Welcome to the Private Property Farming Podcast. My name is Mbali Mwaka and thank you so much for joining us on this Tuesday evening right now at eight o'clock. If you're catching us on our Facebook channels, thank you for subscribing and following us on all our platforms, social media channels rather not Facebook. But thank you so much for following us on Facebook, Instagram, on Twitter, as well as LinkedIn and also subscribing to our YouTube channel. It's always fantastic to see more and more subscribers, more and more people watching the Private Property Farming Podcast and all the other podcasts that we have right here under the Private Property Family Day, which we'll be discussing about Olive Oils. We had this guest last week but because of connection, you know, we couldn't quite hear her well and she's got so much information around Olive Oils, especially around agro-processing that we felt it necessary to have her onto the show once again, solo, so that we could ask all the questions with regards to olive oil farming, olive oil agro-processing, and how she just got into the industry, it's such a niche crop to be farming olives. And so before we get into tonight's show, I just want to mention a very, very important announcement here is that we actually have the Real Estate Industry Summit brought to you by Private Property in partnership with Apsa coming quite soon. So this is the Real Estate Industry Summit brought to you by Private Property in partnership with Apsa, which will be taking place on the 29th of October, 2021. So this is a wonderful opportunity to expand your real estate knowledge, your expertise, and here are some of the most influential players in the property sector. So if you have a passion for real estate, I believe that the summit is for you. The summit will be taking place virtually. So be sure to tune in on Facebook on the 29th of October from 9am to 1pm South African time. The link of the event is in the comment section and further details will also be available in the show description, or you can visit www.realestateindustriesummit.co.z. Once again www.realestateindustriesummit.co.z. So be sure to tune in on the 29th of October, 9 to 1, and all the details will be on that website. And so, yeah, this one is for you, all industry or real estate lovers out there. Please continue to support the private property channel as well. And another announcement is that we do have a competition running called Know Your Crop. This is under the farming podcast. And it's all about telling us about what crop you're growing and let us know one thing or two about your crop that could obviously fascinate us as the audience, or just enlighten us in terms of why you decided to farm or plant or grow that crop. And we have two competition winners today. I just want to quickly announce the name because it's very imperative that you comment on tonight's live for you to claim your prize. And of course, the prize is a 500 grand cash voucher that you will be walking away with should you be selected as the winner for the Know Your Crop campaign. So today's winners is Uzama Teetwa from Facebook. And we also have Sizz underscore Zwani from Twitter. So that is Zama Teetwa from Facebook and at Sizz underscore Zwani from Twitter. So for Zama as well as Sizz, please comment directly onto tonight's show and tell us something fascinating. You could just say great show. You could like, you could share this. And also maybe ask our guest a question. We love, love engagement onto the show. So maybe ask our guest a question about her business and what she does and what she grows and listen attentively to her business as well. So I think we have pretty much got the formalities out the way. I'm quite excited to bring Bianca Bousart onto the show. Let us welcome her. She is a director of Glen Pat's Cliff, Olive Agro Processing and her farm is based, I think in the Northern Cape, if I stand to be corrected, but she will let us know quite shortly. And she's here to tell us about Olive Agro Processing and her role within a company. Bianca, thank you so much for joining us. How are you doing? Hi, Barley. Thanks so much for having me back specifically after all of those horrible connection issues that I had last week. No, it's understandable. These things happen. Were you based in the Northern Cape? Was it not? No, we're in the Western Cape. We're in the small coastal town. Yeah, I think it was all, it was that whole small town notion that I thought we were in the Northern Cape. And I'm just thinking, olive oils might need some dry area or not. But yeah, in the Western Cape. So thank you once again for coming onto the show. You know, just to get straight into it as well. Maybe for those who missed the first segment where we had your father onto the show as well as yourself, maybe just explain to us what Glein-Babskröf does and what is your role within the company? Okay. So we are an olive and wedding estate. So I say the base and it's in still by in the Western Cape. And our primary focus is olive and olive production. So we've got olive orchards on the farm where we farm olives, harvest, priest, or actually extract olive oil ourselves and then also process other olives we use in other olive products. We have diversified into other areas of business as well. The farm, we benefit from a magnificent view of the Hoko River in Stolbein. And we decided that we needed to, well, capitalize on that in a way. So we also interested into accommodation on the farm as well as weddings and events. So we've got a wedding venue where we host as well. But the primary focus is olive. Yeah, I love this. Oh, sorry, I was before you get into your role. I love this whole value add that farmers are doing on their farms, you know, because farms are such beautiful places to be in. Very peaceful, beautiful scenery. And I've seen some farms in the Western Cape, gorgeous, gorgeous. And I like the fact that you've added this wedding venue into the mix. But, you know, without diverting, maybe just tell us, like you were saying, your role within Gleinbach Slurff. Sure. So we like to describe ourselves as a boutique estate stall, simply for the fact that we are not one of the bigger producers in the field. However, we like the feeling that boutique gives to the product that we produce because we focus on quite an esteemed product. So the business is family owned and family run. As I mentioned last time, it's mostly it's myself, my father, and as well as my mother, who's involved in the business. And we each got our own separate areas that we focus on. My father is the farmer and he makes sure and he's also the olive oil maker. And then we've got my mother, who's like the product developer and also quality control from every product perspective. And then it's myself basically doing everything else, from sales to marketing, to the branding journey, to developing new markets or creating demand, focusing on everything else really around building a business. Right. But before you join Gleinbach Slurff, Bianca, what were you doing before that? Because I remember asking or saying to your father in the previous podcast, you know, how did he manage to twist your arm into the farm? And you actually interjected by saying, oh, no, I'm the one that said, I want to be part of the farm. So what were you doing before?  So my background is actually completely different. I came from the last place that I worked was one of the biggest e-commerce companies in South Africa and I was actually focusing on commercial effectiveness within that space. So a lot of it was focused on like commodity economics, understanding what our different revenue streams are, what our cost streams are, and how we can make our cost streams more efficient, as well as improve more on our revenue streams. So focusing mostly on retail specifically and fashion, but from the type of skill that I was very grateful actually, because the type of skills and the exposure that I got was very business focused and very commercial focused. And I feel that that's something that you can take into the industry. So it was a personal choice for me to move out of that space and move into farming and to do so many business. And there's a few reasons for that. So from a personal perspective, it's one I'm very grateful and humbled to be able to say this. It's my passion, not just the farming side and like obviously I love olive oil and I love what you can do with it and the just the opportunities that it offers. But I also love being part of the family business and building on something that was started by my folks really and then seeing how far we can take that. But then also for the lifestyle, I decided that I want to be able to have the flexibility and what I do and when I do it. The strange thing is that now I work harder than ever. I don't necessarily feel like work because it's for our own business and it's for our own purpose, which makes it so much better. And then also just I said this last time, I feel very lucky that it can be, but I see a lot of opportunity from a business perspective in this space. And I can zone in on that a little bit, but I actually made sure there's a governing body in olive oil called ESA Olive. And the chair of ESA Olive is Mr. Dick Wilkinson.  