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Welcome back, everyone. 
I am Cass PNC and I'm joined as 

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usual, by my partner in crime, 
Mr. Bennett Tomlin. 

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How are you? 
I'm. 

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Doing well. 
How are you, Cass? 

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Hanging in there? 
We're joined by a very special 

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guest today, Patrick McKenzie, 
writer and expert in financial 

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infrastructure and the author 
and operator of the newsletter, 

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Bits About Money. 
Patrick McKenzie, how are you 

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today? 
I'm doing very well everybody 

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and before I get started, have 
to make the obligatory 

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disclaimer. 
We're going to be talking a lot 

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about payments today. 
I previously worked at the 

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company Strike, which does, as 
many of you know, quite a bit of

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payments for six years. 
But I'm speaking entirely on my 

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own behalf, even though I'm 
still an advisor there in some 

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capacity. 
I think it'd be a good place to 

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start just in payments, 
payments, payment 

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infrastructure, like financial 
payments infrastructure, You're 

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an expert in that. 
Do you want to talk about how 

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you think cryptocurrency fits 
into payments and finance in 

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general, and perhaps some of the
issues that you see with it? 

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So let's take a step back for 
the moment to talk about 

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payments. 
Generally speaking, the economy 

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is this overwhelmingly complex 
machine that includes a lot of 

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various actors that are bouncing
off of each other and exchanging

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value. 
Typically a transaction will 

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involve one business and 
generally a customer. 

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Of that business whether that is
a business customer or a 

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consumer customer like you know 
these three handsome blokes that

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are doing a podcast about 
cryptocurrency transaction 

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typically takes multiple steps 
and that that exchange of value 

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is actually like kind of 
complicated when you get into 

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the the details about it. 
You might think like some are 

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pretty simple, simple you go up 
to a cafe, you get a cup of 

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coffee and hand over your money.
But some of them, you know they 

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involve an invoicing process, a 
multiple month contract 

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negotiation etcetera, etcetera. 
And so a payment happens. 

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As an important part, that is 
very much not the whole of the 

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part which is an adjunct to 
these transactions, an adjunct 

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to these customer relationships 
and all payment is, is a message

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between the customer, the pay 
and the business. 

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That tells the business 
something that is useful to know

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about whether they will 
ultimately receive money for the

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good or service that that is 
under issue. 

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Typically the form of the 
payment encodes some information

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as to the level of certainty the
business should have that will 

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ultimately be paid about this 
and kind of like the most 

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interesting thing that payments 
as a field has ever done is 

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convincing people that a payment
is actually much more than a 

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promise that there's, you know. 
Math and infrastructure and 

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yadda yadda. 
And there is math and 

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infrastructure and yadda yadda. 
But at the end of the day, all 

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payment is is a formalization of
a promise that could have been 

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made on words or paper or via 
smoke. 

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Signal, could you walk us 
through an example or 

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prototypical payment just to 
show how like the payment itself

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is a promise and how that works 
kind of in practice? 

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I will disclaim at the at the 
start that everybody who works 

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in payments or crypto or the 
finance field. 

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I grew up in a particular place,
perhaps many places, and they 

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often filter. 
Through their views on the 

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field, through the experience of
that particular place. 

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And when you look at payments 
worldwide, the various different

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payment methods have very, very 
different user experiences and 

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sort of ergonomics associated 
with them. 

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Let's use like the world's most 
terrible payment method and you 

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can make a long list of payment 
methods that are vying for that 

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for that crown. 
But I would claim that the the 

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system of checks in the United 
States is. 

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A system of payments that nobody
would invent in 2023 because it 

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is unsafe for all possible use. 
But it's a good thing to like 

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sort of get a mental model for 
how payments used to work. 

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And so back in the day you like,
go into a grocery store, you 

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pile up a basket full of 
groceries, you take them to the 

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counter and when you pay it a 
check, all you are doing is 

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saying, hey grocery clerk, the 
total comes to. 

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Well, it was back in the days, 
so it was probably like $16.00. 

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And I promised to pay the 
grocery $16.00 for this year 

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basket of groceries. 
And actually, prior to checks 

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being at being much of a thing, 
that was the end of the payment.

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Because the promise was 
literally that. 

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It was a promise. 
The grocery store would just 

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increment your account by, OK, 
you owe $16.00 more than you 

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used to. 
And then a few months later you 

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would go there and pay cash or 
specie or you know, Beaver Peltz

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or whatever it was. 
But. 

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When the grocery stores largely 
tried to get out of the 

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extension of credit business, 
they would say Okay, give us a 

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check and the check is still an 
extension of credit. 

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All it says is okay that verbal 
promise that we used to make, 

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that I will pay the $16.00. 
I'm gonna write that promise 

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down here on a piece of paper. 
And this promise and this piece 

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of paper are magic because you 
can take this here piece piece 

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of paper and this promise on it 
and hand it to my bank and my 

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bank will have will hand you 16 
actual American dollars in 

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behalf of this. 
And importantly, Despite that 

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being the transaction, the 
grocery store almost never 

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actually did that. 
What the grocery store would 

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actually do is take the the 
promise over to their bank, 

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which is typically not the 
customer's bank. 

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And they would say, hey this 
person has paid, has promised to

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pay me $16.00 and the customer's
bank would say, well golly Gee, 

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it looks like another bank has 
promised the bearer of this 

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instrument here $16.00. 
You can deposit that in your 16 

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in your account. 
I will credit you $16.00 perhaps

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today, perhaps 5 days from now 
doesn't really matter. 

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And then I the the bank that you
bank at am going to go to the 

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customer's bank and say, hey the
customer has. 

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Made a promise for $16.00. 
I would like to collect on that 

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promise in satisfaction of this 
credit extension that I have 

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made to my customer. 
And then you layer on that like 

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fascinating Rube Goldberg 
contraptions of the 

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infrastructure built to to 
support. 

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This used to be back in the days
that there were massive, massive

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Courier operations between 
different banks attempting to 

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carry like literally 10s of 
thousands of checks a day. 

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Between them because the check 
was only actually good at the 

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particular institution written 
on the check. 

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And then we developed this 
clearing house infrastructure 

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where everyone said, you know, 
it is crazy that every bank 

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needs to send out 4000 couriers 
a day to 4000 other banks. 

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Why don't you send all the 
couriers to just one place in 

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the middle and they will do the 
math and handle this for 

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everybody And then. 
They made that that 

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clearinghouse system electronic.
If you've heard of ACH, it's the

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automatic clearinghouse. 
The automatic stands for a 

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computer is involved and we've 
had, you know progressive layers

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of infrastructure built on top 
of that, like fundamental, 

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terrible. 
The check is a promise written, 

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physical paper infrastructure. 
By the way, why is the check a 

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absolutely terrible payment 
method We would never design? 

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A payment method in 2023 that 
had all the secrets necessary to

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steal all the money printed on 
the face of the payment method. 

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But check factually does have 
all the secrets necessary to 

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steal all the money printed on 
the face of it. 

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And so anytime you give a check 
to anyone, both the person you 

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are giving it to and anyone who 
even glances at that check for 

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one moment, can debit all the 
money in your bank account. 

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And the reason that doesn't 
happen constantly is because 

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banks are extremely aware of 
this terrible, terrible decision

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made several decades ago, and 
like, constantly squashing 

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attempts to do that. 
Anyhow, that's a brief 

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simplified method, simplified 
understanding of like. 

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The huge amount of societal 
effort that goes into the back 

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office of simply trying to buy 
$16.00 worth of groceries now 

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scaled that up to there are 
many, many different competing 

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payment methods. 
You're probably very familiar 

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with credit cards. 
You're very familiar with 

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various forms of bank payments, 
they under grid, all the 

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essentially all the economic 
activity in the economy. 

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One can quibble on whether cash 
is a payment method used in this

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in this case, but cash is a 
relatively small portion and 

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decreasing portion of payments 
in the economy and getting 

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smaller every year in most 
markets. 

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There's a variety of reasons for
that so I'm happy to go into 

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them, but payments is this like 
giant multi faceted 

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infrastructural beast which is 
hugely interesting to do deep 

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dives in. 
I heard crypto got mentioned 

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somewhere in this podcast that 
we should talk a little bit 

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about crypto. 
I do want to delve into that a 

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bit. 
I think that's a a good a good 

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statement right there because I 
am actually a huge fan of 

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physical cash. 
I I resolutely mention this like

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all the time on Twitter. 
And Bennett, when he when he 

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visited me out here knows that I
was using it to pay for like 

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gasoline and and things that 
most people do not use cash for.

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Why is cash dying? 
What do you think and and what 

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do you think will come to take 
its place? 

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What are the downsides to cash? 
Why so one? 

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Why is Cash Cash dying? 
The fundamental reason cash is 

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dying is because every payment 
method exists in competition 

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with every other payment method 
for business. 

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They want to get business from 
the businesses that are selling 

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things. 
They want to get business from 

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the customers that are paying 
for things. 

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And the reason cash is losing 
share against other payment 

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methods is because other payment
methods give people a variety of

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benefits that they can't get 
from using cash. 

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Other payment methods, you know,
credit cards will offer to give 

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you a reward points. 
So the cost of doing a 

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transaction is literally 
negative where most customers 

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would say that the cost of doing
a transaction in cash is 0. 

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It's not actually true, but from
the perspective most customers, 

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that rounds to true. 
The ergonomics of using cash are

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painful. 
You know, you have to count out 

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change, et cetera, et cetera. 
The cost of using cash for 

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businesses is much higher than 
people believe it to be, because

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you need to actually count it. 
Make sure it's not stolen and 

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cash doesn't have a. 
Most payment methods have built 

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in infrastructure to track the 
relationship between a payment 

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and between the customer who 
made the payment and the 

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transaction that the payment was
made for. 

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Cash doesn't have that built in 
infrastructure and so every 

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business in the economy that 
touches cash needs to build 

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their own software, accounting 
and contractual infrastructure 

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in place of the stuff that they 
would ordinarily buy from, you 

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know, Visa or their bank or 
PayPal or any other provider of 

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a payment method in the economy.
So that that is fundamentally 

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the reason why cash is being out
computed. 

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I don't expect cash to go away. 
Some people like like it two 

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thumbs up you do you the but 
people often say oh it's a 

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conspiracy the government wants 
to get rid of cash. 

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One the difference between 
conspiracy and policy goal is a 

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matter of degree. 
Like if you were to go to Japan 

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and say is it a conspiracy that 
the government wants to get rid 

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of cash. 
They would say, oh, there's a 

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actually, you know, a position 
paper that we have on this exact

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subject. 
Where currently the percentage 

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of cashless transactions in the 
economy is ±20%, our goal is to 

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get that to 40% within the next 
five years. 

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Here are the initiatives that we
have going on with the financial

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industry to do this goal. 
The reasons why we have this 

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goal are, one, we think it will 
decrease the tax gap, 

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particularly with regards to 
small businesses. 

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Two, we think that this will 
help modernize Japan and allow 

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us to engage more international 
commerce. 3 dot dot dot dot so. 

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But the fundamental reason why 
you know any businesses fortunes

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go up or down is their position 
in relation to competitors. 

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And cash is just, you know, not 
what you would come up with in 

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2023 for a a payments experience
that is destined or you know 

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designed to gain share versus 
monitor payment systems. 

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I mean this leads us into the 
cryptocurrency debate. 

