"Marc Andreessen on Finance: ‘We Can Reinvent the Entire Thing’"

Marc Andreessen is the co-founder of the $4.2 billion venture capital firm Andreessen Horowitz. His opinion on the current financial system is that it is outdated and the chance has come to rebuild it entirely. In his interview with Bloomberg Markets Magazine, Andreessen’s opens with the necessity of “unbundling the banks.” As of now, most financial services are tied up in big banks. The financial system is centralized around these banks and investors require them to engage in financial activity. Andreessen’s idea, then, is to have all of the services banks provide performed separately. Unbundling would give value and time back to those who need the financial services banks provide, which at this point is essentially every investor; in this regard, unbundling seems like a wonderful idea. Yet banks are so large and entrenched, it would take a significant movement to remove business from them to a different system. Furthermore, issues such as determining credit worthiness of a loan candidate arise. If banks are not going to measure this, then who will? Andreessen believes that big data holds the key. Mining this data and coming up with a creditworthiness rating based on purchasing history, credit card bills, and the like creates just as accurate of a measure as what goes into generating a FICO score. While Andreessen raises an interesting point, the general public opinion is not going to be shifted that easily. He calls qualitative interactions v. quantitative measures “voodoo”; the average citizen is more likely to call basing creditworthiness on eBay purchases voodoo.  

Andreessen’s answer to how we can decentralize the financial system lies in cryptocurrency, otherwise known as Bitcoin. Andreessen cites the advantage of Bitcoin as a universal currency. An additional advantage is that Bitcoin does not rely on a government or entity to back it up in the way that currencies like the US dollar do, therefore it does not require a centralized system. Andreessen views the confusion of regulators over how to treat Bitcoin as a “window of opportunity” to revamp the financial system. Unfortunately, regulators are not the only confused ones. Bitcoin is such a complicated endeavor that it has and will continue to have trouble gaining traction with the average investor Andreessen so desperately wants to help. The average investor does not understand it, and therefore will not regard it as the powerful innovation Andreessen does.

Andreessen makes a compelling and cerebral case for unbundling the current financial system. But to most people, compelling and cerebral equate to outlandish and confusing. Moving from a centralized financial system toward one that excels in service and price is an easily acceptable proposal. But the means Andreessen proposes we use to shift away from our current system is too complex. The intent of decentralization is to put more power back in the hands of the consumer; Bitcoin takes power away from the consumer because it is difficult to understand. Blindly moving to Bitcoin, if that were an option, would work perfectly. But knowledge is power.