So I don't have the status where I won't be able to give you all the exact numbers, but basically what he comes down to is in the last 20 years, olive oil consumption, specifically extra virgin olive oil consumption in the world has doubled. The expectation is that in the next 20 years, it is once again going to be doubled. There's something like five or seven trees being planted every hour across the world. People are moving into olive industry. And what that means is just quickly going on a side note, another big thing that's happening, two of the big producers in the world like traditionally big producers, Italy and Greece or Italy and Spain apologies. They are moving towards stricter regulation when it comes to extra virgin olive oil. So essentially they won't be able to sell anything with a wording of extra virgin or virgin on anything other than olive oil. So what we've traditionally seen in like South African market is we would import what we think is Spanish, Italian and olive oil, but it's usually blamed. It's got some form of other oil in it. So it's a cheaper thing for them to export, but we are unknowing consumers. So we think that we're getting a premium product. It's exported, it comes from Spain or it comes from Italy, so we buy it. And it also made it very difficult for local producers to be able to compete with those products because our costs are so high and we do pure extra virgin olive oil. So how do you compete with those type of producers? But now what's happening is they are moving towards stricter regulation and they won't be able to do that, which is a huge bonus for specifically if you think of South African olive oil. And then just going back to the fact that the demand is growing so much and that the expectation is that the demand is going to keep growing over the next 20 years. Is when it comes to olive oil production, when you produce it on mass, when you do bulk olive oil production, it becomes very difficult to do complex styles of olive oil. So I'm getting a little bit technical here, but basically what you'll then do is you'll produce a single variety of oil. So you'll have your varieties like your Mission or your Frontoio, or you don't really use Kalamata, I'm just thinking of Laos now, but you'll have a single variety of olive oil that you put that one variety through your praise and that's the oil that you're going to sell, because you need to be able, you, the market will, or the industry will want to keep up with the market. But the type of oils that South African producers make are complex premium style blended oil. So we use old school techniques to make a really high quality, well-balanced, delicious, like amazing olive oil product, but it takes time and it takes a lot of resource, you don't get as much out of it from a profit perspective as you do with just doing a single variety. But what that means is that the world is going to be a shortage in supply of this type of quality olive oil.  There's, the demand is going to be there. What we want to know is will we be able to keep up with the demand from a local perspective? And yeah, basically just like hearing those type of stats and having that type of conversations again just confirmed for me again, the decision I made recently is that there's potential and there's something to focus on. So sorry, I went all the way around to give you just the bigger picture, but now you understand that it's a market with a whole lot of potential. And it's something that I think if there is anyone in South Africa looking to enter a new market from an agri-side, I shouldn't be telling competitors to join, but it's a good place to be. Yeah, yeah. Thank you for those stats in the background around olive oil because it's such a niche crop. You don't get to meet an olive farmer every day. And so it's quite great that you put it into perspective where we stand from a global aspect in terms of olive oil. Going back to Claim Baskerv and your role within the organization, you mentioned that processing specifically the Claim Baskerv brand. It is a premium brand. It requires a lot of resources and a lot of time. Maybe how long does it take from the growing side? So from primary production going to post, let's say that processing element, how long does it take to get a premium olive oil brand bottled from post harvest to pack house? Because you mentioned it's premium. It needs a decent amount of resources to make it premium and to taste good and to meet the standards. So how long does that processing value add take to make sure that at the end of the day you have a product that has still meets good quality standards, export ready or locally can be supplied locally and still meet consumer standards as well. So just going back to the very beginning. My father focused on this more last week when we were with you as well. Basically, if you plant an olive tree, you've got four or five years for what you can call like a harvest. The tree will start bearing fruit but it takes something like seven to almost eight years for it to have a full harvest where you get full yield from your tree. So that's your set up time initially to get to that point. But you can start harvesting around about five years. Then what you do is you run on a yearly cycle. So your trees will bear fruit once a year for you'll see in typically starts very standard to any edible plants or trees that we know. In September, you'll start with a little flowers on the tree which will then eventually blossom and grow into fruit which we then harvest around autumn next year. So we already harvested our olives between March and May this year and we're now starting to see our 2020-22 harvest already starting to grow on the tree. Okay, now once you go from harvest, so it takes about it depends on the type of oil that you want to make. Because we make quite a premium extra virgin olive oil, we prefer to harvest our olives olives more on the green side rather than so you know we get green and purple olives. All purple olives were green and all green olives will become purple. So we don't harvest our olives when it's ripe basically when it's when it's purple. We harvest more on the green side and that gives you a stronger more grassy flavor olive oil where you can if you taste it you can feel it in the back you can throw it that olive oil. But that's what that does mean is that you also you get less out of the fruit because it's green so you get less oil out of the fruit. So it's a balance that you have to decide on. So we would typically harvest from as I said from March to May and what drives that is the different varieties that we have. So we have Mission, Frontoio, Latino and Coratina. The last three of them are Italian varieties and the first one is US variety and they ripen at different stages throughout the autumn months. So we would wait until a specific cultivar varietal is at exactly the right ripeness for us to pick it. Then what's important is that you pick those olives within a two week space because you don't want them to get too ripe and you want them to be very similar. The other thing that's important is and this is something that I started to touch on last time before I got cut off but if you pick a fruit today you have 24 hours to get that fruit cleaned through the brace and into a storage location a cold storage location because the moment you pick that fruit from the tree it starts oxidizing because it comes into contact with with oxygen so and that reduces the quality of the oil. So you want to get it into that cold, cool, dark stainless steel container as quickly as possible. So we give ourselves 24 hours to do that. So you don't have a lot of time you can't pick now and then maybe extract the oil two weeks down the line you do that right now but that happens throughout three months. Then typically we will leave the oil in the stainless steel containers for a period ranging between three or two to three months where my father goes into the blending process. Now contrary to wine olive oil doesn't get better with age you actually want an olive oil as fresh as possible. If you are a consumer