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I think a bit here is that with 
the with the death of cash in 

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general, not for a multitude of 
reasons that are totally fair 

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and reasonable when it comes to 
the future of money and the 

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current state of money. 
Do you think that the future is 

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closer to let's say in China 
they I know everyone uses like 

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WeChat or some sort of 
centralized social media app to 

229
00:12:03,640 --> 00:12:06,360
usually pay for things. 
The way anyone is known as a 

230
00:12:06,360 --> 00:12:11,480
tourist is less whether they 
know Chinese, no Mandarin and 

231
00:12:11,480 --> 00:12:15,760
more if they have like WeChat 
and a a bank in China that they 

232
00:12:15,760 --> 00:12:19,040
can use to pay for this stuff. 
If they're using cash, they're a

233
00:12:19,040 --> 00:12:21,440
tourist. 
Or do you think it's something 

234
00:12:21,440 --> 00:12:26,280
closer to cryptocurrency where 
you have it decentralized to an 

235
00:12:26,280 --> 00:12:32,560
A degree or centralized kind of 
stable coins, which are 

236
00:12:32,640 --> 00:12:36,360
cryptocurrency I guess, right? 
I think one of the interesting 

237
00:12:36,360 --> 00:12:38,960
things that. 
Looking at payments will like 

238
00:12:38,960 --> 00:12:41,440
give you for a glimpse on the 
future is that there isn't one 

239
00:12:41,440 --> 00:12:43,560
future for the world of 
payments. 

240
00:12:44,040 --> 00:12:48,400
We are likely have multiple 
different equilibria in multiple

241
00:12:48,400 --> 00:12:50,080
places. 
It's always difficult to look in

242
00:12:50,080 --> 00:12:53,240
the crystal ball and predict the
future, particularly for a 

243
00:12:53,240 --> 00:12:54,800
country where one is less 
invested. 

244
00:12:55,200 --> 00:12:58,240
But if I were to, you know, be 
in the crystal ball business, I 

245
00:12:58,240 --> 00:13:01,360
would say, oh, it does look like
China will increasingly go in 

246
00:13:01,360 --> 00:13:05,360
the direction of a very small 
number of payment systems that 

247
00:13:05,360 --> 00:13:07,160
are nominally, privately 
administrated. 

248
00:13:07,880 --> 00:13:10,640
Which are as nominally privately
administrated as anything else 

249
00:13:10,640 --> 00:13:13,680
that exists in China. 
And those systems will probably 

250
00:13:13,680 --> 00:13:19,080
be fully electronic, not touch 
cash, and be relatively separate

251
00:13:19,080 --> 00:13:22,120
from the formal banking system 
unless and until the Chinese 

252
00:13:22,120 --> 00:13:23,240
government decides that it would
be. 

253
00:13:23,760 --> 00:13:26,800
More advantageous for them to be
in the formal banking system, in

254
00:13:26,800 --> 00:13:28,600
which case they'll be in the 
formal banking system 

255
00:13:28,600 --> 00:13:31,520
immediately. 
That equilibrium doesn't prevail

256
00:13:31,520 --> 00:13:35,680
in other places. 
So in many markets there is an 

257
00:13:35,840 --> 00:13:38,560
like a Cambrian explosion of 
competition between payment 

258
00:13:38,560 --> 00:13:42,520
methods happening right now. 
And so I am something of gamer. 

259
00:13:42,520 --> 00:13:45,640
Until recently I lived in Japan,
and if you were to go to Steam 

260
00:13:45,640 --> 00:13:48,440
right now, Steam lists 15 
different ways you can pay that 

261
00:13:48,440 --> 00:13:50,160
for, you know, video games in 
Japan. 

262
00:13:50,680 --> 00:13:54,160
And 15 is actually like a small 
segment of the Japanese payment 

263
00:13:54,160 --> 00:13:56,080
market at the moment. 
If you do go to convenience 

264
00:13:56,080 --> 00:13:59,160
store, the number of logos they 
have indoor will be ±40. 

265
00:14:00,040 --> 00:14:02,360
And 40 does not touch the entire
market. 

266
00:14:02,360 --> 00:14:04,920
That's just like the teams that 
were smart enough and big enough

267
00:14:04,920 --> 00:14:06,960
to get the largest convenience 
store chains in the world to 

268
00:14:06,960 --> 00:14:08,960
accept their money. 
That's a very different 

269
00:14:09,480 --> 00:14:11,960
experience from what we have 
here in the United States, where

270
00:14:12,840 --> 00:14:16,160
for the longest time the 
payments industry thought in the

271
00:14:16,160 --> 00:14:19,640
United States that the credit 
card was the final evolution of 

272
00:14:19,640 --> 00:14:23,320
payments in the United States. 
And that all interesting work in

273
00:14:23,320 --> 00:14:26,920
payments heretofore would be 
like different variations on 

274
00:14:27,160 --> 00:14:29,920
let's make it a reward card, 
let's put different credit terms

275
00:14:29,920 --> 00:14:32,000
on it, maybe we can make a 
credit card and take off the 

276
00:14:32,000 --> 00:14:34,640
credit part and call it a debit 
card and that will allow us 

277
00:14:34,640 --> 00:14:36,280
access to a new market, et 
cetera, et cetera. 

278
00:14:36,720 --> 00:14:40,680
And then just in the last few 
years, there's been innovation 

279
00:14:40,680 --> 00:14:43,320
both within the United States 
and coming from places outside 

280
00:14:43,320 --> 00:14:45,480
the United States, greatly 
impacting the US market. 

281
00:14:45,920 --> 00:14:48,520
With respect to things like buy 
now, pay later as an offering 

282
00:14:48,840 --> 00:14:51,600
where they said, you know we can
entirely like take out the 

283
00:14:51,600 --> 00:14:55,080
credit part of this or rather 
take out the card part of this. 

284
00:14:55,960 --> 00:14:58,640
Make it palatable for the 
merchant to underwrite the 

285
00:14:58,640 --> 00:15:02,760
credit extension and knock down 
the cost of credit to 0 for the 

286
00:15:02,760 --> 00:15:06,480
customer and work the numbers 
such that this works out for 

287
00:15:06,480 --> 00:15:09,960
everybody. 
And we see, you know, different 

288
00:15:09,960 --> 00:15:13,480
things in places like India 
where India has a public private

289
00:15:13,480 --> 00:15:17,440
partnership that has. 
Sort of like the Platonic ideal 

290
00:15:17,440 --> 00:15:19,920
of what people who say central 
bank digital currency. 

291
00:15:20,160 --> 00:15:24,080
Like most people who say central
bank digital currency care 

292
00:15:24,080 --> 00:15:26,640
probably less about the slow 
database involved and more about

293
00:15:26,640 --> 00:15:28,800
like the fundamental user 
interface involved. 

294
00:15:28,800 --> 00:15:30,800
Where like any person in the 
economy should be able to pay 

295
00:15:30,800 --> 00:15:34,440
any other person in the economy 
at an arbitrarily low cost. 

296
00:15:35,120 --> 00:15:37,760
And India rolled that out with 
their. 

297
00:15:38,760 --> 00:15:41,520
Sort of public private 
partnership payment method that 

298
00:15:41,520 --> 00:15:44,560
is tied to individuals, identity
cards and et cetera, et cetera. 

299
00:15:45,400 --> 00:15:48,640
Brazil also has an option called
Pics, which is spiritually 

300
00:15:48,640 --> 00:15:50,560
similar, although it has some 
important under the hoods 

301
00:15:50,560 --> 00:15:55,240
differences. 
And in India, like virtually no 

302
00:15:55,240 --> 00:15:59,640
one has a credit card and you 
know, given a like really strong

303
00:16:00,440 --> 00:16:03,520
publicly endorsed alternative 
payment method I think. 

304
00:16:04,480 --> 00:16:07,600
One would probably be bearish on
the perspective of like India. 

305
00:16:08,200 --> 00:16:10,880
You know, credit cards in India 
as a payment method, capturing 

306
00:16:11,440 --> 00:16:12,840
the majority of sharing that 
country. 

307
00:16:13,160 --> 00:16:14,720
But who knows what the future 
holds? 

308
00:16:14,920 --> 00:16:18,320
What do you think the largest 
unsolved problems in the 

309
00:16:18,320 --> 00:16:21,520
payments industry still are? 
Oh, there's so many of them. 

310
00:16:21,720 --> 00:16:25,560
This surprises a lot of people. 
But the largest and most 

311
00:16:25,560 --> 00:16:28,720
sophisticated businesses in the 
world hate money. 

312
00:16:29,560 --> 00:16:31,040
And why do I say they hate 
money? 

313
00:16:31,160 --> 00:16:34,280
It's because they have a team 
that's in charge of payments. 

314
00:16:34,600 --> 00:16:37,600
The team is in either an 
organizational backwater at 

315
00:16:37,600 --> 00:16:41,200
their company or in many cases 
doesn't work for their company 

316
00:16:41,200 --> 00:16:44,400
and they work for a middleman or
a systems integrator or an 

317
00:16:44,400 --> 00:16:48,440
Accenture or similar. 
And the actual interface where 

318
00:16:48,440 --> 00:16:52,040
their customers come and pay 
them, literally all of the money

319
00:16:52,800 --> 00:16:55,200
is like. 
In some cases, it's literally a 

320
00:16:55,400 --> 00:16:56,960
particular webpage you can click
on. 

321
00:16:56,960 --> 00:17:00,320
In many other cases, there's a 
million different interfaces, 

322
00:17:00,520 --> 00:17:05,280
all flawed in their own way, but
that, like the the actual 

323
00:17:05,280 --> 00:17:08,480
experience of a customer 
attempting to pay is broken 

324
00:17:08,760 --> 00:17:11,880
profoundly in so many different 
ways. 

325
00:17:11,960 --> 00:17:14,800
Like, in the same fashion that 
science can demonstrate that 

326
00:17:14,839 --> 00:17:18,839
cigarettes cause lung cancer, 
this webpage causes you to lose 

327
00:17:18,839 --> 00:17:23,400
billions of dollars and that 
persists and so that like. 

328
00:17:23,920 --> 00:17:26,640
The high level biggest problem 
in the world for payments is 

329
00:17:26,640 --> 00:17:31,240
that the adoption story of it 
for businesses is just 

330
00:17:31,760 --> 00:17:34,400
tremendously suboptimal relative
to their goals for it. 

331
00:17:35,000 --> 00:17:37,000
You can also say the same about 
the adoption story for 

332
00:17:37,000 --> 00:17:41,960
individuals, you know be quite a
bit of the like. 

333
00:17:42,400 --> 00:17:46,400
The general distaste for banks 
and etcetera is ultimately 

334
00:17:46,400 --> 00:17:49,960
transactional friction around 
like routine transactions in the

335
00:17:49,960 --> 00:17:52,520
economy that. 
The parties expected to go well,

336
00:17:52,680 --> 00:17:54,800
that didn't go well for various 
reasons. 

337
00:17:55,120 --> 00:17:58,240
And then, you know you need 
someone to blame for that going 

338
00:17:58,240 --> 00:18:00,240
badly. 
And for whatever reason, the the

339
00:18:00,240 --> 00:18:03,320
banks end up carrying the ball, 
sometimes extremely deservedly, 

340
00:18:03,600 --> 00:18:06,640
but other times it's just 
because we haven't figured out a

341
00:18:06,640 --> 00:18:10,120
way to add a societal level. 
Deal with conflicts between 

342
00:18:10,360 --> 00:18:14,160
renters and landlords, for 
example, in a way that doesn't 

343
00:18:14,160 --> 00:18:15,360
bring the payment method into 
it. 

344
00:18:16,160 --> 00:18:18,840
And indeed, that is actually one
of the things that payment 

345
00:18:18,840 --> 00:18:23,000
method offers to the world. 
We have this gigantic society 

346
00:18:23,000 --> 00:18:25,920
wide system for resolving 
disputes between people involved

347
00:18:25,920 --> 00:18:28,120
in commerce. 
It's called the legal system. 

