🔥 Why Has the Cost of Financial Intermediation Refused to Fall? A 145-Year Mystery Explained

“Despite all of its fast computers and credit derivatives, the current financial system does not seem more efficient at transferring funds from savers to borrowers than the financial system of 1880.”
— Thomas Philippon, NYU

Let that sink in.

Finance has witnessed a century and a half of technological revolutions. Yet the basic cost of moving money, managing portfolios, and connecting capital to opportunity remains stubbornly fixed. In a world where computing power has exploded and transaction costs in most industries have plummeted, finance — particularly investment infrastructure — has remained expensive, fragile, and resistant to change.

Why?

Most blame the usual suspects:

• Heavy regulation
• Rising complexity
• Growing risk
• Cybersecurity concerns

These are real. But they’re not the root cause.

🧠 Reframing the Problem

The core issue isn’t about processing trades.
It’s about reconciling outcomes.

And that’s a radically harder problem.

Investment firms aren’t simply transaction processors — they’re outcome synthesizers. Every buy, sell, transfer, dividend, swap, or fee sets off a cascade of consequences. Those consequences ripple through dozens of systems — risk, tax, compliance, client reporting, NAV — each needing to interpret the event differently, based on context, purpose, and audience.

Unlike supply chains or retail systems, there’s no natural finality.
Truth in finance is not a single point — it’s a map of interlocking, reconcilable perspectives.

And this is where the cost hides.

🧩 The Real Bottleneck

The real bottleneck in finance isn’t speed, volume, or even regulation—it’s the demand for reconcilable truth across time, interpretations, and use cases. Fix that, and a fairer, more streamlined regulatory environment naturally follows. But more importantly, it opens the door to the finely tuned operational infrastructure needed to finally reverse the 145-year stagnation in unit costs that has long haunted financial intermediation.

Every firm runs what is, in effect, a bespoke truth engine—attempting to make sense of events as they evolve and ripple. And because the architecture is fragmented, no two systems fully trust each other. So reconciliation becomes a full-time, multi-million-dollar operation.

And it never ends.

🛠️ The Challenges Extend Across the Ecosystem

For all the innovation in financial technology, transparency remains a glaring weakness in our system. Not just for investors—but for regulators, policymakers, and the public at large.

This lack of transparency isn’t just inconvenient—it’s dangerous.
It creates blind spots. It hides risk.
And in moments of stress, it leaves everyone guessing.

What if that didn’t have to be the case?

By modeling the system around domain-driven truth—where every event, transaction, and state is traceable, replayable, and explainable—we create the possibility of a financial infrastructure that is not only more efficient, but more accountable.

And here’s the thing:
This doesn’t come at the expense of the private sector.
It strengthens it.

Because clarity, traceability, and auditability are not regulatory burdens when they’re designed into the core.
They’re features. They’re leverage. They’re protection.

And for the public?

This offers a rare chance to align innovation with the national interest.
Imagine regulators that can see without scrambling.
Policymakers that can respond with confidence.
Firms that can prove—not just claim—compliance and risk control.

This is what happens when an architecture doesn’t just serve a business model—
it serves the system.

👊 The Problem is Structural

Legacy architecture can’t solve this — not because it’s old,
but because it’s wrong.

• No AI can fix it — there’s no clean input.
• No API can unify it — the fragmentation is endemic.
• No transformation project will work — because the underlying model still assumes that transactions are the point.

They’re not.

✍️ Where This Is Going

So yes, Philippon was right.
The cost hasn’t changed.

But not because innovation failed — because no one re-architected the problem itself.

What if we did?

What if, instead of designing systems to process trades,
we designed systems to derive reconciled truth — as a first principle?

That’s where we go next.