Inequality is killing the IPO, which is driving inequality higher still
Late last year, American public investment finally devolved to the point that even stock market executives had to admit that things were looking grim. “The number of public companies in this country is down by half over the past 15 years,” said the head of the NYSE Group. “The American public is [being] deprived of investment choice.”
He’s absolutely right. Over the past fifteen years, the number of IPOs has been dropping steadily, which leads to a drop in the total number of stocks available to buy. That might seem like an esoteric problem, or at least one exclusive to the rich, but it’s actually a direct threat to the dream that financial opportunity exists for anyone hard-working and clever enough to realize it. It means that only richer and richer individuals can afford to compete for fewer and fewer wealth creation opportunities -- which increases inequality, which leads to fewer startups, which sends inequality ever further into its downward spiral.
In the face of such an existential threat to bootstrapped prosperity, the only readily apparent solution is technology -- in particular, blockchain technology. The security token offerings enabled by blockchain are, in the estimation of many experts, the future of investment, and their core virtues could make them perfect for reviving the dreams on which our system is supposedly to be built.
The Vicious Cycle
Access to choice in investment is about more than a varied shopping experience; it’s about sharing prosperity between the haves and the want-to-haves. It’s about keeping the doors to true wealth open to anyone with a small amount of means and a willingness to expose themselves to risk. Without that opportunity, accumulating even a moderate amount of wealth can be insufficient to grant access to the most lucrative financial returns -- which means moderate wealth is harder to turn into true wealth, and the truly wealthy become more entrenched than ever.
“If many of the economy’s greatest success stories aren’t included in the funds that ordinary Americans hold,” SEC Commissioner Robert J. Jackson Jr. told The Atlantic in 2018, “only the wealthiest members of society will enjoy the gains, intensifying inequality.”
The truly damaging part, though, is what happens next: that population, in which fewer people now have the means to launch new business ventures, are less likely to launch new businesses that could one-day go public. This creates yet-further increases in the price of entry to true wealth -- and it also gives the truly wealthy a greater ability to finance ventures themselves, without the need to open the company to the public. This, too, deepens the downward spiral and brings Western economies closer to a sub-first-world level of financial inequality.
Security tokens could cement the legacy of the public share
The unique, trustless security of the blockchain allows all-new types of public interactions and agreements that previous generations could never consider. In particular, blockchain technology allows the creation of enforceable digital contracts (smart contracts) that allow total strangers to streamline an investment process that has historically required layer upon layer of slow, expensive bureaucracy.
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Modern STO platforms like Rocket offer a means for anyone to create an investment product, and provide the easy online access and verification necessary for a much wider array of people to grow their wealth. That takes the inherent purpose and effect of traditional investment and uses technology to achieve the same thing more powerfully and more permanently than ever. The future digital share economy, powered by blockchain, could be stabilized not just by advanced cryptographic technology but by the widespread belief among the population that prosperity is within their reach, if they can simply find the tools needed to reach it.
Democratization isn’t a finance revolution -- it’s a founding principle
Investment was not a meaningful concept under, say, feudalism -- why would it be? The mere idea of a financial “return” implies that someone’s future might be different from their past, and that’s an inherently egalitarian idea. Investment was always about the little guy holding the big guys hostage, creating a system in which those on top needed to offer access to those on the bottom, if they wanted to increase their fortunes even further.
In that sense, blockchain security tokens aren’t so much enabling a revolution as a return to original intent. Investment may be thought of today as the purview of the wealthy, but it’s intended to be the main path by which the middle class can enter the ranks of the truly wealthy -- and after doing so, the path by which they start the businesses that help lift the lower classes into the middle.