348
00:18:28,400 --> 00:18:31,840
It is galactically slow and 
galactically expensive. 

349
00:18:32,320 --> 00:18:35,760
And the thing that payment 
methods offer is to say, OK, you

350
00:18:35,760 --> 00:18:39,440
will always retain the right to 
go to the legal system to argue 

351
00:18:39,440 --> 00:18:43,720
over the $16.00 basket of 
groceries, but neither you nor 

352
00:18:43,720 --> 00:18:45,640
the grocery store wants that to 
happen. 

353
00:18:46,360 --> 00:18:50,960
And so if you use your debit 
card to pay for the groceries 

354
00:18:51,280 --> 00:18:54,920
and an apple spoils and you go 
to the grocery store and can't 

355
00:18:54,920 --> 00:18:57,720
get a happy resolution with 
regards to your apple, call the 

356
00:18:57,720 --> 00:19:01,000
1800 number on the back of the 
debit card, debit card and say I

357
00:19:01,000 --> 00:19:02,960
am unhappy and you get your 
money back. 

358
00:19:03,760 --> 00:19:06,760
And there is this, like massive 
machine and capitalism that 

359
00:19:06,760 --> 00:19:09,360
exists to guarantee you that 
invariant for you, You don't 

360
00:19:09,360 --> 00:19:10,960
have to care about that machine 
at all. 

361
00:19:10,960 --> 00:19:13,320
You just have to know. 
Call the 1800 number on your 

362
00:19:13,320 --> 00:19:15,760
debit card and your problem goes
away. 

363
00:19:15,960 --> 00:19:18,520
And you don't have to pay 
$600.00 an hour for a lawyer to,

364
00:19:19,160 --> 00:19:21,720
like, fight this case in court 
for four months, because no one 

365
00:19:21,720 --> 00:19:25,200
wants that to happen. 
How much are these experiential 

366
00:19:25,200 --> 00:19:29,800
problems in payments tied to the
infrastructure choices that have

367
00:19:29,800 --> 00:19:33,680
been made so far the building it
up from checks? 

368
00:19:33,760 --> 00:19:35,320
To this automated clearing 
house? 

369
00:19:35,600 --> 00:19:38,720
To this various small kinds of 
credit on top of it. 

370
00:19:38,960 --> 00:19:42,160
How are those related to these 
experiential problems? 

371
00:19:42,160 --> 00:19:45,360
Or are they related? 
They're extremely related the 

372
00:19:45,560 --> 00:19:47,800
the word we like to use a lot as
path dependency. 

373
00:19:47,920 --> 00:19:50,160
Many people in the United States
and many people in the crypto 

374
00:19:50,160 --> 00:19:53,560
industry who are heavily exposed
to the United States think that 

375
00:19:53,560 --> 00:19:56,880
transfers between bank accounts 
they take forever. 

376
00:19:57,000 --> 00:19:58,880
And to the extent that they 
don't take forever, they still 

377
00:19:58,880 --> 00:20:01,400
take like way too long for 
computerized transaction and 

378
00:20:01,400 --> 00:20:03,120
then cost a lot of money if 
you're doing wires. 

379
00:20:03,560 --> 00:20:05,760
And all of those are path 
dependent. 

380
00:20:05,760 --> 00:20:08,400
They're because transfers 
between banks and the United 

381
00:20:08,400 --> 00:20:11,400
States is ultimately based on 
this model of like sending 

382
00:20:11,400 --> 00:20:14,320
checks from one end of the 
country to another of like 

383
00:20:14,320 --> 00:20:16,360
various iterations we've made on
top of that model. 

384
00:20:16,720 --> 00:20:19,040
There are reasons why those 
iterations persist. 

385
00:20:19,200 --> 00:20:21,400
The banking industry does not 
lack for smart people. 

386
00:20:21,560 --> 00:20:23,800
It turns out that when you're 
dealing at the scales of the 

387
00:20:23,800 --> 00:20:26,880
economy, things that you could 
do that would make like certain 

388
00:20:26,880 --> 00:20:30,320
aspects of these better for some
people also create losers. 

389
00:20:30,680 --> 00:20:35,240
And society has both, like, you 
know, negotiations between firms

390
00:20:35,240 --> 00:20:37,800
and also negotiations at a 
society wide level through the 

391
00:20:37,800 --> 00:20:40,640
government. 
And like, you know, we want a 

392
00:20:40,640 --> 00:20:46,040
compromise here because we, you 
know, do want to allocate like 

393
00:20:46,040 --> 00:20:49,960
the winners and losers in a way 
that achieves society's desired 

394
00:20:50,600 --> 00:20:52,960
political slash, moral slash 
ethical goals for them. 

395
00:20:52,960 --> 00:20:56,440
And so as an example of that, 
one reason that payments is slow

396
00:20:56,440 --> 00:20:59,440
in the United States isn't 
because anyone is pounding the 

397
00:20:59,440 --> 00:21:03,040
table and saying slow payments, 
man, that is what we need for 

398
00:21:03,040 --> 00:21:04,840
the world. 
What they're actually saying is 

399
00:21:04,840 --> 00:21:07,280
community banking, man. 
That is really important for the

400
00:21:07,280 --> 00:21:10,120
world. 
It is like extremely important 

401
00:21:10,120 --> 00:21:15,200
that a person in, you know, 
rural Nebraska has a point of 

402
00:21:15,200 --> 00:21:18,360
presence nearby that they can 
ask questions of about the 

403
00:21:18,360 --> 00:21:21,480
financial system and about their
relationship to the government, 

404
00:21:21,480 --> 00:21:23,240
which is brokered through the 
financial system. 

405
00:21:23,680 --> 00:21:25,640
That requires community banks to
exist. 

406
00:21:26,240 --> 00:21:29,400
For various reasons, community 
banks would find it very 

407
00:21:29,400 --> 00:21:32,120
difficult to continue existing 
in a world where all payments 

408
00:21:32,120 --> 00:21:33,840
were substantially 
instantaneous. 

409
00:21:34,280 --> 00:21:37,520
That would result in lots of 
them going under due to 

410
00:21:37,520 --> 00:21:40,080
operational risk and technical 
risks that they can't take on 

411
00:21:40,080 --> 00:21:43,400
right now. 
We can't bankrupt 1/3 of the US 

412
00:21:43,400 --> 00:21:47,320
financial system and so we need 
to have due deliberation in 

413
00:21:47,320 --> 00:21:49,960
having instant payments being 
available, which is one reason 

414
00:21:50,240 --> 00:21:52,920
for many of the negative news 
stories regarding Zell. 

415
00:21:52,920 --> 00:21:57,480
And it's one reason why Fed now,
the real time net settlement 

416
00:21:57,480 --> 00:22:01,800
payment method that the Federal 
Reserve has had in the cooker 

417
00:22:01,800 --> 00:22:05,480
for a while now has been 
sardonically referred to as Fed 

418
00:22:05,480 --> 00:22:07,440
later for the last couple of 
years. 

419
00:22:07,560 --> 00:22:09,960
I'm hit with two questions here 
and feel free to answer 

420
00:22:09,960 --> 00:22:14,000
whichever 1. 
You think is more reasonable, 

421
00:22:14,000 --> 00:22:20,160
but one, I think we're talking 
about the payment infrastructure

422
00:22:20,160 --> 00:22:23,200
and I wonder if the payment 
infrastructure is also hindered 

423
00:22:23,200 --> 00:22:28,240
by something that we've all kind
of accepted as normal now, which

424
00:22:28,240 --> 00:22:32,680
is KYC AM L, but KYC AM L was 
only really introduced within, I

425
00:22:32,840 --> 00:22:36,640
mean my lifetime like I I in 
2001. 

426
00:22:38,200 --> 00:22:43,720
After after 911. 
So KYC AM L is a relatively new 

427
00:22:43,720 --> 00:22:46,360
construct. 
I wonder if that actually does 

428
00:22:46,360 --> 00:22:51,760
slow things down on purpose as a
policy goal or the other side of

429
00:22:51,760 --> 00:22:54,720
this that I think is relevant to
what you were stating is that 

430
00:22:54,720 --> 00:22:56,880
you're talking about community 
banks, you're talking about kind

431
00:22:56,880 --> 00:22:58,920
of the banking structure of the 
United States. 

432
00:22:59,240 --> 00:23:04,080
And I know that we have a lot of
banks here or things that are 

433
00:23:04,080 --> 00:23:08,360
close to banks and I wonder if. 
We're watching that kind of 

434
00:23:08,360 --> 00:23:12,520
collapse now and if that indeed 
will change the payments 

435
00:23:12,520 --> 00:23:16,960
infrastructure in America, one 
it is not to the case that Know 

436
00:23:16,960 --> 00:23:21,680
your customer KYC or AML, anti 
money laundering regulations 

437
00:23:21,680 --> 00:23:27,480
started in 2001. 
They were refined by the Patriot

438
00:23:27,480 --> 00:23:31,040
Act in 2001 in the wake of the 
9/11 attacks. 

439
00:23:31,720 --> 00:23:34,720
But the sort of legislative 
history of them dates back to 

440
00:23:34,720 --> 00:23:38,200
you, I believe the late 1970s in
the United States under what's 

441
00:23:38,200 --> 00:23:40,560
called the Bank Secrecy Act or 
BSA. 

442
00:23:41,480 --> 00:23:44,960
And the Bank Secrecy Act 
basically says, like banks 

443
00:23:44,960 --> 00:23:46,760
please have less secrecy from 
government. 

444
00:23:47,400 --> 00:23:52,880
But originally encodes the 
notion that banks are required 

445
00:23:52,880 --> 00:23:57,080
to have for there are accounts 
which have an ongoing 

446
00:23:57,080 --> 00:24:00,520
relationship with the customer. 
You need to discover what you 

447
00:24:00,520 --> 00:24:02,960
believe the true identity of 
that customer to be and persist 

448
00:24:02,960 --> 00:24:07,240
information about that customer 
and their identity for the 

449
00:24:07,240 --> 00:24:08,880
lifetime of the account. 
And sometime after. 

450
00:24:09,080 --> 00:24:13,200
And all KYC kind of flows from 
that original fountain in the 

451
00:24:13,200 --> 00:24:16,400
United States. 
In an international point of 

452
00:24:16,400 --> 00:24:19,080
view, it's kind of complicated 
because there are these super 

453
00:24:19,080 --> 00:24:22,680
national quasi judicial, quasi 
private organizations that 

454
00:24:22,680 --> 00:24:27,040
promulgate KYC standards which 
are like somewhat rubber stamped

455
00:24:27,040 --> 00:24:30,080
by various international 
treaties and government policy 

456
00:24:30,080 --> 00:24:33,040
making and sometimes sort of 
like adopted by the banking 

457
00:24:33,040 --> 00:24:35,200
infrastructure. 
Less because their government 

458
00:24:35,200 --> 00:24:38,280
has said you, you know, legally 
must adopt this thing and more 

459
00:24:38,280 --> 00:24:41,760
because they don't want their 
wires like the physical, you 

460
00:24:41,760 --> 00:24:44,600
know, copper wires to other 
nations getting yanked out at 

461
00:24:44,600 --> 00:24:47,560
the source. 
So there's a big ball of wax 

462
00:24:47,560 --> 00:24:52,800
there, but so clarifying that, I
think it is useful for more 

463
00:24:52,800 --> 00:24:54,840
people that are involved in 
cryptocurrency. 

