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The Crypto Ant & the Pension Grasshopper - a modern tale.

The Crypto Ant & the Pension Grasshopper - a modern tale

One crisp day in late autumn, the industrious little Ant was walking and heard a familiar chant. 

The Grasshopper, her neighbour amongst the weeds, grumbled that he didn’t have enough for his needs. 

  • “I am hungry! I am weak!” he exclaimed, “my friend, don’t you have something for my beak?”
  • “What happened?” the Ant answered in surprise, “you were joyfully dancing only last week!”
  • “I finally retired; of course, I was merry! After a whole life tired working in the prairie.”
  • “So explain this sudden change of condition. Hasn’t all your labour come to fruition?”
  • “My existence, all just forgotten, I have given them my youth, and now I’ve been left to rotten.”

The Ant was perplexed. The Grasshopper was known as a spender, singing the summer nights away in splendour. But he lived his life with honour, earning well his wages on the farm of Mr.Connor.

  • “Your life’s work!” roared the ant. “Have you not kept any of it?”
  • “I was lied to; I was deceived! I was promised a fair pension, thieves!”

It was at this point that the clever Ant closed the loop. She finally understood the scoop!

  • “ Oh, my dear Grasshopper, haven’t you heard? I got the news last week from our friend the Bird. The insect council just found out that their last ounce of grain was given out. Now with troubled eyes and souls full of fear, they wonder how to feed those who are near.
  • “My Ant, wondered the Grasshopper, how do you still stand tall? How did you avoid this fall?"
  • Just like you, I worked hard and long, but I planted my grains to grow big and strong. Instead of splurging the night away, I planted them in good soil, and now they pay” 

The Ant added: 

  • You worked for a pension and put your faith in their promise; I planted my grains early and kept my future honest.

With this, they parted, each their way, One to endure winter, the other in warmth to stay. Thus, we learn in our lives, through every turn, that the future we build is the future we earn.

In a nutshell…

We can learn much from this reimagining of La Fontaine’s fable. Let’s take a look at a European country. 

Germany has the most significant pension gap in the world - a staggering 234% of their GDP. 

Said otherwise, the total amount of additional money needed by all German retirees to maintain their standard of living is more than TRIPLE the value of all goods and services that the country produces in a year.

Our lighthearted take on this famous fable exposes a serious issue that isn't confined to Germany but is also a growing concern for many developed nations, including France, Switzerland, and the United Kingdom.

The key question to ask yourself is, if you are like me, a millennial or younger, can you truly believe you'll get a retirement at 65 like your parents have?

Nicolas Rémond, SwissBorg CTO.

What’s the problem?

Pension cap by country
Pension cap by country

Western pension systems, set up to ensure financial stability during retirement, were mostly designed over a century ago and are struggling to accommodate today's socioeconomic shifts.

A faltering pension system inevitably leads to old-age poverty. This places a heavy burden on government finances and undermines a fundamental societal value – the right to a dignified retirement.

The pension gap results from two simultaneous social trends, both exacerbated by a struggling monetary system:

1: Increasing Life Expectancy

Life expectancy at birth has continually improved in Western countries since record-keeping began. However, it's only in recent decades that significant improvements in life expectancy at older ages have emerged. Medical advancements such as bypass operations, stent insertions, cancer treatments, and cholesterol-reducing drugs have helped extend life expectancy by 2.5 years in Europe alone over the past 20 years. With the introduction of AI in medical treatments, this trend could grow exponentially in the coming decades.

Life Expectancy at Age 60
Life Expectancy at Age 60

2. Crashing Fertility Rates

At the same time as life expectancy is improving, fertility rates have been steadily falling. The fertility rate refers to the average number of children a woman will have during her childbearing years.

Fertility total rate anbd life expectancy at birth
Fertility total rate anbd life expectancy at birth

The global fertility rate required to maintain the current population level is about 2.1. However, between 1965 and 2014, the worldwide fertility rate fell from 5.1 to roughly 2.5. This trend is even more pronounced in Europe, with the current rate at about 1.5.