buying olive oil look on every bottle there has to be a harvest date and a bottling date the bottom of it as well as a batch number look for those batch numbers and make sure that you buy a fresh olive oil and when I say fresh I mean anything nothing less than that or older than a year. Technically if olive oil is stored correctly um regulations or the regulatory authorities or bodies say that you have 24 months in which to consume so if someone is selling an oil older than 12 months it's not that they're breaking any laws or giving you a bad quality oil it's just not the best quality oil that you can get anyway so in those three months my dad would go and he would work on his blends. So you can go and say okay I've got this much from the oil that this much from the chino he would taste what it tastes like so every year you get a slightly different flavor harmony out of each of them and he wants to blend them to make sure that he gets the exact right flavor and the state blend that he wants to sell. So he'll take his time to to taste the olive oil work on his blend and during that time you also send your oils off for testing. There's a lab based in Joerbeck or Petoria where they make sure that the oxidation levels in the oil is right. I'll look for um what's it called the hair dye that's useful um to bleach your hair oh my it's on the bottle I've got the bottle here with me and I can't remember okay so they basically make sure that that the quality of the oil is within regulation of adding an extra virgin olive oil and that there's no toxins or anything bad in the oil. So those lab results back yeah what I want that's the word I don't just repeat that the rock side the rock side I wouldn't know but it has you know it has to be under a certain level sorry Joerbeck. So um what I want to find out is that basically you've mentioned the different varieties and the importance of processing the olive oil within you know minutes after harvesting it right and you mentioned your technique around harvesting the green as opposed to the purple you know once it's ripe. Once you've harvested the green and you're putting it into the processing facility are there any other things that you're adding within that processing element um to maybe make the olive oil maybe taste sweeter I wouldn't know or um especially even flavors does it come in different flavors so what else do you add uh within that processing value take value chain until the actual olive oil is now bottled and ready to be sold. It's a very good question and the answer is absolutely nothing. That's the whole thing about olive oil it is 100 pure olive oil and if you and that's what the difference between extra virgin virgin and the just standard olive oil so extra virgin olive oil means the olives were put through the through the praise only one so that's that initial olive oil that you get from the fruit you get a little bit from the purple but it's the best quality oil that you can get from an olive if you buy virgin olive oil that they means that the I can say the mush that you get on the other side often you've extracted the first round of olive oil gets put through the praise again and then you extract more but that's got a lower quality and it's got a higher like tannin level which is not necessarily always that nice to taste but um you get more oil so you get a bigger yield so there's nothing wrong with it it's just the type of product that you that you want to sell in the end and then if you want I mean you can try it through again but then you're not even close to any formal virginity for the well so um what you see then as as olive oils sold as the flavored olive oil so the chili oil the lemon and reganum oil or something like that that would typically be the oil that gets extracted on the second or third time of putting this fruit through the praise and then they add I don't think it's it's flavored and I'm saying there because it's not something that we do but you would then add your your flavoring so you'd have the in your stainless steel container you could add the chilies and you start infusing the oil and create that the chili flavored olive oil so it's it's I would be quite surprised if someone actually made an extra virgin flavored olive oil just because of the high cost involved in firstly creating an extra virgin olive oil and the quality of the product that you're working with um I can't imagine of flavored olive oil but you don't really see that so the big thing is and that's very important and that's why olive oil is vegan friendly it's um it's got all of these benefits because it's so natural and it doesn't have anything added to it the one thing the one thing that can affect it is obviously your farming techniques if you use pesticides or any growth hormones or something like that that would be in the in the fruit which would then get extracted into the oil but that is something that the um that's tested for in the in the quality controls before you're allowed to sell the oil it's tested for the level of those toxins necessarily in the well and it has it's very low like it's you can't you you struggle to pass with any form of like really hard cool yeah and tell me Bianca with uh Glenn but within Glenn basketball um is a specific percentage of olives that go that go for processing and a specific percentage maybe that goes to to selling directly to your your cost your customers just as olives um or are you completely a processing olive oil farm no we do both okay so for for us we actually work with some of the other farms in our area as well to for the when we sell whole olive product or any product olive product other than like a edible product other than olive oil um we like to use the mission varietal which is a really big like it's got a lot of meat it's really beautiful big olive essentially so it's really nice to have in brine or to pickle because it holds its shape quite well and it goes soggy it's nice to look at a nice um olive and we don't grow on the estate actually as much of the missions as what our demand is at the moment so uh a big part of what my dad's job is is to build relationship with some of the olive other olive farmers and to make sure that he gets the pick of his crop for the quality that he wants to sell under the k muskler label so um our olive will be produced on the farm but that's some of the olives that we sell we actually buy in for processing or for those products and that's also it's definitely something that that could be considered if you're going into an olive oil business um because because we are a smaller farm it's more expensive for us to grow olive okay um and you don't you don't have the bulk where you start getting efficiencies of scale and adding as much on it so we make sure that we produce a world-class extra virgin olive oil and we make sure that we produce world-class olive product yeah but for that we make sure that we've got a supply that's the supply chain that supports that type of demand that we fold up under the brand okay got it you know in the every industry there's almost so much pressure for farmers to start processing or adding some sort of value add to their primary crop you know to just get additional revenue streams maybe to reduce waste on their farms um and also just add another product you know that has a longer shelf life so within your farm as well have you found that this greater chances maybe for profitability um in agro processing or processing the olives or you know is the balance pretty much the same whether you're selling the olive's raw or processed so that becomes a numbers game essentially I like efficiencies of scale you can get um and it depends on which business model you want to follow so we do we do small batch premium quality olive oil we we with that kept in mind that defines the customer that we work with the defined um the stock is that we work with it defines the packaging that we have on the product it defines the way we communicate where you've got your big growers who go into the quantity game and then you start once you've got those high levels of of productions you can start looking at stuff like doing a chili oil and a lemon oil something because you've got this this extra product that you need to start utilizing so I think I think there's there's arguments going both ways yeah um and if I look at what the trend in the industry is we have more we have a lot of more high quality producers and then a handful of the bigger they also do high quality products but then you've got I think there's about like 90% of the industry is almost controlled by 11 big growers or big producers we then go that game yeah well Bianca my last question for