 Hi everyone, it's MJ, the fellow actuary, and in this video I want to talk about lions, dragons and regulation. Not first you might be wondering why I want to talk about an animal, a mythological creature, and probably the most boring part of the actuarial syllabus. And I guess it's a way to turn this very dry topic into something a bit more more fun, because whether we like it or not regulation is critical for for actuaries. In fact, it's the reason why our profession is so powerful because regulation says that you need a statutory actuary to sign off on insurance reserves. So without regulations you wouldn't really have the actuarial society at its strength that it is today. But also without regulations you wouldn't really even have a financial system because it is something that depends primarily on trust and cooperation and you do need some rules and bylaws to make sure that everyone is on the same page. So regulation is good, but what we're gonna see and we're gonna be talking about this with regards to this lion and dragon thing is we're gonna also see that regulation after a while starts to stagnate and actually becomes bad. It starts to become a barrier of entry. It stifles innovation. It starts becoming really really expensive. There's this huge compliance burden and what we want to try and maybe see is is there a better way to do regulation? Now I made a video, I think it must have been what, 2016 or I think 2016, 2017. So quite a while ago I'm saying that I brought up called the regulation cycle and the whole idea of that video was to say that regulations need to constantly be updated. We should look at old rules and say, do we still need this and either replace them or remove them completely? Where instead what we're simply doing at the moment is we just add on rules. It's just like putting on bandage off the bandage off the bandage whenever there's a chaotic event. So for instance, we had the financial crisis of 2007, 2009 and we simply added on more rules and it was because people getting a little bit strangled with the current rules that they created these credit default swaps, which technically on swaps is more like insurance, but there was so much heavy regulation around insurance that they rather wanted to refer to it as this derivative instrument. But then it didn't have the protection of that and of course all the financial chaos. So what I want to do in this video is take a lot of steps back. I want to take almost like 100 years back, maybe even further and look towards Frederick Nietzsche. So Nietzsche wrote a book called Thus Spoke Zarathustra and I'm currently reading a seminar given on this book by Carl Jung where he kind of tries to address or help interpret it because Nietzsche is a bit of a tricky character to interpret. But essentially Nietzsche refers to this idea that regulations can turn into a dragon, a terrible dragon that forces us to do things not because we want to, but because it's become all powerful and it tells us this is the way it's supposed to be done. So he refers to his dragon as Thou shalt. And Nietzsche being a very big intellectual and probably the only person capable of doing this takes on the morality of the Ten Commandments. Now as we know the Ten Commandments are a cornerstone of civilization. They help people get along and a lot of the rules that they implemented are common sense. Don't kill, don't steal, don't be jealous of other people's things. These things really help us to live together. But of course what we know is that it wasn't just Ten Commandments. You read the book of Leviticus and lots and lots and lots of other rules start getting put into place. And the system becomes very much like a dragon where people are forced to do things or live in certain ways because this is how society deems that it has to be done. And that's why Jesus comes in and it's weird because the Bible refers to him like a lion, the lion of Judah. And Nietzsche says, where the dragon says Thou shalt, the lion is very much I will. So where the dragon morality is based on these are the rules you do as I tell you, the lion morality is I'm going to do this because I want to. I've got the freedom and the responsibility to choose to do the right thing, not because I'm being forced but because I'm a good person and this is what I want to do. So of course Jesus comes in and we know in the Gospels that he heals people on the Sabbath and he says it's not what goes into a man that makes him unclean but what comes out. And he challenges a lot of the dragon morality that religion had started to form. Of course Jesus was 2,000 years ago and over time we see that the Christian church started becoming more and more of a dragon in the way that it had these various rules as sort of introducing these new things. And so you would have other lions popping up, most notably Martin Luther who then challenged the Catholic church with various things like the Pope doesn't have absolute power and all these other things but we would see that Luther himself would get challenged again by that Swiss reformer whose name I'm probably going to mispronounce, Zwingli, which is kind of what a lot of the American and African Christianity is based on on some of his things where he kind of challenged more of Luther's things. Anyway, we're not going to get too much into Christian dogma but the idea was that you have these set of rules that are really beneficial for a society but over time they start to strangle the society. It's almost like they're in this form of order and they keep all this chaos away but by keeping all the chaos away you're keeping away, think of it maybe as water. So you've got this crazy river rushing through and you can't actually access the river because it's just so chaotic. So we build a dam to keep the water stale. Now you can actually use the water, it's very beneficial. But if you don't allow a little bit of movement in the water, if you don't allow that circulation, that water is going to become stagnant, it's going to become a swamp, there's going to be mosquitoes and it's not going to be very, very nice. So we see this happening with religion. Of course with religion it takes thousands of years for these standing bodies of water to become stagnant and I guess a little bit polluted. And we see that Nietzsche, one of his most famous comments was that God is dead or challenged against the authority of the church and the world was becoming more secularized because they were moving away from this dragon morality that the church had imposed towards the late 19th century and kind of like the collective consciousness had moved away from it because it just was, I mean no one likes the dragon, and away from it we didn't really have a new set of morality to replace it. I think Nietzsche himself swam himself as a bit of the lion with his book Zarathustra, almost I guess he wanted to replace God with his own version of morality. Unfortunately Nietzsche went mad and people completely, or a bunch of people disregarded a lot of what he said and we see that the world then suffered to major world wars. So, because suddenly I mean one