In practical terms, a smaller proportion of young people is expected to support a larger number of retirees as the baby boomers leave the workforce and the populations of active millennials and Gen Zs shy in comparison.

This demographic shift is often represented by the "inverted population pyramid". Consider the evolution of the European Population pyramid over the course of less than one lifetime:

 evolution of the European Population pyramid
evolution of the European Population pyramid

Sixty years ago, the pyramid had a broad base of working-age individuals supporting a small group of retirees aged 60 and above. However, today's pyramid no longer maintains that solid structure. Instead, a relatively small group of younger people is expected to support an increasingly larger number of retiring baby boomers placed above the yellow line. 

This shift threatens to overload national pension systems built around triangular demographic distributions - potentially leading to their complete collapse in the coming decades.

What are the solutions?

The government’s take

The recent surge of mass protests in France has highlighted the urgency of the pension crisis that nations are facing globally. Governments are trying to solve this pension crisis in one of two ways.

  • Continuing to raise the Retirement Age - By pushing the retirement age higher, governments can extend the working life of their citizens. This action places the retirement threshold upward, ensuring a larger section of the population remains in the workforce for longer.

  • Accumulating Debt to fill the gap - Currently, ALL Western nations operate deficit-ridden pension schemes, meaning they spend more on pensions than they have. To sustain these unviable systems, the solution simply involves creating more money. With the abolition of the Gold Standard, central banks worldwide can print as much money as they see fit, and they use it to prop up failing systems like Western pension schemes artificially. But who foots the bill for this? The answer is everyone - pensioners, workers, and you. The cost is paid through inflation, as the value of your money diminishes with each additional unit printed.

Raising the retirement age as a solution is like putting a band-aid on a broken ankle. It doesn't diminish the pain and does not address the actual issue. It only shifts the deficit problem further ahead, giving the illusion of budgetary relief at the expense of an elderly workforce but without ever actually attempting to solve the source of the problem. The birth rates keep diminishing and the pension system is not adapting. 

The second solution is simply a self-destructive cycle of increasing debt - leading to an ever-growing burden that would eventually precipitate the collapse of entire economic systems. It's like allowing gamblers to take out loans to pay off their casino debts repeatedly.

To illustrate this last point, consider the management of the largest national budget on earth over the past 50 years. It is characterised by systematic cyclical deficit trends showcasing exactly when the bubbles burst before starting all over again and the increasing outstanding debt to fill in those ever-increasing budget gaps. If the USA or any other Western nation were a company competing in the free market, they would have declared bankruptcy multiple times over.

USA Budget
USA budget

How to not become a Grasshopper

The hard truth is that most governments aren't in a position to resolve the pension crisis. They operate within a political framework that encourages short-term thinking, their horizons typically stretching no further than their next election. The surrounding financial system is debt-based, with debt being the primary mechanism for monetary expansion, and their budgets have been running deficits for decades. 

Would you place your possessions aboard a sinking ship with headwinds so strong that it cannot move close to the port and whose leaks grow larger yearly?

More than ever, it is essential to understand that your future and financial security are in your hands.

Today’s society is prone to blame-shifting; people fall easily into victimhood, helplessly pointing fingers when facing challenges and obstacles. In a world of handouts and artificially sustained safety nets, achieving financial independence means courageously taking personal responsibility for your life. Once you positively rely on yourself, you become resilient & strong.

Resilience is not about weathering the storm; it’s about learning to dance in the rain. 

Cyrus Fazel, SwissBorg CEO

Not becoming a Grasshopper can be achieved in three steps:

  1. Understand the Game: Educate yourself about the world you live in. How does your financial system work? When and how is money created? How is it distributed? What are the repercussions? What does it mean for you?
  2. Make Your Own Rules: If the game's rules are stacked against you, create your own action plan to regain control over your life and tilt the odds back in your favour.
  3. Level-Up: Consistency and discipline are essential, not only in games and fitness but also in finance. Execute your action plan patiently and confidently, and watch yourself become a better player.."