this evening is pretty much um what tips would you give to a person who wants to maybe go into the processing uh element of olive oil I remember we had a a young agripreneur a few uh episodes back um who is also growing uh processing his own virgin extra olive oil so you know just for a farmer maybe he's growing olive oils even on a small scale let's say about five hectares 10 hectares uh also and maybe he's just thinking of other alternative ways of getting some additional income for for their farm like what are some maybe two tips do's and don'ts um each two tips each do's and don'ts that you would recommend to an olive uh farmer where agro processing is concerned um so one thing that immediately came to mind as a don't and this is not necessarily on agro processing this is about your final product is don't sell something for the sake of selling it because it can be detrimental and while I say that if I'm going to give you a practical example as we recently launched new packaging where we have a very specialized cap on the bottle which is called the slow pourer which is really nice because it gives you a lot of control when you're pouring your olive oil instead of it just opening under this whole blob of oil folds in your plate what that means though is that it's a non-refillable bottle so once the bottle is empty someone will have to throw that we will have to throw it away and restaurant don't necessarily like spending money on that because it's more expensive for them to keep replenishing new bottles so we considered at some point shouldn't we be looking at a refillable cap but then we realized the moment you start you go that fruit yes we'll get a few initial sales we'll tap into some restaurants we'll be able to make sales to them get some exposure but you have absolutely no control around what happened to that bottle or that oil after the initial product's been used so that restaurant or their consumer can fill it up with whatever they want afterwards they can buy a cheap olive oil somewhere else and fill it into your brand name and the customers are going to consider yes it could be a new market opportunity you will create more demand for us but because we want to market ourselves and position ourselves as a premium product that means you have to control so don't just think about what because that's essentially what you're building you want to build a brand that consumers recognize and consumers trust and then just from making sure that you get the best quality because and everything that inevitably comes into the bucket of harvested olive oil or olives not everyone needs to do that and it doesn't necessarily it doesn't have a bad impact but it kind of takes the taste of it so set yourself up full success essentially from the gate guard is the big the big tip that I can give in this I mean there's a few things from a technical perspective in that one um you asked for two I don't have another don't it's okay I think some of you know quite critical rinsing you know take olive oil agro processing which is her main function uh open above the marketing the branding and the sales with the claim bar screw of olive brand so follow them on social media I know that they are on instagram and maybe you could visit their website I mean there are two time award-winning essay olive competition winners so you know they are selling a very premium brand and they take very good pride and keep processing of the olives and it is a premium brand and if you catch tonight if you missed tonight's episode please catch it on our youtube channel private property under the farming playlist and if you have any specific technical questions around olive oil um or if you want to purchase claim bar screw of olive uh please contact uh Bianca or claim bar screw of directly um onto their platform that's it for me this evening I'm so sad that Zama and sis underscore Zwane could not claim their prize unfortunately um it will go to the next round of winners uh perhaps Thursday maybe maybe not but constantly follow us on our social media platforms uh that's where you'll see the campaign know your crop running share a picture of a crop let us know one thing or two about your crop and you could stand a chance to win 500 grand in cash prize and don't forget our real estate industry summit on the 29th of October which will be held virtually go to our website to see all the other information around that and this is for all the industry the industry or real estate lovers um this is where the summit will be held virtually and you could get all the information around me tonight signing out Balin Walker and I'll see you on thursday at eight p.m take care


back to Think Tech. I'm Jay Fidel. We're going to talk with Tom Yamajika here. I'm talking packs with Tom about the fiscal condition of the state. They're calling this state financial condition still dismal. And I would add been getting worse. We got an F from truth in accounting, which is nonprofit on the mainland that looks into the relative fiscal positions of various states. And Hawaii got an F. So we're going to talk to Tom today about why that happened, how we could have avoided it, how we can avoid it now, and what happens if we don't avoid it? Wow. It's just six hours. That's all we have for this discussion. Ready, Tom? Well, we can try. We have to kind of get the high points of this. And thank you for having me on the show, Jay. This report comes out from truth, truth in accounting called financial state of the states. It comes out, I think, every year. And what we're talking about is for the fiscal year 2021. And it compared published financial information from all the states for fiscal year 2020. So we got to remember at this point in time, the information was being gathered when we're kind of the thick of the pandemic, because the fiscal year 2020 year end is June 30, 2020. And we got an F that was the grade that happened to be given to the bottom 10 states, which were from numbers 41 through 50 were New York, California, Vermont, Kentucky, Delaware. Notice Hawaii hasn't been mentioned yet. Hawaii, Massachusetts, Illinois, New Jersey, and Connecticut. So Connecticut was on the bottom of the bottom. And we made, I think, 46th. But this is not something that came up in the middle of the pandemic. We've been, this is a trend that's been going on in Hawaii for quite some time, isn't it? Of course. The way the scoring was determined is that the financial accounting, I'm sorry, truth in accounting, looked at the comprehensive annual financial report or CAFR that the state budget and finance department puts out every year. It's audited. And they said, okay, let's first look at the amount of assets that we have. So it's both $30 billion in assets. And they took away capital assets and restricted assets, because those can't really be used to pay bills. So when the capital assets and restricted assets were deducted, we had $6.5 billion left to pay bills. And our total bills, which are not long-term debts, but bills we have to pay in the short and medium term, were $24.5 billion. The shortfall divided by the number of taxpayers we have here yields about $37,000 of shortfall per taxpayer. That include women and children? Sure does. Well, maybe not so much children, but the women definitely. Well, this goes back to a program that ThinkTech did 10, 15 years ago about the same issue. Why weren't we paying our bills? And at the time, the emplosure time and system was something like $12 billion during Abercrombie. $12 billion in the whole and we weren't paying it. And that was only one of a number of things. And the estimates were the total of unsatisfied, both liquidated and unliquid, unsatisfied liabilities was something around $40 billion. I don't know what that number is now, but this report is consistent with it. Let's talk about the nonprofit, though. Is this a credible nonprofit? Is this a nonprofit that is the truth in accounting, nonprofit respected around the country? I don't know. I mean, we've been citing it for a number of years, as has a number of our sister nonprofits, like the Tax Foundation in the mainland and other nonprofits who are concerned about such things. So I don't know how to answer the question that you asked, but what I can say is that these figures have been circulating around now in the press and otherwise for a while. You know what strikes me so ironic about this is that in an election year, you expect a little spending where political officials want to gain popularity and thus vote for the election, right? That's just part of our democracy. But this year, make it the 2022 session, we were really being extravagant. We spent a lot of money. And while we're