464
00:24:54,840 --> 00:24:58,120
An example, for example to like 
understand that the the genesis 

465
00:24:58,120 --> 00:25:03,800
of KYC and AML that dates back 
to a while ago, does that 

466
00:25:03,800 --> 00:25:06,840
intentionally make payments 
products worse than they would 

467
00:25:06,840 --> 00:25:08,480
be? 
This is a complicated topic. 

468
00:25:09,960 --> 00:25:13,680
One thing that I and if folks 
haven't followed me for a while 

469
00:25:13,680 --> 00:25:15,400
and haven't like gotten this 
impression already. 

470
00:25:15,640 --> 00:25:18,600
I'm something of a crypto 
skeptic myself, more than 

471
00:25:18,600 --> 00:25:21,760
something of a crypto skeptic. 
Remember back when Bitcoin was 

472
00:25:21,760 --> 00:25:24,560
$17.00 saying that it was 
overpriced by $17.00? 

473
00:25:24,560 --> 00:25:28,080
And I have not seen any evidence
over the course of the last 10 

474
00:25:28,080 --> 00:25:29,480
years to chase me from that 
point of view. 

475
00:25:29,960 --> 00:25:34,280
Be that as it may, the thing 
that the crypto folks are like, 

476
00:25:34,280 --> 00:25:38,600
fundamentally right about is 
that AML and KYC regulations are

477
00:25:38,600 --> 00:25:41,680
a matter of choice for society. 
Society should choose them. 

478
00:25:41,680 --> 00:25:44,560
To the extent that it believes 
that it advances societies 

479
00:25:45,360 --> 00:25:49,400
instrumental goals and achieves 
our values, and to the extent 

480
00:25:49,400 --> 00:25:52,440
that they don't achieve our 
instrumental goals and values, 

481
00:25:52,440 --> 00:25:55,680
we should like change the AML 
slash KYC regime. 

482
00:25:55,800 --> 00:25:58,160
AML slash KYC creates winners 
and losers. 

483
00:25:58,560 --> 00:26:01,680
One of the things that you hear 
over and over again in talking 

484
00:26:01,680 --> 00:26:03,880
to people who are unbanked or 
underbanked and that you will 

485
00:26:03,880 --> 00:26:07,720
see in the scientific literature
about this sort of thing is that

486
00:26:08,080 --> 00:26:10,920
the, you know, difficulty of 
formally verifying one's 

487
00:26:10,920 --> 00:26:15,720
identity to a bureaucratic 
process causes people to not be 

488
00:26:15,720 --> 00:26:17,840
able to open bank accounts. 
And that's one of the reasons 

489
00:26:17,840 --> 00:26:20,880
that they remain unbanked or 
underbanked. 

490
00:26:20,960 --> 00:26:23,960
That's negative to the extent 
that we want everyone to, you 

491
00:26:23,960 --> 00:26:26,600
know, be able to partake in the 
economy on equal footing and to 

492
00:26:26,600 --> 00:26:28,880
be able to like trivially do 
things like order from, you 

493
00:26:28,960 --> 00:26:31,040
know, DoorDash that both is 
true. 

494
00:26:31,040 --> 00:26:33,040
But it's not like the entirety 
of the story. 

495
00:26:33,560 --> 00:26:37,760
Often that gets blamed on AML 
slash KYC where it is not 

496
00:26:37,760 --> 00:26:39,960
actually required in the 
regulations that it be difficult

497
00:26:39,960 --> 00:26:44,560
to demonstrate your your 
identity to a bank if if you are

498
00:26:44,680 --> 00:26:50,040
for example a an immigrant in 
under documented circumstances. 

499
00:26:51,480 --> 00:26:56,600
But banks are like kind of OK 
with a maximally sort of risk 

500
00:26:57,400 --> 00:27:02,040
averse version of their AML 
slash KYC policies because it 

501
00:27:02,040 --> 00:27:06,000
turns out that you know, sort of
tightening the dial on AML slash

502
00:27:06,000 --> 00:27:11,120
KYC improves their metrics with 
regards to operational losses 

503
00:27:11,120 --> 00:27:15,160
and fraud losses by the way is 
another thing like independent 

504
00:27:15,160 --> 00:27:18,800
of any. 
So obviously nobody is in favor 

505
00:27:18,800 --> 00:27:21,280
of tax fraud and nobody is in 
favor of terrorism. 

506
00:27:21,360 --> 00:27:26,360
Goes kind of without saying. 
But AML, KYC don't only impact 

507
00:27:26,440 --> 00:27:28,840
tax fraud and terrorism. 
And in fact, they probably 

508
00:27:28,920 --> 00:27:32,040
impact those a little bit less 
than the drafters of the 

509
00:27:32,040 --> 00:27:36,720
policies think. 
But they the notion that like 

510
00:27:36,720 --> 00:27:41,160
every credit card has a, you 
know, an identity attested to 

511
00:27:41,160 --> 00:27:44,360
with like some degree of 
credence to it causes having a 

512
00:27:44,360 --> 00:27:48,480
credit card to be an excellent 
risk signal for a variety of 

513
00:27:48,480 --> 00:27:49,760
businesses throughout the 
Academy. 

514
00:27:50,000 --> 00:27:53,440
Whether that is a e-commerce 
merchant that is sending you a 

515
00:27:53,440 --> 00:27:56,240
PlayStation Five in the mail or 
whether it's a hotel that you're

516
00:27:56,240 --> 00:27:59,600
checking into which is trying to
like run a process on every 

517
00:27:59,600 --> 00:28:02,280
customer that checks in. 
Are you going to be the one who,

518
00:28:02,280 --> 00:28:06,960
like you know, invites in a 
prostitute and then sets the bed

519
00:28:06,960 --> 00:28:11,360
on fire and, like you coming up 
with a credit card and checking 

520
00:28:11,360 --> 00:28:14,480
to the hotel, says fairly 
persuasively to most hotels on 

521
00:28:14,480 --> 00:28:17,480
the basis of a whole lot of 
historical evidence that this 

522
00:28:17,480 --> 00:28:19,320
will not be the person that 
burns the hotel down? 

523
00:28:19,480 --> 00:28:22,400
We're watching the collapse of 
regional banking or we did see a

524
00:28:22,400 --> 00:28:26,720
minor, minor, no, not minor 
significant collapse of regional

525
00:28:26,720 --> 00:28:30,080
banking in the United States 
with First Republic Silicon 

526
00:28:30,080 --> 00:28:32,320
Valley Bank. 
We saw Silvergate go under, We 

527
00:28:32,320 --> 00:28:36,480
saw signature. 
It seems like this hasn't quite 

528
00:28:36,920 --> 00:28:40,360
finished yet, that they're still
going to be more banks that 

529
00:28:40,360 --> 00:28:44,240
suffer more banks that come to 
the same realizations that maybe

530
00:28:44,240 --> 00:28:50,440
they've got a balance mismatch. 
And I'm just wondering if you 

531
00:28:50,440 --> 00:28:54,160
think that could change the the 
fact that there could be a shift

532
00:28:54,160 --> 00:28:57,280
in community banking services 
and regional banking services in

533
00:28:57,280 --> 00:28:59,080
the United States in the next 
few years? 

534
00:28:59,480 --> 00:29:02,000
Do you think that could alter 
payment processing services? 

535
00:29:02,080 --> 00:29:04,960
They're supposed to be the 
concrete what we actually expect

536
00:29:04,960 --> 00:29:07,720
to see in the United States 
spool out over the next couple 

537
00:29:07,720 --> 00:29:09,640
of years version of this. 
And then there's also kind of 

538
00:29:09,680 --> 00:29:13,200
like the if everyone were a 
spherical cows like we have in 

539
00:29:13,200 --> 00:29:14,840
physics classes, what would you 
expect? 

540
00:29:16,040 --> 00:29:20,760
The spherical cows version is 
that society, society ultimately

541
00:29:20,760 --> 00:29:23,200
has goals for the structure of 
the banking system. 

542
00:29:23,880 --> 00:29:27,240
One of the goals for the United 
States having such a vibrant 

543
00:29:27,240 --> 00:29:33,240
community banking sector is that
it helps bank the, oh, I forget 

544
00:29:33,240 --> 00:29:37,120
the numbers off the top of my 
head, plus or minus like 50% of 

545
00:29:37,120 --> 00:29:39,680
the United States who lives 
outside of a major metropolitan 

546
00:29:39,680 --> 00:29:41,320
area. 
That might actually be like 20 

547
00:29:41,320 --> 00:29:46,680
or 30% but helps them get access
to a local point of presence for

548
00:29:46,680 --> 00:29:50,840
the financial system and through
their government which 

549
00:29:50,840 --> 00:29:52,680
interfaces with them through the
financial system. 

550
00:29:52,880 --> 00:29:56,240
When I when I say that kind of 
glibly that means like you know 

551
00:29:56,240 --> 00:29:58,600
your bank is the place where you
pay taxes and your bank is the 

552
00:29:58,600 --> 00:30:01,320
place where you get government 
benefits, taxes etcetera, 

553
00:30:01,320 --> 00:30:05,440
etcetera. 
I'd say it is another branch of 

554
00:30:05,440 --> 00:30:07,200
government in all but name in a 
lot of ways. 

555
00:30:07,280 --> 00:30:10,040
Historically, it was broadly 
believed that if there was not a

556
00:30:10,040 --> 00:30:13,280
physical bank branch within a 
reasonable travel distance from 

557
00:30:13,280 --> 00:30:17,600
your house or workplace that 
that was a bug the system should

558
00:30:17,600 --> 00:30:20,240
fix in the same way that the 
system, you know, the United 

559
00:30:20,240 --> 00:30:22,240
States of America decided as a 
policy priority. 

560
00:30:22,840 --> 00:30:24,960
We don't care where you live in 
the United States of America, 

561
00:30:25,040 --> 00:30:27,280
you are going to get a phone 
line and you are going to get 

562
00:30:27,280 --> 00:30:30,200
electricity because the standard
of living that we expect for 

563
00:30:30,200 --> 00:30:33,520
Americans will in the future 
include a phone line in 

564
00:30:33,520 --> 00:30:35,200
electricity. 
And that happened in people's 

565
00:30:35,200 --> 00:30:38,080
living memory, by the way. 
They'd be very old at the 

566
00:30:38,080 --> 00:30:41,560
moment, but the real electric 
Patient Rural Electrification 

567
00:30:41,560 --> 00:30:44,760
Act, there are some people who 
were alive before the passing of

568
00:30:44,760 --> 00:30:47,200
that act. 
What if it is not actually true 

569
00:30:47,200 --> 00:30:50,240
about the world that we need a 
physical bank branch around you 

570
00:30:50,240 --> 00:30:52,800
to give you banking or bank like
services? 

571
00:30:53,000 --> 00:30:55,880
What if that can be delivered 
more efficiently through the 

572
00:30:55,880 --> 00:30:58,320
Internet? 
What if the thing that people 

573
00:30:58,320 --> 00:31:02,480
have wanted for forever and the 
advocacy space, postal banking. 

574
00:31:02,480 --> 00:31:05,720
Let's put a bank in every post 
office can be delivered much 

575
00:31:05,720 --> 00:31:07,280
more efficiently. 
Let's just put a bank in every 

576
00:31:07,280 --> 00:31:12,160
iPhone and every Android, and 
that will be like the basic bank

577
00:31:12,160 --> 00:31:16,240
account available to people. 
And they can later on like more 

578
00:31:16,240 --> 00:31:18,600
complicated banking services, 
potentially including a branch 

579
00:31:18,600 --> 00:31:21,040
if they want them. 
But from a perspective of like 

580
00:31:21,240 --> 00:31:24,320
the bare minimum thing you need 
to exist in a society exists on 

581
00:31:24,320 --> 00:31:29,520
every phone, I think that that 
in, you know, a spherical world 

582
00:31:29,720 --> 00:31:32,240
is like a very reasonable thing 
to expect that most banking, 

583
00:31:33,160 --> 00:31:36,120
particularly at the lower ends, 
is going to be intermediated by 

584
00:31:36,120 --> 00:31:39,520
various players like, for 
example, cash app, which cash 

585
00:31:39,520 --> 00:31:41,960
app is not a bank. 
I'd be a very bad financial 

586
00:31:41,960 --> 00:31:43,560
technologist to I said Cash App 
is a bank. 

