data cost drop vs. high barriers to entry protected by regulation, data as a social listening tool, data leading the development process, divergent services - premium service vs algorithmic service. Scenario: robot HFT swarms fighting each other - "by 2017 a bank becomes an uncontrolled swarm of robots" - ie - humans lose control of the financial system in favour of the machines - an outcome already partially evidenced by 'flash crash' days and 'cascades' - unintended consequences flowing from causal relationships and outcomes via the net.

Regulation - as monetary diversification explodes, what are the regulatory implications of democratized finance?

A conversation with Ruth Finch, Regulations Expert

The implications of democratized finance are in conflict with current regulation at large. In terms of feasibility, direct to consumer financial services, especially advice, present challenges for emergent concepts and startups looking to enter the field - and present high barriers to entry for new market participants.  Lending - especially between organizations vs people - present the fewest regulatory hurdles relative to share allocations, advice giving, funds, etc.  Current structures for regulatory framework are slower than the market, but it appears that brick/mortar rules largely apply to online ventures for the moment, when dealing in hard currency financial flows. secondary value, barter, and virtual models remain to be evaluated from most regulatory perspectives, providing opportunity for innovation in conjunction with the relevant authorities.

Whiteboarding: The Future

Indy Johar, The Hub, and Stan Stalnaker, Strategic Director, Hub Culture 

Consensus on the role of banks not as the drivers of new financial architectures - followers vs leaders. an emerging spectrum between angel - VC - PE worlds, where everyone plays similar roles in collective or individualized formats. Taken to logical conclusion, we may see the emergence of 'mob dictation' in the form of real time corporate governance - shares + social network.  Are public companies fundamentally broken as a result?  Rise of the lean mesh - an evolving corporate structure that relies on Private ownership in a collaborative or cooperative context - ecosystems of swarm companies or organizations that act in concert. Regulation is broken? It was designed to prevent systemic collapse but has largely failed. However: Consensus based decisionmaking in practice does not lead to disruptive innovation. Therefore it is the outliers - the wildcats - who will create the boxes (structures) to be later filled by the mainstream. 5-10 year horizon will see the emergence of Digital Asset Grids - who controls these grids will be at the core of New Finance.