spending the money, we're going in the hole on fiscal stability. So can you talk about how much we spent this year and whether that was appropriate? Well, whether it's appropriate is kind of a policy decision, but I can give you an idea of how much we spent. As you probably know, we have a tax rebate coming up, or that's been going on since I think August, and they're still waiting for paper to print the checks on, but what's the tax rebate in the state of Hawaii? $300 per exemption for those making this than 100,000 per person. And that's because we have a surplus in the Constitution requires that if we have a surplus, we pay the tax, pay it back to the taxpayers. Not entirely. I mean, that's what the constitutional provision first read, but now they can satisfy that requirement by either giving some back to the taxpayers or making contributions to the rainy day fund, or making contributions to the pension fund. And this bill, which is Senate Bill 514, Act 115, did both. So they provided the tax rebates, which are supposed to cost about $250 million. It put down $500 million to the rainy day fund, and $300 million to the pension accumulated fund to pay down some of these unfunded liabilities. And then as you recall from other discussions we've had in the past, our legislators also appropriated $600 million for the Department of Hawaiian homelands. That was an optional thing. That was a matter of their decision to do that. They were not obligated to do that. They weren't obligated to do any of the above. I mean, when they were faced with the Constitution requirement in the past, they said, okay, $1 per return. And they did that for a number of years. And that's when they had no other choice. So at least this time, the rebates were substantial, and they've committed, you add up the $600 million and the $500 million and the $250 million, and you have, you know, $1 billion and a half. Well, I don't understand why when in 2020 or 2021, we had a shortfall for a taxpayer of $37,000. That's a lot of bread. In 2022, we are so lush that we can afford to spend that kind of money and not pay our debts, not reduce to $37,000 per taxpayer. I don't understand that. I think we did a little bit because most of the shortfall that was identified in the Truth and Accounting Report was from the other post-employment benefits. When state workers come into our system, we promise them stuff. We promise them a pension, and there's a pension plan. It's called the Divine Benefit Plan. That's the ERS, Employee Restirement System. And we also promise them healthcare. And that's sometimes called the EUT for the Employee Union Trust Fund. And in the old days, they promised lifetime healthcare for state retirees. Lifetime. And that's, that could be a long time. Yeah, that's sweet. A lot of people work for the state for that reason. Yeah. And so we've made promises, and it just so happened that the legislature that made the promises isn't the one who's paying off on these liabilities. Sweet, right?  And so what happened? When you add to that that we probably have too many state employees, it becomes even more ironic. Well, I'm not blaming the employees, okay? No, no, no. They need to hire themselves. I'm going to have to hire them, Tom. Yeah. And when the print article that I'm talking about came out, there were some employees who took personal offense. And I had to explain, look, I'm not saying that hardworking state employees in general caused this. It was a matter of the promises that were made and the follow through or lack thereof of our lawmakers. And again, going back to the truth and accounting report, they said that according to the state's audited financial statements, we had 10.4 billion of unfunded pension benefits and 9.4 billion of unfunded health care benefits. That's 20 billion dollars right there out of the 24.5 that we said need to be shielded by taxpayers in the short and medium term, okay? So 20, that accounts for 20 out of the 24.5 billion, which basically is the problem right there. Yeah. And it goes back to that program I told you about where the estimates were higher than that in terms of liquidated and unliquidated unfunded liabilities. Yeah. So when you look at, for example, these estimates of, you know, how well these benefits are funded, which is what they are, their estimates. There are of course some areas that are debatable and most notable of which is you have a stream of liabilities in the future, you know, the health care benefits and pension payments and such. And to get to the present value of what they are, you need a discount rate. And that is, you know, typically an interest rate that you get on the assets that, you know, that you have in the fund that is going to, you know, pay for these things. So for a long time they were using I think an 8% discount rate that was mandated by statute. But the fund assets weren't getting anywhere close to that. So and compounding the problem was when they did get returns on those assets that were, you know, huge. The legislature pounced on them saying, oh, we can find better uses for this money. So we're going to raid them. We're going to raid the fund that provides for those other post-employment benefits and we're going to invest in something else. And that's what they did. So you can't do that if you've got the rate of return that you want. But if you just eat the losses and take away all the benefits because, of course, you know, the market goes up and down, you'll never get to the rate of return.  Before the show, we were talking about, you know, the Abercrombie administration and Calbert Young, who was the director of finance. One of the initiatives Calbert put through was there was a law in 2013 that basically said, look, if the state can't meet its annual obligations to fund the pension plans or if the counties can't, then they're going to sequester things. What does that mean? For the state, if they didn't appropriate enough money for the pension plans and the health care plans, they would sequester the general excise tax. What does that mean? They would take whatever was needed from the general excise tax before it came in and could fund anything else. That's pretty dramatic. Yeah, but the problem is that this was just a law. Lawmakers could amend the law if they so chose and sometimes they did. Let me throw some more irons into fire here. First of all, it seems to me that we have all these bills that call it depreciation for maintenance and repair of infrastructure around the state. I think everybody will agree that at least in Oahu, the roads need work and they haven't been getting that work. This is a long time they haven't been getting that work and I'm sure to a moral certainty that there are other infrastructure facilities that are in similar circumstances. So while we're spending money like we did at a rapid rate in 2022, we're really not fixing the infrastructure. And then we throw another iron on top of that. Joe Biden has pushed his infrastructure bill through. A lot of people are sitting waiting. A lot of organizations and government itself sitting and waiting for that money, they're going to spend this money. And at least theoretically, it's a lot of money. Of course, that could change dramatically if Congress changes its configuration in a few weeks. Yeah, well, let's start with the roads and bridges. By and large, the roads and bridges are funded separately from state government. We have something called the Highway Fund and we have that there as a federal requirement. So the feds can kick in federal transportation money and help us build, maintain or whatever the roads, bridges and stuff that's out there. Does that work? Because what we heard from Joe Biden not too long ago, and you and I must have heard from other sources, is that the federal infrastructure support hasn't worked. And in fact, there's infrastructure all over the country, which is decayed and deteriorated and it hasn't been maintained and repaired. There's bridges falling into rivers. Why isn't the same process happening right here in Hawaii? Well, of course it is. I mean, the fact that we have money doesn't necessarily mean we're spending it. And that is a problem that we've had for a long time. In the 2010 timeframe, I remember that when Jill Takuda was ways and means chair, she's running for congressional office now. When she was ways and means chair, she had some hearings during the summertime. I think around the 2010 timeframe, and she took the Department of Transportation to task for not spending the money that the feds were giving them. Why would you not spend the money the feds were giving you? It could be one of several reasons you could have permitting