EFTA Document EFTA01783176

From: Joi Ito < Sent: Saturday, April 23, 2016 8:09 PM To: Jeffrey Epstein Subject: Re: rough draft of a paper on accounting Does it help if I add =his paragraph in bold? Right now, the financial system is built on top of a way of =hinking about money and value that was designed back when all we had =as pen and paper and where reducing the complexity of all of =he web of dependencies and obligations was the only way to make =he system functionally efficient. The way to reduce to complexity was =o add it up and simplify it. The current technology just builds =n these 700 year old building blocks trying to make the system =better" by doing very sophisticated analysis of the patterns and =nformation without addressing the underlying problem of a lossy =nd over-simplified view of the world. This view of the world being =hat everything of "value" should be as quickly as possible reduced to =ome "value" where "value" is a number denominated in "money." The idea of "value" is a reductionist view of =he world that is useful to scale the trade of commodities that are =oughly of equal worth to a large set of people, but in fact most things =ave very different values to different people at different times =nd I would argue that much if not most things of value can't and =robably shouldn't be reduced to numbers on a spreadsheet. An email from you to me about a feeling that =ou had about our last conversation is probably valuable to me at a =articular time and probably not useful for most people. An apple to a =ungry person is worth a lot more that an apple to a apple orchard =wner. If you lived in Boston and all you ate were Big Macs, having your =aycheck paid in Big Mac certificates would probably more valuable to =ou than cash since the price of Big Macs might fluctuate. Context =s everything. Financial =value" has a very specific meaning as well. For instance, if you have a =ome, or you are a bank that owns the mortgage on a home. The home =learly has "value" because someone can live in it and it's useful. =owever, if no one wants to buy it and no one is trading similar homes, =ou can't set a price for it, it's illiquid and it is impossible to =etermine its "fair value." Some contracts and financial =nstruments are non-negotiable and may not have a "fair value" from a =ricing perspective but may be "valuable." Part of the problem and the =onfusion comes from the difficulty of describing legal and =athematical ideas in English. Then =here is the issue of exchange rates. My wife moved to Boston several =ears ago, but still looks at prices and converts them into Yen. She =ometimes comments on how expensive something has gotten because =he value of the Yen has diminished. Because most of our earnings and =ost of our spending are in dollars I always have to remind her, the =value" in Yen is irrelevant to her now, although to her mother who =he talks to in Japan cares about the "value" in Yen. EFTA_R1_00103603 EFTA01783176