So far, this narrative has sought to illuminate point 1: the game is flawed. Now, let's proceed to points 2 & 3:"

Change your rules and win the game

Once you understand that you can no longer blindly rely on the pension system to secure your future and the future of your kids, you must become an Ant; this means recognising that the official game rules are not in your favour and understanding that you have the power to alter the rules you play by.

The Ant and the Grasshopper have worked honourably throughout their lives, earning a respectable income. The key difference between them is that the Ant understood early the importance of taking matters into her own six legs.

The official rule book might tell you to work hard and contribute to your taxes over a period of 35+ years to then receive an adequate retirement based on your previous salary. Yet the Ant understood that this promise was anything but a guarantee. She understood the game was hinged on a failing system and decided to exchange fear and uncertainty with assertive action. 

The action plan: Hack the game

Estimates of what investors need to earn 7.0%
Estimates of what investors need to earn 7.0%

In a capitalist world, everyone has two things to leverage: one’s labour and one’s capital. 

Though the main reason for your labour is to increase your capital, thus not investing your capital means not understanding the game of capitalism. A game the Ant played well and the Grasshopper failed to engage in.

However, investing has become much more complex.

Here's what it took to achieve a return on par with the average market performance over the last three decades.

In the last century, a simple savings account's interest rate plus some low-risk bond exposure would have been sufficient to grow your wealth.

Traditional banks offer no yield today, and fixed-income securities haven't been appealing since the turn of the millennium.

The Web 3.0 solution to a failing Web 2.0 world

The Web2 Fiat machine resembles a ticking time bomb with a potential for destruction that even Oppenheimer would dread. It's a system replete with ever-expanding debt bubbles that are bound to burst eventually.

Given the constricting economic model of Web 2.0, we find ourselves in dire need of a robust alternative, and that's where Web 3.0 enters the scene. It's not just a candidate for the future; it's the inevitable progression of our digital world. Early adoption of Web 3.0 technologies and principles is much like being part of the tech growth in the mid 90’s. It adheres to the basic tenet of investment: the earlier you step in, the greater the potential benefits.

Capitalising on the value creation that the Web 3.0 revolution will drive is one of our age's most asymmetrical wealth redistribution opportunities. Perhaps even the final wealth redistribution event for humanity. 

This is because as we move towards extreme automation—where innovation will be bred not by humans but by AI—the rules of the economic game might be rewritten forever.

Internet user vs unique active addresses
Internet user vs unique active addresses

Therefore investing in Web 3.0 projects extends beyond their high return potential. Web 3.0 is more than an upgrade; it's a paradigm shift that aims to build towards a profoundly humane reality. It is potentially the last resistance of the human experience in the face of an inanimate AI destiny. 

Web 3.0’s mission is to hand back power and freedom to individuals by creating a permissionless, peer-to-peer economy, giving you and all human beings unprecedented autonomy to design your own financial future.

Your Web3 action-plan blueprint: 