delays. You could have just ineptness. Okay. We know about permitting delays. Yes, we do. We have a kind of virus about permitting delays. And I guess in a general sense, they're really not justified, but they continue to happen despite all the pressure to expedite permitting process. Yeah. And then we have a kind of a clunky procurement system that we have to comply with in order to spend state money to get stuff done, especially in the big contracts. So that has to kind of be dealt with. And it takes time to go through all the steps. So that's stuff that was cited by the department. How much is true, I don't really know. But and I think since that time, the Department of Transportation has caught up a bit in spending these federal monies as well as the state appropriated dollars as well. And like I said, it comes from a kind of a separate fund. We have the gas tax. That's the primary driver of the fund. And the gas tax has had its own problems because with the transition to hybrid and electric vehicles, people aren't buying so much gas anymore. Okay. Well, that really takes us back to the fact that we have a and have had a huge fiscal problem in terms of balancing the budget. And although the Constitution says we're supposed to have a balanced budget, that's imperfect. And but worse, we have bills, we haven't paid, we have liabilities, we have not paid. And I hear it from you, Tom.  And for that matter, good for truth in accounting. But I don't hear it as a platform point. We just got through a season of campaigning. I don't hear it as a platform point. Why is it not a platform point? There are, I think, several possible reasons for that. My speculation, and that's what that's all it is, is that it's a really, really difficult issue to crack. Several governors in the past have been confronted with this. We've made a little progress, maybe, but not much. It's a big problem. And it's kind of exacerbated not only by some of the other issues that we've talked about, like the procurement system and civil service in general, the civil service system in general. But there's also kind of the usual clunkiness that comes with a large bureaucracy of it. That comes with a large bureaucracy, which is what we have. Nobody wants to step up and fix it. And if it wasn't a platform point in the campaigns, especially gubernatorial campaigns this year, it's not likely to be a high attention point in the administrations to follow. Well, unless the people, the constituents start telling them that this is a problem. Well, if you said it's complex, and the average person, the average voter, the average constituent, she doesn't really understand how serious this is, or even how we got here. A word goes from here, and this is very arcane stuff. So they're not likely to bang into anybody's door about it. They have other fish to fry. Other genders, other points of interest to work on. When the legislature opens in the middle of January, people are not going to be pounding on doors and walking the halls to argue about fiscal policy that affects everybody. They're going to be walking the halls about their own points of self-interest. Am I right? For a large, to a large extent, that's right. We do tell them, and other people tell them, that you got to worry about this. Sometimes they listen, sometimes they don't. Sometimes they understand, sometimes they don't. But that's why people like you and me are here to try to help the public gain understanding, to help the legislators gain understanding of the humongous problems that we are facing. Yeah. I mean, talk about homelessness, for example. That's an unliquidated liability. We know we're going to have to spend a lot of money on it. We know that. We don't know how much. And so that's just going to grow. And it's going to become another hole in the boat. It's a great concern. At the same time, our state's economy, on the other side of the ledger, our state's economy is not doing all that well. There's a lot of businesses who have folded in COVID, and there's not a lot of businesses that have been generated entrepreneurial activity during COVID. So it's not like we can look forward to an enormous prosperity in the state of Hawaii. What's more is, while we have these unfunded liabilities, or while we have the prospect of recession, and it was in the paper yesterday, again, about that prospect of national recession, and of course we're affected by real estate and mortgage rates have gone up, as you know, and that affects the real estate market. All of that considered, we're not doing much to actually encourage and incentivize the development expansion of our economy. And when you do that, what happens is people leave town because they can't get jobs they like, they can't buy houses they like, and so forth. We talked about that last session. So there's no incentives going on for technology, agriculture, and other sectors that might improve the state's economy, thus the gross income for the state, thus the availability of a tax base. And so my question to you is out of Charles Dickens. I don't think, I don't think we talked about Charles Dickens last time, Tom. If we did, tell me now. Charles Dickens wrote, you know, The Christmas Carol, right? And he talked about Ebenezer Scrooge, and he talked about Jacob Marley, and he talked about Bob Cratchit, remember those guys? Of course. And one of the elements of The Christmas Carol is the ghost of Christmas future. When Ebenezer Scrooge is forced to look into the future, he sees enough there to make him change his attitude about what's happening right now. And I wanted to ask you about the ghost of Christmas future. If we do not incentivize our economy, if a fair number of our graduates leave town, if our businesses don't do well and fail, then if we don't pay our liabilities here, and we, you know, we continue from 37,000 negative per taxpayer to some higher number, and we spend the money in the wrong place, and we bank on federal assistance that may or may not come in the change of administrations and the change of the, you know, configuration of Congress, what then? What happens to Hawaii if all these things, you know, are part of the ghost of our Christmas future? Well, I think that the main problem that we have now is that the one thing that Scrooge did is he believed the ghost of Christmas future, and that caused him to, you know, modify his outlook on the present. We can, you know, paint these visions for lawmakers, but the question is whether they'll believe them. And if they don't, you know, we can kind of count on more of the same and more of the same and more of the same. But we're trying to tell them, look, you know, the ghost of Christmas future isn't lying to you. We can see the population leaving. We can see economic indicators like, you know, those that are referenced in this report going, you know, going down. And lawmakers can't be expected to fix the problem by saying, ah, well, just raise taxes some more, which is what they've done in the past. I think there's a limit. And we're reaching that limit. And the reason I say we're reaching that limit is because you can see people getting on those planes and getting the heck out. That's been documented by, you know, ourselves and others to a great degree. It's in our census data. It's been happening a long time. But I think, you know, it can be accelerated. I think it is being accelerated by these very factors we're talking about. And, you know, when you do the switch out on population, you say, well, let's see, we'll have a lot of people who buy three, four million dollar condos near the water. But we'll have a lot of people in the middle class who leave town. You have a different Hawaii at the end of the day. The ones who are, you know, buying the expensive condos, they may not live here. They may not work here. It's just a different demographic. It's a different fiscal character, so to speak. And if you take out the young kids who might start businesses and be entrepreneurs and build up, you know, sort of develop the state's economy to a more robust condition, what happens then? You have all these real estate building condos, but you don't have the businesses that support the actual economy. I'm not sure how that works. Maybe you have a better handle on it than I do. But if I look into the ghost of Christmas future and I see through the keyhole what life will be like, well, what will it be like? Do you have a vision of that, Tom? Well, I don't, you know, I don't, the ghost never came to me, but I really do hope it visits the, you know, those who will be leading our state. Yeah, well, what would you tell them in terms of, you know, there's a lot of issues here. And if