Lloyds approach

Issues

Everyone understands that any electoral governance system, where responsible decisions are made by delegates from certain communities, is not perfect , but only seems to be the only possible solution in societies where it is not feasible to gather everyone in one place or to reach out to everyone in order to form a common opinion.

Such a system has two significant drawbacks:

• the dilution of the weight of each member’s voice in society. Their voice is passed on to a delegate, who then uses their own voice to participate in decision-making. Practically, the weight of an individual citizen’s vote is equal to zero.
• stemming from the first drawback the effect of alienation when the elected power no longer has a connection with the voters and is focused on pursuing its own interests.

This situation is typical not only for the state but also for corporations managed by hired managers. Moreover, the smaller the corporation, the greater the chances that the hired manager will be a professional, while the larger the corporation, the more likely it is that the hired manager will be a politician.

The options for addressing the issue of appointing professionals to power are flawed, as they hinge on the question: “Who will evaluate the professionalism of the most professional?” One possible answer to this question, which involves inviting “varangians” to power—individuals who can be assessed from the outside and who have no local ties—has been widely discussed and has proven to be quite productive. However, it is clear that the population could only influence the decisions of those in power through rebellion, as their voices, conveyed through the electoral system, were completely disregarded.

Is it possible to completely eliminate delegation and organize direct participation of the population in the legislative process? There are already hints at the possibility of this. The informatization of society at this stage allows for the direct consideration of each citizen’s vote in addressing any issues. In practice, it would be relatively easy to organize a “perpetual referendum” instead of a parliament.

A terrifying utopia, you might say, and you would be completely right. It’s hard to imagine how a housewife could professionally analyze budget articles to purposefully and beneficially spend the taxes she herself has paid. It’s also difficult to envision that literally every decision made by parliament would turn into a campaign with propagandists on all sides. It just doesn’t work.

Lloyd’s

But what does the word “Lloyd’s” in the title refer to? It pertains to an interesting system of independent decision-making that exists in this market, which is framed as controlled delegation. For those who are not familiar with how it works, we will describe it now.

Lloyd’s was originally established as a “cooperative” of individuals willing to take on liability for the risks they agreed to insure with all their assets. The term “underwriter” comes from the word “signature,” as each underwriter would sign their name to indicate their commitment. Naturally, it would be too much for any individual underwriter to insure an entire ship, so they could take on a portion of the risk, say 0.1% of its value, while other underwriters would cover the remaining shares. This is why Lloyd’s operates as a “cooperative”—insuring large risks alone is challenging.о., a.It’s easier to beat a father when you’re in a group.Текст для перевода: ..

When the underwriter accepted the risk for insurance, he stated that he was willing to insure a portion of the risk at a specific rate according to certain standard insurance conditions (this is important). If the ship was valued at £30 million and the underwriter was prepared to take on 0.015 of the risk at a rate of 0.2%, then this underwriter would be entitled to a premium of £900 and would be obligated to pay £450,000 in the event of a loss.

This method of insurance is very reliable—it’s unlikely that a significant number of underwriters would be unable to pay out on a claim due to complete bankruptcy. The limits within which underwriters were able to accept risks were strictly controlled by their peers in the industry. Additionally, Lloyd’s monitored the integrity of the underwriters, and the decision to pay out was made not by the underwriters themselves, but by claims adjusters who followed the insurance rules. It was important that the set of risks, such as (fire, storm, piracy), and the insurance rules were clearly defined before underwriters began to sign on to the risks—so that it wouldn’t happen that different underwriters had different interpretations of the insurance conditions, leaving the policyholder without the full payout. Underwriters, of course, did not run around ports and shipowners; they stayed in their offices. It was the brokers who did the running around. Their job was to scour the market and place 100% of the risk, for which they earned their commission.

Let’s take a specific example: We need to insure a Tu-154 aircraft from 1982, which operates regular flights from Tbilisi to Moscow. Fifty percent of underwriters are unfamiliar with what a Tu-154 is, seventy percent are put off by the word “Tbilisi,” another sixty-five percent are uneasy about the word “Moscow,” and thirty percent, who are particularly informed, are aware that there could potentially be a war there. Overall, this is referred to as uncertainty about risk or lack of knowledge about risk. They have no information, no analytics, and no loss statistics. Of course, they could spend a week digging around to get a clearer picture of the risk, but they’re too lazy. They would rather underwrite some concrete beams at the bottom of the Pacific Ocean and be happy with that. It’s like a game of preference. There’s no such thing as under-ordering. 🙂

In this case, the broker’s job is to find one or two underwriters who have a good understanding of the risk. These individuals are referred to as the “lead underwriter.” The one who signs first and commits, say, 0.03% of the airplane at a rate of 2%. The broker can wipe the cold sweat from their brow, thank the expert, and then go to the market, gathering signatures from less confident underwriters. Once half of the risk is placed, they can approach newcomers, showing them that everything is in order and there’s nothing to worry about.