587
00:31:44,040 --> 00:31:46,440
Let's say Cash App is from the 
perspective of an 

588
00:31:46,440 --> 00:31:49,240
unsophisticated consumer of 
banking services, a whole lot 

589
00:31:49,240 --> 00:31:51,760
like a bank if you squint at it.
That isn't criticism by the way.

590
00:31:51,760 --> 00:31:54,240
I think Cash App is a wonderful 
thing to exist in the world that

591
00:31:54,240 --> 00:31:56,440
that it's probably one of the 
best things in the technology 

592
00:31:56,440 --> 00:31:57,920
industry has shipped in the last
20 years. 

593
00:31:58,040 --> 00:32:00,760
I don't work for Square or Block
or whatever they call themselves

594
00:32:00,760 --> 00:32:04,640
these days and never have. 
They're just that existing like 

595
00:32:04,640 --> 00:32:06,840
2 thumbs up guys. 
Now let's talk about, like in 

596
00:32:06,840 --> 00:32:08,840
the world we actually live in, 
what will happen over the next 

597
00:32:08,840 --> 00:32:10,960
couple of years. 
Community banks aren't going 

598
00:32:10,960 --> 00:32:12,440
away. 
Regional banks aren't going 

599
00:32:12,440 --> 00:32:15,360
away. 
And I do believe we're in a bit 

600
00:32:15,360 --> 00:32:17,960
of a banking crisis at the at 
the moment. 

601
00:32:19,040 --> 00:32:21,920
Banking crisis crises are not 
good things for the world. 

602
00:32:22,680 --> 00:32:25,840
Nobody should celebrate them. 
But this one seems to be less 

603
00:32:25,840 --> 00:32:28,920
severe in scope than previous 
ones that we have weathered and 

604
00:32:28,920 --> 00:32:32,320
you know come out the other side
as a nation slash economy sort 

605
00:32:32,320 --> 00:32:38,800
of addition to issues such as 
the you know retail facing 

606
00:32:38,800 --> 00:32:42,120
experience for like basic 
payments and you need some place

607
00:32:42,120 --> 00:32:46,160
that isn't your mattress to hold
money based off often sorry. 

608
00:32:46,280 --> 00:32:50,080
They also have a very important 
credit creation and monetary 

609
00:32:50,080 --> 00:32:54,280
creation function inside the 
United States economy And those 

610
00:32:54,280 --> 00:32:56,520
functions aren't going away and 
they can't conveniently be 

611
00:32:56,520 --> 00:32:58,560
substituted by any other player 
at the moment. 

612
00:32:59,000 --> 00:33:03,120
So you know every apartment 
building, every dentist office 

613
00:33:03,120 --> 00:33:05,000
etcetera, there is a capital 
stack behind that. 

614
00:33:05,000 --> 00:33:08,840
And that capital stack in almost
all places outside the big 

615
00:33:08,840 --> 00:33:12,760
cities for almost all buildings 
materially involves community 

616
00:33:12,760 --> 00:33:17,280
banks or regional banks. 
And it would be a catastrophic 

617
00:33:17,280 --> 00:33:19,320
outcome for the United States of
America if that was not true 

618
00:33:19,320 --> 00:33:21,960
because of the way that we have 
our banking system set up. 

619
00:33:22,520 --> 00:33:26,480
Now again there are many 
equilibriums that you can, you 

620
00:33:26,480 --> 00:33:28,440
know, imagine different 
countries falling into in the 

621
00:33:28,440 --> 00:33:30,160
world. 
Like if we look over at our 

622
00:33:30,160 --> 00:33:33,800
friends in the UK, the UK is in 
a lot of ways a New York period 

623
00:33:33,800 --> 00:33:37,200
to the United States and the UK 
has like basically four banks 

624
00:33:37,200 --> 00:33:40,560
and they're cool with that. 
And you know that's one way to 

625
00:33:40,560 --> 00:33:43,960
do it. 
Japan has a system that is 

626
00:33:43,960 --> 00:33:47,480
closer to the United States in 
character in that there are sort

627
00:33:47,480 --> 00:33:51,160
of like large money center banks
and also smaller community 

628
00:33:51,160 --> 00:33:54,080
focused institutions. 
But these, quote UN quote, small

629
00:33:54,160 --> 00:33:56,400
community focused institutions 
are much larger than they are in

630
00:33:56,400 --> 00:33:58,840
the United States and they're 
far less numerous on a per 

631
00:33:58,840 --> 00:34:04,000
population basis. 
But you know these are multiple 

632
00:34:04,000 --> 00:34:07,720
equilibriums that we ended up in
due to a variety of like 

633
00:34:08,000 --> 00:34:11,880
straight up geographic factors, 
due to historical factors, due 

634
00:34:12,280 --> 00:34:13,719
to this path dependence that 
we're on. 

635
00:34:14,120 --> 00:34:17,280
And the transition the United 
States would have to undergo to 

636
00:34:17,280 --> 00:34:21,280
go from having more than 6000 
financial institutions to having

637
00:34:21,520 --> 00:34:25,679
like, let's say 200 financial 
institutions would be basically 

638
00:34:25,679 --> 00:34:28,520
cataclysmic and unthinkable. 
So I don't expect 

639
00:34:28,760 --> 00:34:31,480
cataclysmically unthinkable 
things to happen in the course 

640
00:34:31,480 --> 00:34:34,560
of the next 5-10 twenty years. 
The thing I hope to kind of get 

641
00:34:34,560 --> 00:34:38,040
at with this episode is. 
Why? 

642
00:34:38,199 --> 00:34:41,679
Cryptocurrencies, at least 
generally, don't solve most of 

643
00:34:41,679 --> 00:34:43,639
the problems people have with 
payments. 

644
00:34:43,880 --> 00:34:46,560
And I think what I've been 
hearing from you over these last

645
00:34:46,560 --> 00:34:51,000
30 minutes is that most of our 
payments infrastructure is built

646
00:34:51,000 --> 00:34:55,360
around managing the trust of 
various actors in this entity 

647
00:34:55,679 --> 00:34:58,200
and making sure that things 
behave in a. 

648
00:34:59,080 --> 00:35:02,840
Repeatable way that is 
reasonably acceptable to most of

649
00:35:02,840 --> 00:35:06,040
the participants in the system. 
As we've been going over that, 

650
00:35:06,040 --> 00:35:11,160
it has just been reiterating in 
my mind how different that is 

651
00:35:11,160 --> 00:35:13,640
from the goal of like 
cryptocurrency is a payment 

652
00:35:13,640 --> 00:35:16,120
method. 
All of this infrastructure 

653
00:35:16,120 --> 00:35:19,040
you're talking about isn't 
really about transferring the 

654
00:35:19,040 --> 00:35:21,680
actual dollars from point A to 
point B, at least. 

655
00:35:22,680 --> 00:35:24,600
Most of the stuff built on top 
of it isn't. 

656
00:35:24,600 --> 00:35:27,120
It's about managing the 
expectations about everyone who 

657
00:35:27,120 --> 00:35:31,520
needs those dollars or has them.
And cryptocurrency people always

658
00:35:31,520 --> 00:35:35,800
focus on the actual transfer and
specifically focus on trying to 

659
00:35:35,800 --> 00:35:41,200
make that a transfer that can 
happen to anyone, like at any 

660
00:35:41,200 --> 00:35:44,640
time, for no reason. 
And I think what's becoming 

661
00:35:44,640 --> 00:35:46,840
clear to me as you're talking 
through to this or becoming more

662
00:35:46,840 --> 00:35:50,160
clear to me is. 
How often that would fail for 

663
00:35:50,160 --> 00:35:53,240
most payments use cases. 
You were discussing the example 

664
00:35:53,240 --> 00:35:56,040
with the grocery store, and just
a normal person trying to buy a 

665
00:35:56,040 --> 00:35:59,600
card of groceries discovered the
card of groceries was not up to 

666
00:35:59,600 --> 00:36:02,240
their satisfaction for whatever 
reasons. 

667
00:36:02,640 --> 00:36:05,840
In a world where cryptocurrency 
is the default payment method 

668
00:36:05,960 --> 00:36:08,480
and you're using it in the way 
most crypto advocates would 

669
00:36:08,480 --> 00:36:10,920
expect. 
You don't have that option to 

670
00:36:10,920 --> 00:36:13,440
call the 1800 number. 
You need to go back to the 

671
00:36:13,440 --> 00:36:16,240
grocery store and try to 
convince them they should give 

672
00:36:16,240 --> 00:36:19,000
you your money back. 
So what it really looks like to 

673
00:36:19,000 --> 00:36:22,360
me in a lot of ways is 
cryptocurrency. 

674
00:36:22,360 --> 00:36:27,280
People saw one of the problems 
of the financial system, meaning

675
00:36:27,280 --> 00:36:31,480
that sometimes these entities 
slow payments, stop payments or 

676
00:36:31,480 --> 00:36:34,720
will not allow you to be one of 
their users who makes payments. 

677
00:36:35,240 --> 00:36:39,600
And decided that that was the 
largest problem in payments 

678
00:36:39,600 --> 00:36:43,280
instead about solving that and 
assuming once that was solved 

679
00:36:43,280 --> 00:36:46,160
everything else was solved. 
Does that match up with kind of 

680
00:36:46,160 --> 00:36:49,880
the tension you see between what
crypto advocates think is wrong 

681
00:36:49,880 --> 00:36:52,440
with payments and in your 
experience, what is actually 

682
00:36:52,440 --> 00:36:54,640
wrong with payments? 
I tend to think people think 

683
00:36:55,200 --> 00:36:59,320
that I deserve more trust than I
have, so you shouldn't take my 

684
00:36:59,320 --> 00:37:01,040
point of view as gospel on this 
one. 

685
00:37:01,480 --> 00:37:04,720
Like, I don't like McDonald's 
burgers flat out. 

686
00:37:05,120 --> 00:37:07,800
I would do many things to avoid 
eating at a McDonald's burger. 

687
00:37:08,040 --> 00:37:11,080
But we, you know, we can observe
the universe outside of us and 

688
00:37:11,080 --> 00:37:13,720
see that a lot of people like 
McDonald's burgers for a lot of 

689
00:37:13,720 --> 00:37:16,680
purposes. 
Now we can observe the universe 

690
00:37:16,680 --> 00:37:19,880
of crypto payments which exist 
in like crypto. 

691
00:37:19,880 --> 00:37:22,680
People have been saying, yeah, 
adoption is coming any year now 

692
00:37:22,680 --> 00:37:26,960
for about 10 years and you know,
buy now, pay later could say the

693
00:37:26,960 --> 00:37:28,520
same thing and yet buy now, pay 
later. 

694
00:37:28,520 --> 00:37:30,880
Like you can actually use that 
to pay for stuff to separate. 

695
00:37:30,880 --> 00:37:34,600
If you walk into separate today,
you can't use Dodge Coin. 

696
00:37:34,600 --> 00:37:36,760
You can't use USDC, etcetera, 
etcetera. 