you said, well, let's let's do a bill in the legislature in 2023 on every single issue we've talked about, boy, you'd be busy. That's not going to happen. But if there was one or two bills that were most important to deal with this, you know, shortfall, to deal with our grade of F on the national, the national survey, what would you tell them? What's the say one or two things that they should be doing to address this? Sure. I mean, we should be, you know, very disciplined when it comes to our fiscal situation. I mean, we talked about Calvert Young before in the in the 2013 legislation that was signed into law by Abercrombie to achieve just that. We have to take that seriously. You know, we can't be legislating deviations from that all the time. We have to be serious. We have to pay down our debts. We have to come into a situation where, you know, like, like most of us have mortgages. We live in our houses and we have mortgages and we don't, you know, worry about the, you know, the 300,000 or 400,000 dollars we owe at the moment because we're making our payments on time. So that may be kind of like the attitude that our lawmakers are thinking about, but we do need to impress on them some consciousness of what the big picture actually is. I notice you didn't mention anything about incentivizing entrepreneurship. Does that fit at the top of the list also? Well, I don't know because there are those who will argue that incentivizing anything is detrimental to the economy because it inhibits free market, which and they argue that that's what we really need to get us out of this mess.  It just gets into so much complexity. It's unbelievable. Well, these things are problems that can be solved with good policy. Cesspool removal, to me, is not, it's not an investment in the future. Cesspool removal is not an investment in our economy or our youth or, you know, long-term prospects for expanding the tax base. So you make a decision about what you want to incentivize and you incentivize industries and activities that, that your experts, and there must be some out there somewhere, if they're not here in Hawaii, maybe, maybe they're in Cincinnati, they must be somewhere who can tell us what activities will give us the greatest bang for our buck. We're investing in ourselves. And so, I mean, to the extent that people say, I don't want to give any money to those young kids, you know, they're spoiled anyway, let them go make a buck themselves, let them enjoy the free market and suffer. I say to them that, you know, we have to manage our economy and in an island state, a free market may not be the solution. In an island state where the lobbyists walking the halls every January doing self-interest, but not doing fiscal policy that actually helps the whole state and incentive policy that actually holds, we have run into this problem year after year and decade after decade, where we have not done proper incentives for industries that could be a valid and useful investment. Certainly what we have to do is to figure what we're good at as a state and with the population that we now have and work toward making it better. Have we done that? I don't think so. No, I don't think so either. So would you add that? Don't tell me we need to do a report because reports go nowhere. But would you add that to the list of critical things the legislature ought to be considering and the administration hoping we get the kind of leadership we need here? Because as you and I have discussed on a number of occasions. I think one of the critical things of any company, any nonprofit, any organization is you figure what you're good at and get the most mileage out of it that you possibly can. With companies, it's like what's your product? What's your service? And that becomes your core competency. And what you then do, the rest of your company should be built around that core competency and making a living around it. And I think we ought to be doing the same thing. Yeah, but I don't think it's limited to what you're good at or core competency is limited to what's good for the state in general, the economy in general, the youth of the state in general, the quality of life of our people. So it's more complicated than a profit corporation deciding what's good in the marketplace because we have to also consider the people who we are serving in government. To me, that's the whole population. Anyway, I hope somebody listens to this, Tom. Make them listen, will you? We'll try. That's why we're here. That's why we're here. Tom Yamachika, president at the Tax Foundation of Hawaii, helping us understand fiscal policy in Hawaii. Thank you so much, Tom. Thanks for having me on the show, Jane. Aloha. Thank you so much for watching Think Tech Hawaii. If you like what we do, please like us and click the subscribe button on YouTube and the follow button on Vimeo. You can also follow us on Facebook, Instagram, Twitter, and LinkedIn, and donate to us at thinktechhawaii.com. Mahalo.


Got me he got me with the bombs Someone set us up the bomb chat. I have good timing. Where'd he go?  I didn't pick up a oh great. Oh Turf war my bad.  I have perfect timing chat. Well, I didn't know he was gonna do all that By the boom big By the big I was hungry anyway. I'm the funny. I have to use rations after I eat wait. I'm out of flesh No Is he low can we drop? I? Can't tell Crap I was too late on the shrink. Did he just like Head first into that come trying to get me. He's in rage. All right. Can't trap him. Wow No, he's still in rage. I think we lost Rester and now he's limping please. I have no more shock traps. I Have a shock trap That was my first time fighting him I've never fought him before I've run away from him I've run away from him many times. I've never had to fight him though. Wow Today I learned Not very fun to fight with hammer. That's for sure. I Don't particularly like fighting him with him.  I should have went I well, I wouldn't anticipate in that fight to be like that. Honestly dig pig dig Well, thanks again champ champion 7b came through guys with 220 200 get the subs man Just really made my day month year not year but yeah All right, I got eight of those C's now We must go deeper. Yeah, 200 get the subs It was amazing Amazing He's gonna emote me next week. You're way further than the ps4 version. Yeah. Yeah, I kept going man It provides level five earplugs. That's funny. Oh Yeah, my bounty Yeah, I'm trying to get through all these optionals today Yeah, he roars cried a bit quite a bit All right, I got the remake. I think I should remake because we had a drop and Since we had a drop that means that People won't be able to join again It seems that way at least So we will remake. I'm gonna restart the whole game Instead of doing the online session thing What won't want won't want won't want won't Thanks beefy deluxe nice name It's all pink and beefy with deluxe toppings. All right. Here's a session Okay All right, we're down to the arenas now. You should go faster. I think I'm gonna sit down Been standing for at least an hour. I think we're gonna start with pink Raytheon you just go down the list Rathian Raytheon You're missing an Azure Rapture capture by the way We're talking about I haven't got it yet. Oh, yeah, I haven't got it yet. Okay, but you mean I was missing it on the list sessions in chat if you want to join I Think I might do a what you call it after everybody joins. I'm gonna do a flare Just in case we get another DC. Hello, Mick Swalton. How you doing, buddy? Won't I think I need anything from here. Do I I missed uppercut? Sorry rest. Yeah, this is the This is the Diablo's hammer that just got today.  I was aiming and firing pressing the button. It didn't the dragonator you say I'm down for that.  Oh Did I get the quick out of your neck? There it goes worked it out license counter practice Leave me alone leave me alone. You keep running over me.  Don't break them back here Frank paralyze them. Hurry up Frank. Come on, Frank. You see what's happening.   Oh good great. This hurts me more than it hurts you It's like did you did you like them apples, huh? I'll show you Good good time Frank. I Don't kill. I won't kill. Oh good job Frank.  Oh This is it. This is where we part ways Frank. I Hope you brought some luggage Track the monster. Okay. That was good timing.  I had a lot less yesterday