of the basic tenets of Christianity is that humanity is built in the image of God and therefore life is sacred. You then have Nazi Germany and they're like, well if God is dead then man's not created in any image and we can now desecrate that and we can commit all these crimes against humanity. And no one liked that. There was very, very bad time for humanity so you see the United Nations was kind of set up and tried to restore a little bit of order by giving us all these rights and indirectly going back towards some of the pre-Christian values. And the reason why I bring this up is because like I said Nietzsche was talking about it a lot with regards to religion regulation and religion kind of go hand in hand. But finance is a relatively new thing in humanity and we haven't really learnt too much or we haven't taken the lessons from our religious experiences and applied it to this financial system. So with finance we've just kept on adding more and more rules. As soon as someone finds a loophole or there's a break in the rules we just add on more rules, add on more rules, add on more rules. And what we're seeing is the financial system right now is turning into this dragon. So even when it, let's say, comes to investing for, let's say, a pension fund. So as an actuary you're designing the investment strategy you don't really have a lot of leeway or choice on what to do. It's kind of like it's almost become prescribed. Like okay 60% has to go into bonds, 35% has to go into equity 25% you can maybe play around with and 20% has to be, you know, overseas and so much has to be here. And it becomes very, very prescriptive about what you have to do. And like I say, it's become very much like a dragon. You know, the financial system it's all about what you can't do and what you can do and these are the rules. And I think this is why we've got this lion that has emerged in the shape of crypto. And why people are embracing Bitcoin or embracing Ethereum or embracing the blockchain is because they kind of see it as the financial system is too strangling, it's too suffocating where we can come to this new system where there aren't any rules and we can do whatever we want. And of course that is, that's a lot of fun. There's a lot of innovation. A lot of crazy decentralized applications have been built for financial things. But of course the lion, what we know from our storybooks is that the lion is also quite a dangerous animal. Like it will eat you if you do not tame it. And we are seeing these massive Ponzi schemes. We are seeing all these scandals that are happening without regulation. So crypto has allowed for a lot of innovation but also a lot of people have lost their hard-earned money because there are a bunch of cheats and Ponzi schemes and all these horrible things. So where this kind of leads us is we almost need to, I guess as actuaries, is we need to be joining this conversation when new rules and regulations are introduced into the financial system. And I think we also need to start putting a little bit of pressure on the rules that are bad. So rules that are suffocating or preventing things from going forward, actuaries need to be part of that conversation to say, hey, is this rule getting set up to just strengthen the establishment or is it really being designed to prevent another scam from taking place? Because you can imagine, if you're a very, very big company and you really have everything established, you kind of want to ride the dragon because if you've got, let's say, an insurance company and you set up a rule saying, in order to start a new insurance company you need a significant amount of capital, then you basically don't have to worry about any startup or app or anything that can pop up at the grassroots level because they just can't access that amount of capital and you can justify it by saying, it's very good that we have more and more reserves to protect the policy holder. Meanwhile, this rule has got a bit of a double edge in the sense that it's designed primarily to keep competition away. So basically, I guess to maybe sum up this rather weird video, we need to be conscious that the financial system doesn't become too much, or I guess it really is a dragon, so we need to say, hold on, if the current financial system, ooh, did I push the wrong button there? Sorry, I hope I'm back. I pushed the wrong button. But yeah, I guess in conclusion, as the financial system, we need to start thinking to ourselves, are the current rules and regulations that we have in place beneficial for the system as a whole, or is it just benefiting the top participants? Because if it is only benefiting the top participants, then what we're going to see is people are going to try and rebel and become a lion to the system, embrace crypto, and we could see two competing systems moving forward. So the best way for the financial system to respond to crypto, I would say, is not to try and regulate crypto and bring in rules and try hitting the exchanges and KYC and tax and all these kind of things which they're going towards. I think instead the current regulation system should look back at itself and say, hmm, how do we compete with this existing system? How do we make our rules more efficient? And basically having the strength to say, because I guess you could almost look at it like coming back to the Catholic Church, is you had some people like Erasmus who was very much negative towards Luther saying, no, let's rather have the reformation from within the Catholic Church. Let's rather change the things within, rather than breaking out and forming the Protestant movement. And Luther was like, well, that's not really going to happen with the current people in power because these rules are benefiting them tremendously. The Karatenale and all these kind of people who are in there for the wrong reasons were not going to just give up their power. And I guess that kind of contributes to the whole pagan kind of morality that Nietzsche kind of saw. So it's a very, very tricky situation that we find ourselves in, because yes, there are some rules that we would love to change, we would love to relax and allow for more innovation in the existing financial system, but the big power parties, the big participants, are not going to let them be changed without a fight. That means that people are going to be looking to building things rather in the blockchain and the crypto universe, rather than in the existing space. But like I say, this is just me thinking out loud. I mean, I literally have just minted the piece on SuperAir as an NFT. If I can, I'll try to pop it up and you guys can have a look at what it is and give a link if you can go check it out on SuperAir. But I was just, like I said, I was reading this book on Nietzsche talking about these different forms of morality, I was thinking about it, and then I was like, wait, that's very similar to what's happening in the financial system. But as always, I'd love to hear your thoughts and comments on this topic and let me know what I should chat about next. Thanks so much for watching and I'll see you all soon. Cheers.