  1. Escape the Losing Game of Fiat: Outperforming 7% returns in traditional financial markets has become increasingly challenging as all your investments relentlessly fight an uphill battle. In the Web2 world, you're compelled to invest your money as it will be worth less tomorrow than today. This scenario creates artificial pressure and short time horizons. Imagine running with all your money on your shoulders but on quicksand—that's what investing in traditional markets is like. As the quicksand pulls you deeper, you're forced to be exponentially more innovative and risk-tolerant with your investments to escape. Assets like real estate, gold, or Bitcoin do not necessarily increase in value; instead, the dollars and euros you compare them to lose their value. The moment you realise that Bitcoin is not an investment, you've completed this step.
  2. Establish a Sound Base for Your Wealth: Assets that are inherently scarce and non-manipulatable are known as sound assets. You can't just create more of them, so as the economy grows (in real output & value creation terms), so does the unitary value of each of these assets. Combine this with readily available liquidity, and you have sound money. Gold epitomised traditional sound money—objectively scarce, immutable, and durable. That's why it has been the backbone of the financial system throughout history, from the Denarius during the Roman Empire, the Florin in the Renaissance era to the gold-backed dollar standard of the past century. Throughout history, a clear correlation between societal prosperity and the use of sound money can be observed.
  3. Conversely, a clear link exists between monetary debasement and civil debasement. The Web3 revolution furthers the cause of sound money by allowing its permissionless adoption and adding superior properties of divisibility and storage across space and time. The moment you start measuring your wealth in Bitcoin, you've accomplished this step.
  4. Investing as an act of transcendence, not necessity: ​​Imagine a scenario where if you do nothing, your money will be worth more tomorrow than it is today. How much higher quality will your investments become when you're no longer rushing to invest? Once you've placed your savings in sound money that naturally appreciates over time, you will be able to approach actual investment from a healthier perspective. Suddenly, the opportunity cost has flipped. The risk now lies in investing your money, not in holding back. This shift reveals the true nature of investing. When your time preference becomes low, so do your tendencies towards greed and fear. Taking funds away from your sound money becomes a calculated exercise naturally favouring high-value investments. As investing is a tool of collaboration, the value of your investment no longer lies in surviving a draconian financial system but in helping shape a better world. To illustrate this, the same rule applies to spending—if you know your money will be worth more tomorrow, your impulse to spend on frivolous items is discouraged. You will increasingly only spend on things that genuinely add value to your life, and Web3 allows you to do that without third-party intervention, truly enabling you to regain control over your wealth. The moment you no longer invest in the rat race but improve the world, you will have mastered this step.

Conclusion: Web 3.0's Peer-to-Peer Economy: Beyond Retirement

The web3 revolution isn't limited to investment; it's also dramatically reshaping the labour market dynamics. We are witnessing the rise of the Freelancer Generation.

Consider a graph charting the average revenue per IBM employee over the past century:

IBM Historical revenue per Employee
IBM Historical revenue per Employee

Half a century ago, it took 50 IBM employees to generate 1 million dollars. Today, they need just 5.

This trend is pervasive across various industries and businesses. The barrier to success is significantly lower today, as technological advancements have enhanced human capacity by automating numerous tasks, focusing more on critical strategic work. And with the emergence of AI, we may be on the brink of an economic paradigm shift:

A generation of AI-empowered freelancers operating freely in a thriving gig economy.

This gig economy already exists today, where online platforms often facilitate freelance work and short-term contracts. According to a recent survey conducted by Fiverr , 70% of Gen Z consider freelancing a viable career option alongside a traditional 9-5. This approach allows them to continue working and earning an income well into retirement.

Web3 technology fosters, however, an entirely new kind of gig economy— is a genuine creator economy where individuals worldwide can freely participate in a global labour market. With objectively verifiable credentials and smart-contract-enabled work agreements, information asymmetries that create unequal working conditions will diminish. Individuals will be rewarded meritocratically, reflecting the quality and value of their work. 

These individuals could be contracted for their value-added services as needed, enabling them to seamlessly transition from one company to another, schedule vacations freely, or opt for ongoing engagements. 

Importantly, web3 eliminates the need for mis-incentivized and misinformed centralised governmental control over national labour markets, thereby restoring financial ownership and freedom to individuals.

Today’s Pension Plans were designed at a time when working abroad from our home country was the exception, and working from a laptop was the privilege of a few selected scholars. Tomorrow Web3 might entirely reimagine how we earn, save and invest. 

Web3 is the entire system of value and money shaping our age's biggest and most impactful wealth redistribution. 

There has never been a better moment to become an Ant.

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