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Openness is one of the key design features of blockchain networks. They are inherently designed to enable intra-organizational collaboration. As soon as you start to use a blockchain to support a closed organization, you start to find that there is no real reason to use a distributed ledger at all and that it is better just to use a centralized authority to maintain the database. With closed centralized institutions, the drive is to concentrate the most efficient resources in the center. Indeed, the most valuable and effective centralized organizations are the ones that can concentrate the most efficient nodes in the center and exclude those that are less efficient. Distributed networks, however, have a very different dynamic, quite the opposite. They create the most amount of value by going outwards towards the edges to harness the resources of the massive people within user-generated systems of exchange. These open user-generated systems are what we would call markets. One of the most effective ways to understand the shift into a token market economy is through looking at transaction costs, as it is the reduction in transaction costs and the increase in automated coordination that is now enabling us to convert centralized organizations into open networks. By automating transactions, automating compliance and trust and connecting people peer-to-peer, blockchain systems will radically reduce the friction within economic networks of exchange and make markets a primary mode of organization. Markets can enable the decentralized coordination of large and complex organizations. One of the basic features of complex systems that we see in the world around us is that complex organization can, in fact, be the product of simple rules. Markets engender this principle. Actors and markets can operate based only on very simple local information. If someone will pay me more for this car than it is worth to me, then I will sell it. If I get paid more at one job than another and I like the job, then I will do it. The rules under which actors operate within an economy are often very simple, but through all the interactions we can get complex emergent behavior on the macro level without that organization being pre-specified. Blockchain networks enable the shift in organization from formal structures to much more fluid structures based on value exchange via markets, and those markets are organized through price signaling that alter people's local incentives. Prices are the signals that coordinate economic activity via markets. A price is a signal wrapped up in an incentive. An increase in the price of oil signals users that oil has become more valuable in alternative use. But we don't just want to signal to people, we also want them to move in the right direction, to take the signal seriously, to adjust in the right way. The higher price does exactly this. It gives users of oil an incentive to respond to the signal. They respond by using less, by substituting a lower cost alternative. Suppliers are also incentivized by the signal to invest more in exploration, to look for alternative sources to build more, etc. The price system economizes on information. It's able to allocate resources in a decentralized fashion using all of the information available. But without collecting all of that information, without having to transmit all of the information, because it makes use of the information in a decentralized fashion, it uses the information which is in people's heads via the local choices they make in the market. Markets are linked. They are linked geographically across the world. They are linked across different goods. They are also linked through time. The market acts like a giant computer that arranges our limited resources over space, time, and across different goods, so that we can allocate resources via a decentralized mechanism. For example, after a hurricane, it's quite common for the price of generators and chainsaws to become very expensive. It's signaling that we need more of these resources. The higher price is in a hurricane devastated region, that says, bring the resources here. The high price is a signal saying that the value of generators, the value of chainsaws, it's really high in this location at this time. And that higher price is acting as an incentive. It's telling entrepreneurs you can profit by bringing resources from where they have low value to where they have high value. The price system is doing exactly its right job. It's signaling and incentivizing people to respond to these shortages. There are some pots and economists at RMIT University describes well how tokens work similar to the pricing system. The purpose of the token system is to publicly coordinate private actions. And that's the interesting part of this. It's not a monetary system, it's not a price system per se, but it's still a system where you've got coordination going on where individuals are able to look at the tokens, what they're doing, the tokens are doing the coordinating, and adjust their behavior with respect to that. And what you get then is emergent order. That emergent order is an economy. The proper word for it is Cadillaxie, not an economy. But the tokens are doing the coordinating and they're not doing it because of their exchange value or their use value or their store value value. They're doing it because of their coordination value. Anything that can do that, use rules that can create private coordination using a public signal, is an economy. In this respect, the best way to understand money and currencies is as current sees. That is to say, tokens allow us to see currents within the network. Jason goes on to note that, what tokens are about to open up is a whole new world of coordinating signals that didn't exist before. That's the big thing. That's the game changer that we've never seen before. We are going to get a much more refined pricing system with all these tokens and automated exchanges. That means we can coordinate an economy so much better with all this new coordinating information which requires a token. This reduction in transaction costs that will be enabled by distributed blockchain networks will have a systemic nonlinear effect. It is not like simply altering one component or one section of the system. It will alter many exchanges within the economy. That kind of nonlinear systemic change can give exponential improvements. Transaction costs are fundamental to wealth creation and economic well-being. Interestingly, reducing transaction costs across an economy by just a small percentage can massively increase the wealth creation in that country. The result of that lowering of transaction cost means that it will be easier to access resources out on the edges of the network. What decentralization and the reduction in friction does is to enable access to resources out on the very edges of the network. By shifting from closed organizations to open decentralized markets, we have the opportunity to really build global networks that begin to include those right out on the edges. Today, about 2 billion worldwide remain unbanked. In Asia, 60% of the people are cut off from the world economy. They do not have bank accounts. They don't have access to the financial system. In South America, it is 65% and in Africa, it's 80%. The majority of the world's population is cut off from the world economy. In most cases, they can only use cash, which means they can only deal with the people that they see face to face. It's a very small community of economic trade. The average sub-Saharan African makes about $550 a year. It is simply not financially feasible to expand a traditional banking system into remote countries that are sparsely populated with individuals that make only a little income. The marginal cost of adding an account at that level of the protocol and open source community is marginally close to zero. So if we are able to build this decentralized economic infrastructure, that is where the value will be, out on the edges of the network. There are 4 billion under and unbanked individuals in the world, and that is huge global growth potential. With blockchain-based token economies, we are not just expanding what value types get incorporated into the economy, but also by reducing transaction cost, we are extending markets further out. By converting centralized organizations with boundaries and borders into open networks, we are making the networks of the global economy accessible to many more people. These token networks are going to be incredibly global like we have never experienced before. The infrastructure does not reside on a centralized server in Silicon Valley, but on computers around the world. We can create protocols as peer networks that reside on a distributed computer network and simply provide the coordination mechanisms through which people interact without anyone necessarily owning or really controlling that system, thus reducing borders to entry and expanding markets to almost everywhere.