Uncategorized, Article, Urbit

Credential dilution

The CFA Institute, the professional organization for investment professionals, announced this week that it would be moving forward with exclusively computer-based testing (CBT) for all three of its exam levels beginning next year.  This will also enable the Institute to hold more sittings for the exam throughout the year rather than the normal twice (for Level 1) and once (for Levels 2 and 3).  The plan was already in place for the Level 1 exam but COVID-19 hastened the change for the whole battery.  Now instead of losing three or more Memorial Day weekends as a right of passage to earning the designation, rather than taking the exam in a cavernous convention center, candidates will be able to choose a date convenient to them and at a convenient test center — maybe with a contact on the inside that can provide “assistance”.

Complaining about every new cohort of charterholders that follows you is an old trope. Hell, imperial scholars in 1904 were probably complaining about how easy it was for youngsters to get the chin-shih degree that year. Since I’m writing semi-pseudonymously I want to be careful that I’m not claiming I have the designation myself.  That said, the Institute has clearly fallen into the common trap of growth for growth’s sake, and mostly driven by the opportunity (perceived and real) of growth in Asia.  Particularly in China and India.  The former head of the Institute promised to spend half his time in the Hong Kong regional headquarters. With the long-standing trademark issues in India resolved and CFA test prep cottage industries popping up across China, while the US and Europe are mostly tapped out, growth in Asia makes sense. Logistics are difficult, however, and cheating risks are rampant. Who needs the hassle? Moving to test centers solves a lot of problems constraining registrations and member growth.

The change will debase the credential, however, and just like debased coins chasing out good ones the impression will be that a CFA designation earned after 2020 is worth less than those that came before. The same will happen in states like California that do away with bar exam requirements. It has already happened to undergraduate degrees as so-called ‘elite overproduction‘ has accelerated.

What could this have to do with a decentralized peer-to-peer computer network? As I see it, Urbit provides stable identities and the opportunity to create robust communities incentivized to maintain reputation. As individuals and enterprises enter the network and earn trust, they benefit more from the network. Diluting that reputation through SPAM, bad content, etc. will be punished with less access to the Urbit network.

Further, Urbit’s growth parameters are already set. There is a set (very generous) number of azimuth points available. There is no reason for Tlon, Urbit Asia, or anyone else to pursue growth for growth’s sake. No one can issue debased planets, or super-charged ones for that matter. It’s up to the owner to develop their reputation and network credit. As the network grows and network effects improve, each incremental addition can be high value whether it’s today or a decade from now.