697
00:37:37,040 --> 00:37:39,480
Why is the market telling 
crypto? 

698
00:37:39,560 --> 00:37:41,880
Thanks for this cool, slow 
database. 

699
00:37:42,240 --> 00:37:44,120
It doesn't solve problems for 
me. 

700
00:37:44,240 --> 00:37:46,480
I will not put it on my payments
website. 

701
00:37:46,480 --> 00:37:50,600
I will not use it to transact 
with Google, with Delta, with 

702
00:37:50,600 --> 00:37:53,320
Hilton, with all the other, with
McDonald's, with all the other 

703
00:37:53,320 --> 00:37:57,480
businesses I transact with. 
Because crypto, kind of like 

704
00:37:57,480 --> 00:38:01,440
maniacally focuses on that 
settlement part of the payment 

705
00:38:01,440 --> 00:38:04,800
experience and not on the many, 
many other things that payments 

706
00:38:04,800 --> 00:38:07,920
have brings to the table. 
Some of those are about money 

707
00:38:07,920 --> 00:38:11,160
movement. 
Frequently payments is bundled 

708
00:38:11,160 --> 00:38:14,400
with things that are not 
directly about money movement or

709
00:38:14,400 --> 00:38:16,720
the software and contracts that 
make money movement go. 

710
00:38:17,480 --> 00:38:23,920
And so a pitch from the credit 
card companies to every other 

711
00:38:24,000 --> 00:38:28,640
user in the ecosystem since time
immemorial has been The reason 

712
00:38:28,640 --> 00:38:32,520
you pay for credit cards is not 
simply a convenience fee for 

713
00:38:32,520 --> 00:38:35,200
getting cash from their pocket 
into your pocket. 

714
00:38:35,480 --> 00:38:39,280
It is because if people use our 
plastic, the people that come in

715
00:38:39,280 --> 00:38:42,680
burying our plastic will be the 
most desirable customers, and 

716
00:38:42,680 --> 00:38:45,560
they will spend more money on 
our plastic than they would if 

717
00:38:45,560 --> 00:38:48,680
they were using something else. 
And since you prefer more money 

718
00:38:48,680 --> 00:38:51,280
to less money, you should be 
willing to pay a convenience fee

719
00:38:51,280 --> 00:38:54,400
for that, just like you're 
willing to pay for, for example,

720
00:38:54,440 --> 00:38:57,960
advertising. 
And the thing that many people 

721
00:38:57,960 --> 00:38:59,920
don't appreciate is like 
different credit cards have 

722
00:38:59,920 --> 00:39:02,200
different prices for different 
businesses in the economy. 

723
00:39:02,560 --> 00:39:05,840
So for example, if you use not 
an endorsement, et cetera, et 

724
00:39:05,840 --> 00:39:08,320
cetera, not using any private 
information, if you use the 

725
00:39:08,320 --> 00:39:11,840
Chase Sapphire Reserve. 
Chase Sapphire Reserve is like 

726
00:39:11,840 --> 00:39:14,440
sort of the credit card of 
choice for you know 

727
00:39:14,720 --> 00:39:16,360
professionals in the Bay Area. 
Why? 

728
00:39:16,440 --> 00:39:18,120
Because they give a lot of 
points and are very nice to 

729
00:39:18,120 --> 00:39:20,040
their customers. 
Creating the Chase Sapphire 

730
00:39:20,040 --> 00:39:23,960
Reserve required chase to get in
touch with I believe Visa and 

731
00:39:23,960 --> 00:39:28,000
say look you've got existing 
tiers for like different Visa 

732
00:39:28,000 --> 00:39:29,880
cards and they get more 
expensive for businesses. 

733
00:39:29,880 --> 00:39:32,440
You go up in tiers. 
We need an entirely new tier 

734
00:39:32,440 --> 00:39:35,680
because we're bringing an 
entirely new, like Primo 

735
00:39:35,680 --> 00:39:37,320
experience to the Visa 
ecosystem. 

736
00:39:38,160 --> 00:39:40,920
And that tier is like materially
more. 

737
00:39:40,920 --> 00:39:43,800
It's like I can't remember how 
many basis points it is, but 

738
00:39:43,800 --> 00:39:46,560
that is Google and it's like 60 
basis points. 

739
00:39:46,560 --> 00:39:51,760
So 6/10 of a percent or 1% more 
expensive for businesses to take

740
00:39:51,840 --> 00:39:54,760
a Chase Sapphire Reserve then 
take the next tier of Chase 

741
00:39:54,760 --> 00:39:57,120
card. 
Why? 

742
00:39:57,520 --> 00:40:00,560
Because like they successfully 
got into hands of a bunch of 

743
00:40:00,560 --> 00:40:03,240
rich people in New York and San 
Francisco and many other places.

744
00:40:03,240 --> 00:40:06,720
And when those people like pull 
out the the card at the top of 

745
00:40:06,720 --> 00:40:08,120
their wallet, they spend a lot 
of money. 

746
00:40:08,120 --> 00:40:10,680
And businesses like transacting 
with rich people for a lot of 

747
00:40:10,680 --> 00:40:12,920
money and that is the thing that
can be bought and sold in the 

748
00:40:12,920 --> 00:40:14,680
economy. 
I don't know that I realized 

749
00:40:14,680 --> 00:40:17,960
that before today that like 
credit card fees were different 

750
00:40:17,960 --> 00:40:20,320
for different tiers of credit 
cards because normally when I've

751
00:40:20,320 --> 00:40:22,200
been seeing it, it's abstracted 
away, right? 

752
00:40:22,200 --> 00:40:24,840
I'm looking at say Stripes 
example and they're charging 

753
00:40:24,880 --> 00:40:30,120
2.9% + 30 cents or whatever, but
that then is like an aggregate 

754
00:40:30,120 --> 00:40:32,920
with their margin based on like 
the distribution of fees they're

755
00:40:32,920 --> 00:40:35,960
paying to the credit card 
networks specifically. 

756
00:40:36,200 --> 00:40:39,440
A good like heuristic for for 
thinking about is that this is 

757
00:40:39,440 --> 00:40:40,840
like, what is the price of 
coffee? 

758
00:40:41,320 --> 00:40:44,120
Well, coffee is like $0.25 if 
you buy it at a diner, or it's 

759
00:40:44,120 --> 00:40:45,560
free if you get it on an 
airplane. 

760
00:40:45,560 --> 00:40:47,840
Or it's like $6 if you get it 
from a Starbucks. 

761
00:40:48,520 --> 00:40:50,960
But if you buy like 50 gallons 
from Starbucks at a time, they 

762
00:40:50,960 --> 00:40:53,520
will cut you a deal. 
But if you buy those 50 gallons 

763
00:40:53,520 --> 00:40:57,080
in the specific context of, you 
know, delivering them to a hotel

764
00:40:57,080 --> 00:40:59,560
event space, it will suddenly 
cost you like five times more 

765
00:40:59,560 --> 00:41:01,440
than Starbucks would have 
charged you. 

766
00:41:01,440 --> 00:41:04,400
And this is all just like built 
into those various commercial 

767
00:41:04,400 --> 00:41:05,960
relationships and ways to deploy
it. 

768
00:41:06,120 --> 00:41:09,240
So what is the underlying cost 
of, like, charging a credit 

769
00:41:09,240 --> 00:41:10,640
card? 
Well, it kind of depends like 

770
00:41:11,040 --> 00:41:13,560
you know who you are in the 
economy, what sort of 

771
00:41:13,560 --> 00:41:15,880
relationship you have, what 
other things are getting bundled

772
00:41:15,880 --> 00:41:18,960
into that transaction. 
If you are Walmart, you don't 

773
00:41:18,960 --> 00:41:22,520
pay the same amount for charging
even a Chase Sapphire reserve As

774
00:41:22,560 --> 00:41:24,640
for example. 
I do if someone uses that to buy

775
00:41:24,640 --> 00:41:28,000
my newsletter. 
And partly that's due to like 

776
00:41:28,040 --> 00:41:29,600
different levels of negotiating 
power. 

777
00:41:29,880 --> 00:41:33,000
Partly that's due to things like
you know providing financial 

778
00:41:33,000 --> 00:41:35,880
services and involves like a 
variety of different goods like 

779
00:41:35,880 --> 00:41:40,680
you know you need a 24/7 phone 
team and OPS team etcetera, 

780
00:41:40,680 --> 00:41:42,280
etcetera. 
And it's difficult to bill for 

781
00:41:42,280 --> 00:41:46,320
those things directly. 
And the economy went away from a

782
00:41:46,320 --> 00:41:49,280
model in which most. 
That company said, OK, it starts

783
00:41:49,280 --> 00:41:53,480
like it's $100 a month for your 
basic card, basic charge to get 

784
00:41:53,480 --> 00:41:55,880
hooked up to international 
financial rails and then we 

785
00:41:55,880 --> 00:42:01,680
charge you like a per percentage
fee and mostly with like some 

786
00:42:01,680 --> 00:42:03,160
holdouts. 
The financial system has said 

787
00:42:03,160 --> 00:42:07,720
actually like that $100 a month.
We're going to absorb that and 

788
00:42:07,720 --> 00:42:09,800
you know we will, we will pay 
for the OPS team, we'll pay for 

789
00:42:09,800 --> 00:42:11,680
the customer support people 
etcetera, etcetera. 

790
00:42:11,920 --> 00:42:14,960
We will adjust our our 
percentage rates in various 

791
00:42:14,960 --> 00:42:19,200
places. 
To be to like have the entire 

792
00:42:19,200 --> 00:42:21,800
business work off of 
transactional fees or software 

793
00:42:21,800 --> 00:42:24,760
fees or et cetera, et cetera. 
That pricing story would be an 

794
00:42:24,880 --> 00:42:27,440
entirely different podcast, 
hopefully by an entirely 

795
00:42:27,440 --> 00:42:29,520
different person who isn't 
constrained by having like 

796
00:42:29,520 --> 00:42:32,960
written so many documents about 
it but say useful thing no in 

797
00:42:32,960 --> 00:42:37,480
the world by the way. 
So probably not new information 

798
00:42:37,480 --> 00:42:39,840
for you, but will be new for 
many of your listeners. 

799
00:42:39,840 --> 00:42:42,600
The. 
There is a greatly different 

800
00:42:42,600 --> 00:42:45,480
cost in the cost to process 
credit cards versus the cost to 

801
00:42:45,480 --> 00:42:48,840
process debit cards. 
And that was created largely due

802
00:42:48,840 --> 00:42:52,960
to financial regulation in the 
wake of the 2008 banking crisis.

803
00:42:53,280 --> 00:42:54,880
More or less. 
And I don't know if this would 

804
00:42:54,880 --> 00:42:58,360
be endorsed by many other people
as a way of saying, darn it, 

805
00:42:58,360 --> 00:43:02,440
Banks, you screwed up, we're 
going to hit you back as a 

806
00:43:02,440 --> 00:43:03,760
result of that. 
And again. 

807
00:43:04,240 --> 00:43:07,720
And when you know our electric 
representatives were saying 

808
00:43:07,720 --> 00:43:10,360
banks you screwed up, we are 
going to like punch you in the 

809
00:43:10,360 --> 00:43:14,400
face and like decrease the 
amount of money that you can 

810
00:43:14,400 --> 00:43:16,400
earn from debit cards. 
The community banking 

811
00:43:16,400 --> 00:43:19,600
association put their hands up 
and said okay, you can do that 

812
00:43:19,600 --> 00:43:21,280
to Bank of America. 
You can do that to Chase. 

813
00:43:21,280 --> 00:43:25,800
They will continue existing but.
We find it extremely, extremely 

814
00:43:25,800 --> 00:43:29,320
useful to have like material 
interchange fees. 

