Re: <nettime> The End of an Era: the Internet Hits Ground

["R. A. Hettinga" <rah@shipwright.com>]

That's right. Money is *not* necessarily banking.

(Sometimes it takes me a while to figure these rather obvious things out,
being an ordinary net.entrepreneur/average net guy. Nice to have some
help, there. :-))

Cheers,
RAH

--- begin forwarded text


Date: Tue, 23 Jan 2001 11:15:23 -0400
From: Somebody
To: Somebody Else
Cc: Buncha People, rah@shipwright.com
Subject: Re: <nettime> The End of an Era: the Internet Hits Ground

Somebody Else wrote:
>
> Fascinating (realistic) stuff.

I think the essential point that comes out of this current burst of
retrospective hand wringing is that the laws of finance and economics
dominate those of the net.  Not that I ever thought that was in doubt,
myself.

> Can anyone point me at chapter & verse on the following?  Seems to
>conflict with the e-money legislative approaches in Europe?
>
> "For all its technical feasibility, anonymous electronic cash remains as
> elusive as it did 5 years ago, not the least because governments have made
> it clear that they would not allow any financial institution operating
> within their jurisdiction to issue such a currency."

I suspect the author is guilty of gross simplification.  He's assumed that
there must be one cause to the failure of this fairly obvious innovation.  
Of course, looking at the complexity of the events, it's easy to assume
that "the government" is to blame.  And it's often enough a valid
assessment in the public mind to make it a good starting point.

The real problem lies more directly at the feet of the Internet
entrepreneur.  The field of electronic money is probably the most complex
of all, and it seems to be complex in excess of the capabilities of the
average net guy (I don't think this is so much of a criticism, as I've yet
to find any other sort of guy that could do better...).

There are many more barriers to entry in the money business than other
businesses, not least a cultural weight that implies that money is
banking.

That 'banking' barrier is a direct result of governments, although they
would not understand the words.  For about a century, the arisal of
central banking has been accompanied by the arisal of a heavily regulated
sector of banks that basically exhibit herd behaviour, in the words of
economists.  As the regulation increases, companies discover that
cartelisation is the best choice, as if one company does the same as all
the others, it cannot be wrong.

A side effect of this is to remove innovation as a plausible mechanism
within the banking sector.  So, thus, the cultural message that money is
banking also means that e-money isn't going to happen, as it is
innovative, and thus at odds with what banks can do.  (I have a paper by
Merton Miller somewhere where he discusses innovations in finance, and
lists a goodly number.  Not one came from the banks, but all were adopted
by the banks eventually.  Note that this is a *general* observation, the
exceptions like the Belgium and Dutch smart card successes are interesting
because of that.)

As I say, that's only the government part of the story, I once counted up
the barriers to entry in digital money and came up with 8, way more than
other industries.  That's enough to stop most in their tracks;  so I'd say
the author is simplifying and being unkind in his assessment.

Unfortunately I lost the bit of paper I wrote my barriers on and have
never been able to recreate the exact 8.  Yet one more barrier, perhaps :)

<Somebody's .sig>
--- end forwarded text


-- 
-----------------
R. A. Hettinga <mailto: rah@ibuc.com>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'





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