Brokers have their own rituals before heading to the market. They have their favorite cafes where they must have coffee, their ritual underwear, their customary manners, and so on. They get anxious. If you don’t find a lead almost immediately, the market will know that someone is trying to place something that a number of savvy underwriters have already turned down. The outlook is grim.

Interestingly, it is the insurers who pay the broker’s commission, not the insurers themselves. They pay specifically for the placement of risk. Insurers also work with brokers, thanks to their reputation. After all, it is the broker who will handle the claims. The broker is responsible for the completeness of the information about the risk, and it is the broker who agrees on which specific insurance rules should be applied. This is not our Ukrainian “20% for nothing,” but a real fee for real work.

Politics

Having gained an understanding of how Lloyd’s operates, one can begin to model a management system in which elected authority is fundamentally absent.

For example, we need to divide the budget. Each household contributed a certain amount in taxes last year, and generally, everyone can expect to have a similar amount to work with in the next year, anticipating some growth in their income. The total of all possible taxes to be paid by all households constitutes the budget, and the projected growth represents the budget deficit. Where should the money be spent? On what items?

In this process, those who want budget money get involved — specific medical institutions, builders, road workers, energy companies, the military, and so on. They need to raise funds from the population for their projects. Naturally, when it comes to the repair of the Zhytomyr-Korosten road, the votes will come from the residents of these cities, plus the businessmen who need this road for transit purposes. Several companies will want to build the road. Each one wants funding. Who will go out into the “market” to ask for it?

The brokers will rush in. They will try to convince people that a portion of their taxes should be allocated specifically to this project and to this particular contractor. Do they need to convince everyone? No. Sooner or later, recognized professionals will emerge, whose opinions society values and to whom people will turn for guidance.

There’s no need to physically run around to reach everyone anymore — it’s enough to have some software like a social network (Ivanov “likes” spending 0.1% of his income on building a bridge (link to the project) over the Dnieper in Zaporizhzhia. Click “Like” and be the first among your friends to show your support).

Let’s imagine that the question of building a road interchange is being considered. Which project should be taken as the basis? What does everyone like? Who believes in which authority, who is just talking without action, and even spending a portion of their own money on one project or another? After all, the interchange is being built with the specific money of specific taxpayers. So let them, the taxpayers, vote for one interchange or another (sign off on a particular project, trusting a specific contractor or budget). Moreover, not everyone in the population should participate in financing the interchange. People from Shepetivka, if they don’t visit Kyiv weekly, don’t care what happens there. We just need to gather specific funds—so let’s collect them from those specifically interested in benefiting a particular contractor. And if you fail to earn their trust, you won’t have the “administrative resources” to win next time. Because there is no power, not even delegated. What about the mother of order?

Retired or incapacitated? Delegate to a relative. Is the “leader” a delegate? To some extent, yes. However, they are fully controllable, and you can choose another “leader” if you disagree for some reason. There is no “term of office” for anyone. You can become the “leader” at any time if you are confident that people will listen to you. Moreover, there are no regular elections or delegates alienated from the voters. Everything is fluid and automatic. But.

Nuances

The voices of the people should only be taken into account if their participation in the overall budget is fair. In other words, there must be 100% confidence among the population that everyone is contributing. taxes and which ones exactly. So that it’s clear who is rich and who is poor. To avoid phrases like “my friends gave this to me” or “this isn’t mine, it’s my mother-in-law’s.” Then, by the way, the motivation of the rich (capitalists) will change from wanting to siphon off the budget to wanting to allocate it properly. After all, they are essentially dividing what is theirs, not someone else’s.

It is important to understand that concerns about the ultra-wealthy gaining excessive power under these circumstances are unfounded:

• The super-rich in this country aren’t really that wealthy. All they own are some businesses in offshore zones. Their factories don’t actually belong to them, but to those companies. In other words, their wealth is non-resident and won’t participate in income distribution. They don’t pay taxes as much as one would like.
• If a super-rich person has capital here, they will have to explain the source of its origin and, at the very least, pay a tax on the capital itself, and then also pay tax on the income that this capital generates. At worst, they might end up in prison after unsuccessful attempts to explain how they acquired this capital and why those taxes weren’t paid earlier if it was obtained honestly.
• Well, and the motivation, as already mentioned above. If I paid a billion in taxes and “signed” to spend it on purchasing construction work for, say, an airport, then there’s no point in inflating the budget for the sake of embezzlement. All the excess profit will eventually return to the treasury in the form of taxes, and the contractor, if they try to “pad” the budget, will essentially be robbing themselves. They might profit if they manage to get enough other people to sign off on the construction. But… who will follow a “leader” who clearly has their own self-interest at heart?
• All of the above will practically motivate everyone, both the rich and the poor, to pay their fair taxes, as no one will try to “cut” or embezzle them; and everyone will know where the money is being spent.

The honesty of tax collection can only be ensured through the transparency of people’s transactions. To allow everyone to see each person’s income and expenses, we should start by eliminating cash. It is also important to… expand motivate people in such a way that they would want to pay what is currently called taxes.

But who will implement the decisions of such a power? Who will write the other laws that govern society? Who else? Brokers. For a fee. For a fair fee, paid for their hard work.