815
00:43:29,320 --> 00:43:32,840
They're called for swiping debit
cards because that is like built

816
00:43:32,840 --> 00:43:35,520
into the cost model providing 
banking services in middle of 

817
00:43:35,520 --> 00:43:37,760
America at the moment. 
And if you take away that will 

818
00:43:37,760 --> 00:43:41,000
collapse and society, society 
wide, calamity will follow. 

819
00:43:41,600 --> 00:43:45,160
And so there was the Durban 
amendment to the legislation 

820
00:43:45,160 --> 00:43:47,640
about this, which said basically
there's a threshold. 

821
00:43:47,960 --> 00:43:50,960
Above that threshold, you are a 
big bank and you are not allowed

822
00:43:50,960 --> 00:43:53,000
to charge very much at all for 
swiping debit cards. 

823
00:43:53,240 --> 00:43:55,840
Below that threshold, you are a 
Durban exempt bank and you're 

824
00:43:55,840 --> 00:43:58,600
allowed to charge quite a bit 
for swiping debit cards. 

825
00:43:58,600 --> 00:44:01,080
And that was a choice society 
made through our elected 

826
00:44:01,080 --> 00:44:03,000
representatives. 
And the choice is not gone. 

827
00:44:03,000 --> 00:44:06,160
Consequences like if you for 
example use cash up. 

828
00:44:06,800 --> 00:44:09,800
Cash App has a debit card 
offering available. 

829
00:44:10,080 --> 00:44:12,960
I would guarantee you that that 
debit card is issued by a Durbin

830
00:44:12,960 --> 00:44:15,240
exempt bank because Cash App 
likes the idea of being paid a 

831
00:44:15,240 --> 00:44:17,080
lot of money for doing their 
debit cards. 

832
00:44:17,320 --> 00:44:22,400
And indeed if you look at almost
any fintech offering their their

833
00:44:22,400 --> 00:44:25,040
debit card will be issued by a 
Durbin exempt bank because of 

834
00:44:25,040 --> 00:44:27,400
money. 
And people like hear them and 

835
00:44:27,400 --> 00:44:30,280
think, oh that's right, 
regulatory arbitrage that nobody

836
00:44:30,280 --> 00:44:31,760
expected that to happen. 
True. 

837
00:44:31,760 --> 00:44:33,680
No one explicitly expected that 
to happen. 

838
00:44:34,160 --> 00:44:35,800
Not necessarily a bad thing 
though. 

839
00:44:35,800 --> 00:44:38,720
I mean if to the extent that we 
believe that like cash app 

840
00:44:38,720 --> 00:44:40,960
banking underbanked people 
throughout the United States or 

841
00:44:41,400 --> 00:44:43,640
I can't believe it's not. 
Banking underbanked people 

842
00:44:43,640 --> 00:44:46,560
throughout the United States 
actually provides societal value

843
00:44:46,840 --> 00:44:50,160
that like in economic model 
which makes that possible for 

844
00:44:50,160 --> 00:44:52,880
cash app to do without charging 
the end user of cash app 

845
00:44:52,880 --> 00:44:57,800
directly for it is like positive
in some respects and the like 

846
00:44:57,880 --> 00:45:02,240
flurry of additional fintech 
financial technology products. 

847
00:45:02,760 --> 00:45:06,560
That are where material part of 
the model is underwritten by 

848
00:45:07,000 --> 00:45:08,920
these Durbin exempt debit card 
charges. 

849
00:45:09,480 --> 00:45:12,520
It has provided some amount of 
you know customer perceivable 

850
00:45:12,520 --> 00:45:13,760
value in the last couple of 
years. 

851
00:45:14,280 --> 00:45:18,000
And so, you know, if you were 
hypothetically A regulator or a 

852
00:45:19,200 --> 00:45:22,520
the staff at a congressional 
office looking at like, oh, 

853
00:45:22,520 --> 00:45:24,840
there's this. 
Like weird little thing that 

854
00:45:24,840 --> 00:45:29,000
happened in the Durban amendment
to this legislation back in the 

855
00:45:29,000 --> 00:45:32,200
day, which seems to have these 
like huge knock on consequences 

856
00:45:32,440 --> 00:45:35,360
that weren't intended. 
Should we maybe like poke at 

857
00:45:35,360 --> 00:45:37,640
that a little bit? 
Like you'd have to understand 

858
00:45:37,640 --> 00:45:38,360
that. 
OK, that. 

859
00:45:40,280 --> 00:45:43,360
Due to this past dependence, 
that has also created like a 

860
00:45:43,360 --> 00:45:46,480
huge amount of things that are 
now hanging off that amendment 

861
00:45:46,720 --> 00:45:51,440
and like just mixing it, would 
cause consequences in the real 

862
00:45:51,440 --> 00:45:53,400
world. 
You brought up like a Chase 

863
00:45:53,480 --> 00:45:56,520
credit card as an example of 
like, well, people in the Bay 

864
00:45:56,520 --> 00:46:00,440
Area like the specific things 
that they get with this card. 

865
00:46:00,920 --> 00:46:02,720
You know, you're talking about 
regulatory arbitrage. 

866
00:46:02,720 --> 00:46:06,600
Now I wonder if everyone doesn't
wish that they could also 

867
00:46:06,600 --> 00:46:10,960
provide those same kind of. 
Offers to their customers if 

868
00:46:10,960 --> 00:46:14,000
every bank doesn't wish that 
they could do that they're just 

869
00:46:14,000 --> 00:46:17,440
not able to. 
And I and almost like I think 

870
00:46:17,440 --> 00:46:22,200
about what happened with Silicon
Valley Bank and it's like they 

871
00:46:22,480 --> 00:46:25,720
it's almost like they were 
desperately trying to get to 

872
00:46:25,720 --> 00:46:31,160
become Chase like that was the 
end goal of of their business 

873
00:46:31,160 --> 00:46:34,120
model. 
Sort of like this idea of if we 

874
00:46:34,120 --> 00:46:38,280
just keep we just need to keep 
growing and I guess I I wonder 

875
00:46:38,280 --> 00:46:41,160
if. 
That's like if that's a pitfall 

876
00:46:41,160 --> 00:46:46,240
because then the only real 
business model for these smaller

877
00:46:46,240 --> 00:46:51,560
banks is to constantly grow and 
like is that what we want in 

878
00:46:51,560 --> 00:46:55,040
our. 
In in the the community banks, 

879
00:46:55,040 --> 00:46:59,400
in these smaller organizations 
that are supposed to be for the 

880
00:46:59,400 --> 00:47:03,720
people that they're around, the 
community that they are centered

881
00:47:03,720 --> 00:47:05,880
around, I'm a. 
Little bit constrained in what I

882
00:47:05,880 --> 00:47:08,440
can say about like any 
individual bank in the banking 

883
00:47:08,440 --> 00:47:11,840
system, partly due to, you know,
reasons of being exposed to them

884
00:47:11,920 --> 00:47:14,120
to to prior employment and 
partly due to like the 

885
00:47:14,120 --> 00:47:17,880
unfortunate social reality that 
banking is a very small world 

886
00:47:17,880 --> 00:47:19,960
when you get down to it and 
there's like probably someone 

887
00:47:19,960 --> 00:47:22,320
who is. 
Control effing all mentions of 

888
00:47:22,320 --> 00:47:24,400
their bank today and we'll send 
out nasty grams to anyone who 

889
00:47:24,400 --> 00:47:26,760
says the wrong things while 
occupying the wrong social 

890
00:47:26,760 --> 00:47:28,680
position. 
That's not a conspiracy theory 

891
00:47:28,680 --> 00:47:30,160
by the way. 
I was one of those people in 

892
00:47:30,160 --> 00:47:32,480
prior life. 
One the United States has had a 

893
00:47:32,480 --> 00:47:35,560
number of bank failures in the 
course of 2023. 

894
00:47:35,760 --> 00:47:38,800
The banks that failed were 
largely not community based. 

895
00:47:38,800 --> 00:47:40,760
They were largely not tiny 
institutions. 

896
00:47:40,760 --> 00:47:42,960
That bank grandma and the Little
League team. 

897
00:47:43,600 --> 00:47:47,480
They were large regional banks 
with 1/2 exceptions. 

898
00:47:48,920 --> 00:47:52,760
That would, on a global scale, 
be among the largest banks in 

899
00:47:52,760 --> 00:47:56,560
the world. 
And you know some banks prefer 

900
00:47:56,560 --> 00:47:59,120
growth there. 
Many large, sophisticated 

901
00:47:59,120 --> 00:48:01,160
businesses prefer growing versus
not growing. 

902
00:48:01,200 --> 00:48:04,560
Financial regulators and bank 
CEOs at community banks would 

903
00:48:04,560 --> 00:48:09,040
say that they prefer measured 
studies, sustainable growth, and

904
00:48:09,040 --> 00:48:12,120
that growth which is not 
measured or steady is likely 

905
00:48:12,120 --> 00:48:14,760
unsustainable and likely 
concealed risk for the banking 

906
00:48:14,760 --> 00:48:17,200
system. 
And so you know that should be 

907
00:48:17,200 --> 00:48:21,960
dis preferred smarter people 
than me will look at the actions

908
00:48:21,960 --> 00:48:23,880
that regulators took over the 
last couple of years with 

909
00:48:23,880 --> 00:48:28,400
respect to some banks that are 
no longer with us and say was 

910
00:48:28,400 --> 00:48:31,480
there an identifiable person in 
an identifiable office who could

911
00:48:31,480 --> 00:48:33,880
have made certain identifiable 
choices that are different that 

912
00:48:33,880 --> 00:48:36,480
would have resulted in like the 
United States having a different

913
00:48:36,480 --> 00:48:39,280
number of banks in 2023 than it 
factually does and. 

914
00:48:39,920 --> 00:48:42,600
Maybe some of some decisions 
that were made in prior years 

915
00:48:43,000 --> 00:48:47,160
will be, you know, rethought in 
that light script of euphemism. 

916
00:48:48,200 --> 00:48:50,040
There was a bit of failure to go
around there. 

917
00:48:50,040 --> 00:48:52,520
There are banking management 
teams that did not apparently do

918
00:48:52,520 --> 00:48:53,840
a great job of banking 
management. 

919
00:48:54,120 --> 00:48:58,360
There are banking supervisors 
who should not be captured by 

920
00:48:58,360 --> 00:49:00,240
banking management. 
That's the entire point of being

921
00:49:00,240 --> 00:49:05,720
a supervisor who did not do a 
very good, good job by society's

922
00:49:05,720 --> 00:49:08,920
lights, with respect to, you 
know, the goals that we have. 

923
00:49:09,600 --> 00:49:11,560
And we were. 
We required extraordinary 

924
00:49:11,560 --> 00:49:16,400
intervention to ameliorate the 
societal fallout of failures of 

925
00:49:16,400 --> 00:49:19,120
banking supervision. 
Also failures by, you know, the 

926
00:49:19,120 --> 00:49:20,560
banking teams, the risk 
departments. 

927
00:49:20,560 --> 00:49:23,760
Yeah, yeah, yeah. 
There's also like external to 

928
00:49:23,760 --> 00:49:25,320
banking supervisors and the 
banks. 

929
00:49:25,560 --> 00:49:29,080
Can one look at the Fed and say,
hey, we understand that it is a 

930
00:49:29,080 --> 00:49:33,040
important societal goal to get 
inflation under control? 

931
00:49:33,040 --> 00:49:36,880
Because obviously Americans, as 
of many people worldwide have 

932
00:49:36,880 --> 00:49:39,120
been really feeling in the 
pension, the pocketbook the last

933
00:49:39,120 --> 00:49:40,720
couple of years. 
So that's important. 

