How Porsche Hacked the Financial System and Made a Killing
What is documented here is extremely difficult to do in markets that encourage transparency. It was done a lot in the early 1900s before the data became more accessible, much to the chagrin of many an investor (if you haven’t, you MUST read Reminiscences of a Stock Operator which is an excellent lesson) but to see it done in more modern times given exchange laws and transparency is quite a coups. Not sure whether to be scared or hat tip ze Germans.
(via Hacker News)
Forget the Tech, the Fee (or lack thereof) is the Key to Mobile Payments
A number of companies are working hard to get payment systems in our mobile phones and cards. Contactless technology is great, but why such a race all of a sudden when the technology has been there for years? I’m perfectly capable of swiping my credit card and as a consumer it doesn’t save me THAT much time to get it out of my wallet. So why is everybody pouncing on this? One word: Fees.
For the last 50 plus years, credit card companies and banks like Visa and JPMorgan Chase have charged businesses fees for using their system of payment. These fees are a hugely profitable line of business and were completely understandable in the past when capital requirements to make the network function were very high - swipe cards, risk, payment systems, international networks, football-field sized super computers, etc.
Thanks to the exponential progress of technology, however, the cost to get a secure transaction from vendor to bank is approaching zero, and Point of Sale systems are diversifying from leased apparatus to mobile phone peripherals that allow you to swipe and pay without a huge monthly dig into your profit.
So - what’s so special about Google’s foray into the mobile payments business and why are banks developing competing systems? Google has said that (at least initially) they will not be charging transaction fees for their mobile payment systems. Their revenue will be driven by increased search and web traffic to their pages. This is a huge deal as there has never been a major institution willing to gain only the revenue of a secondary economic effect to power financial transactions. Banks make money on fees, but Google will make money when you surf more because of an enabling technology. Much like the web has “democratized” industries like music and publishing, this no-fee payment system could allow retailers and businesses to branch out on their own as well and significantly improve the bottom line.
The response from banks is to develop their own mobile payment systems or cooperate and make money through the no-fee model. JP Morgan, Bank of America, and Wells Fargo have banded together to start an SMS and e-mail based payment system to exchange money between their customers. If we use their bank system they are still able to take a small cut of each transaction as a fee. (Looking further, it’s actually a pretty big cut at an estimated $12-50 dollars).
Whichever standard prevails (if there is to be one major winner), or whatever turbulence this causes in the market as it’s figured out, I’m excited for what this burst of technology and ideas means for the general consumer and businesses in terms of transaction fee competition and expansion of options to accept payments. I feel that while it’s not where it needs to be for wide adoption at the moment it will hit its stride very quickly as the next series of major devices is released later in the year.
Looking forward to it!
Inspired via: WaPo Business article on Google’s new system.
The Gold Standard?
I just watched a DVR’d Colbert Report with Ron Paul that was pretty shocking. I know, “seriously, Seph, you should not be shocked by members of congress anymore!” but I can’t control these things.
Mr. Paul made an appearance to back up his past opinions on the gold standard as a reasonable basis for finance. That’s not insane, but then Colbert stated that Ron Paul was becoming the Chairman of the House Finance Committee. What? Who on earth thought that was a good idea? But back to the argument.
Proponents of the Gold Standard (I’m not sure who that might be except for Gold distributors) might suggest that tying money to an actual thing instead of Fiat currency might be a good thing as it keeps our money-printing in check. Prevents us from just printing random money. Sure, but so does our desire to keep the value of a dollar somewhere at a level where we can buy stuff.
Perhaps the thing not realized by Gold Standard fans is that the dollar isn’t just used in the United States. It’s not something that we can change isolated to our country, nor is Gold a commodity for which we can fix the price. As a result of it being such a staple currency, there are trillions of dollars (not gold - actual dollar bills) currently being stored in the vaults of foreign countries. Trade surpluses, currency rigging, etc, all result in dollar outflows to foreign governments. What do you think would happen if all of a sudden we needed to back up those dollars with Gold? Let’s not even get into the fact that there’s an international commodity market for Gold that we’d have to go to in order to get it.
Further, when we all of a sudden need to buy the pacific ocean worth of bullion, what do you think will happen to the price of gold exactly? How is this feasible? Why are we even talking about this as a priority?
Mr Paul - what would be your plan for actually making this happen, and what’s the benefit to our country? Happy to hear any arguments that might be out there to make me feel ever so slightly less incredulous of legislative committees.
Also - post script for those poll watchers - eventually if you put crazy folks in key positions you’re going to be perceived as crazy. Not sure if Obama’s poll numbers topped 50% this week because of him or because of you. Something to keep in the back of your mind.
About Me
A strategy consultant with a passion for IT, geopolitics, economics, and the open ocean. Awed by simple, innovative solutions to difficult problems. This represents my favorite slices of the web and serves as networked storage for my brain which is now entirely pointer-based. Opinions expressed here are my own and do not represent those of any organization with which I may or may not be allegedly associated.
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