934
00:49:41,400 --> 00:49:44,880
However, you also must not 
collapse the banking system 

935
00:49:44,880 --> 00:49:48,080
while you are doing this. 
And if you look at the written 

936
00:49:48,080 --> 00:49:51,600
record, we told you that if you 
keep moving rates up very, very 

937
00:49:51,600 --> 00:49:54,240
quickly, you will collapse the 
banking system. 

938
00:49:54,920 --> 00:49:56,680
Do you remember reading those 
documents? 

939
00:49:57,760 --> 00:50:01,120
And that, like smarter people 
than us will have, will have to 

940
00:50:01,120 --> 00:50:03,280
have those discussions. 
But society does have to have 

941
00:50:03,280 --> 00:50:05,840
those discussions at some level.
I know you can't speak to 

942
00:50:05,840 --> 00:50:07,640
specific banks. 
I'm not going to ask you to. 

943
00:50:07,920 --> 00:50:09,920
I know Cass can't speak to 
specific banks. 

944
00:50:09,920 --> 00:50:13,920
I might ask him one like 
specific bank that we have 

945
00:50:13,920 --> 00:50:17,280
covered was Farmington State 
Bank up in Washington state. 

946
00:50:17,440 --> 00:50:20,880
And this was a small local bank.
Like their primary function was 

947
00:50:20,880 --> 00:50:24,880
extending credit to like farmers
in the local area who needed it 

948
00:50:24,920 --> 00:50:28,280
to fund a piece of equipment 
that had like a predictable 

949
00:50:28,280 --> 00:50:30,960
impact on their business. 
And like this bank being 

950
00:50:30,960 --> 00:50:33,600
embedded in the community was 
better able to provide that 

951
00:50:33,600 --> 00:50:39,040
services than others. 
And it was taken over by a new 

952
00:50:39,040 --> 00:50:42,800
management team who had 
ambitions to transform this 

953
00:50:42,880 --> 00:50:46,040
small community bank into 
something much grander. 

954
00:50:46,320 --> 00:50:49,240
And they believed that with the 
appropriate partners in the 

955
00:50:49,240 --> 00:50:52,600
right investment from Alameda 
Research, they would be able to 

956
00:50:52,600 --> 00:50:57,000
take this bank and the deposits 
from Alameda Research and turn 

957
00:50:57,000 --> 00:51:00,720
it into like the future of 
online banking and all those 

958
00:51:00,720 --> 00:51:03,040
things. 
And so when Cass was talking 

959
00:51:03,040 --> 00:51:05,960
about banks that felt compelled 
to grow, that was of course the 

960
00:51:05,960 --> 00:51:10,120
example I was thinking about. 
And I couldn't help but think 

961
00:51:10,120 --> 00:51:13,920
about the Federal Reserve cease 
and desist letter issued to 

962
00:51:13,920 --> 00:51:16,200
Farmington State Bank A. 
Wonderful document I would 

963
00:51:16,280 --> 00:51:18,640
recommend to everyone. 
Yes. 

964
00:51:18,920 --> 00:51:22,080
Issued months after they had 
already discharged the 

965
00:51:22,080 --> 00:51:26,320
problematic deposits in question
and it already begun the process

966
00:51:26,320 --> 00:51:30,120
of being acquired by a 
different, slightly larger bank 

967
00:51:30,120 --> 00:51:33,720
in that region, the Federal 
Reserve finally got around to 

968
00:51:33,720 --> 00:51:36,640
issuing their cease and desist. 
That says, wait a second, you 

969
00:51:36,640 --> 00:51:39,560
guys did a whole bunch of things
over those years without telling

970
00:51:39,560 --> 00:51:43,480
us, well, that's not OK. 
And it was a funny document to 

971
00:51:43,480 --> 00:51:46,640
read, both because it 
highlighted how many things that

972
00:51:46,640 --> 00:51:51,480
this bank was doing that was 
apparently against the rules 

973
00:51:51,480 --> 00:51:55,560
without anyone realizing it, and
like the fact that the regulator

974
00:51:55,800 --> 00:52:00,680
didn't issue this document until
months and months after any 

975
00:52:00,680 --> 00:52:04,000
danger from Farmington's 
behavior was already passed. 

976
00:52:04,320 --> 00:52:08,440
And that tension just that case 
has always been one that's stuck

977
00:52:08,440 --> 00:52:10,320
in my mind. 
Since we've covered it, I could 

978
00:52:10,320 --> 00:52:12,400
see that you have thoughts on 
this case, Cass. 

979
00:52:12,520 --> 00:52:15,240
Well, yeah, I I want to let 
Patrick jump in here, but I I 

980
00:52:15,240 --> 00:52:17,480
just wanted to say that it's 
funny that you brought up the 

981
00:52:17,480 --> 00:52:19,840
cease and desist order because 
I. 

982
00:52:20,600 --> 00:52:22,760
I reached out to Bank of Eastern
Oregon. 

983
00:52:22,760 --> 00:52:24,080
I think that's the one that 
bought them. 

984
00:52:24,080 --> 00:52:26,160
Or Farmington got purchased by 
this bank. 

985
00:52:26,160 --> 00:52:28,640
I reached out to that bank on 
the day of the cease and desist 

986
00:52:28,640 --> 00:52:31,840
letter and. 
They basically were like, yeah, 

987
00:52:31,840 --> 00:52:33,560
well, this is no surprise. 
We knew this. 

988
00:52:33,560 --> 00:52:36,160
We knew this letter was coming. 
Yeah, it was filed like 

989
00:52:36,160 --> 00:52:39,000
explicitly with their like 
knowledge and consent or 

990
00:52:39,000 --> 00:52:41,720
whatever like it was said, as 
they've already consented to as 

991
00:52:41,720 --> 00:52:44,720
agreed by whatever. 
And I think this is my my point 

992
00:52:44,720 --> 00:52:47,600
just being that Farmington knew 
this cease and desist was coming

993
00:52:47,600 --> 00:52:49,960
as well, right. 
Like everybody intimately 

994
00:52:49,960 --> 00:52:53,920
involved with the bank itself or
the purchase of the assets of 

995
00:52:53,920 --> 00:52:57,960
the bank or, you know, whatever 
it was, whoever was intimately 

996
00:52:57,960 --> 00:53:00,400
involved. 
Knew that the cease and cease 

997
00:53:00,400 --> 00:53:02,920
and desist was coming long 
before anyone in the public did,

998
00:53:03,200 --> 00:53:07,520
which almost speaks to the weird
regulatory nature of the Federal

999
00:53:07,520 --> 00:53:11,560
Reserve where you go like so who
was this? 

1000
00:53:12,080 --> 00:53:15,600
The war, let's step back from 
the specific example of a 

1001
00:53:15,600 --> 00:53:18,400
specific, specific bank that 
might have been puppeted by a 

1002
00:53:18,400 --> 00:53:20,280
specific bank that does what 
happens. 

1003
00:53:22,000 --> 00:53:24,320
Maybe I'm letting a little too 
much show there. 

1004
00:53:24,360 --> 00:53:27,920
But back from the specific 
example and talk more broadly 

1005
00:53:27,920 --> 00:53:32,160
about banking regulation. 
So one example of like, who is 

1006
00:53:32,160 --> 00:53:35,760
this regulatory action for? 
It's like every regulatory 

1007
00:53:35,760 --> 00:53:38,440
action will have an address on 
the top of like who is supposed 

1008
00:53:38,440 --> 00:53:41,040
to, you know, get it and take 
immediate action based on it. 

1009
00:53:41,560 --> 00:53:44,760
But it's also like essentially 
CCD to every other bank in 

1010
00:53:44,760 --> 00:53:48,640
America. 
And so if your bank gets killed 

1011
00:53:48,880 --> 00:53:55,240
for misdeeds and misstatements 
that you have made the the the 

1012
00:53:55,800 --> 00:53:59,040
document ordering, the execution
of your bank that gets CCD to 

1013
00:53:59,040 --> 00:54:03,280
every other bank in America is 
basically a like a not so quiet 

1014
00:54:03,280 --> 00:54:06,560
instruction. 
Like this shit will not fly. 

1015
00:54:06,560 --> 00:54:09,800
Do not do it. 
You don't need to hear us tell 

1016
00:54:09,800 --> 00:54:11,720
you explicitly. 
Do not do it. 

1017
00:54:12,040 --> 00:54:17,440
Because if you do it, we will 
kill your bank signed the Fed 

1018
00:54:17,520 --> 00:54:19,560
and every other investigative 
agency. 

1019
00:54:19,920 --> 00:54:23,800
People have had like an 
interesting sort of background 

1020
00:54:23,800 --> 00:54:26,480
belief that like regulators are 
naturally in kind of an 

1021
00:54:26,600 --> 00:54:29,840
antagonistic relationship with a
regulated where actually they're

1022
00:54:29,840 --> 00:54:36,000
in like a quasi partnership and 
like a quasi trust relationship.

1023
00:54:36,600 --> 00:54:41,640
And a thing I said on Twitter is
that like big CE OS and Specific

1024
00:54:41,960 --> 00:54:47,360
are kind of like the the old 
British Empire sea captains in 

1025
00:54:47,360 --> 00:54:50,680
that at Sea is master and 
commander. 

1026
00:54:50,720 --> 00:54:52,840
They they have been bred into 
this role. 

1027
00:54:52,840 --> 00:54:56,840
They have the full trust of the 
government and no action of 

1028
00:54:56,840 --> 00:55:01,640
theirs on any Tuesday will be 
countermanded, however, if they 

1029
00:55:01,640 --> 00:55:04,600
screw up. 
The Empire will descend with its

1030
00:55:04,600 --> 00:55:09,840
full force upon them in a, you 
know, like let's snap your Saber

1031
00:55:09,840 --> 00:55:12,080
over our knee or etcetera, 
tribunal later. 

1032
00:55:12,200 --> 00:55:15,480
It is not factually the case 
that there is in most small 

1033
00:55:15,480 --> 00:55:18,560
institutions the regulator 
watching every e-mail or every 

1034
00:55:18,560 --> 00:55:21,400
wire or etcetera, etcetera that 
happens at the bank. 

1035
00:55:21,440 --> 00:55:23,680
They they don't have the 
resources to do that. 

1036
00:55:23,680 --> 00:55:26,080
They don't want to do that. 
The banks don't want them to do 

1037
00:55:26,080 --> 00:55:29,200
that. 
A lot of regulation is ex post 

1038
00:55:29,480 --> 00:55:32,520
and a lot of regulation, it 
involves like an ongoing 

1039
00:55:32,520 --> 00:55:37,400
dialogue with respect to you 
know, regulators like largely 

1040
00:55:37,400 --> 00:55:39,560
are above the level of 
particular commercial 

1041
00:55:39,560 --> 00:55:42,440
relationships in bank cast. 
They they expect the bank to 

1042
00:55:42,440 --> 00:55:44,480
have a portfolio of commercial 
relationships. 

1043
00:55:44,480 --> 00:55:47,240
They want to heavily inform the 
banks, thinking of how the bank 

1044
00:55:47,280 --> 00:55:50,280
assembles that portfolio and 
manages that portfolio. 

1045
00:55:51,200 --> 00:55:54,840
Versus like getting into the 
weeds of like I noticed on 

1046
00:55:55,040 --> 00:55:57,320
August 2nd that you paid out 
this money to this like 1 

1047
00:55:57,320 --> 00:55:59,080
customer. 
I'm not very happy about that 

1048
00:55:59,080 --> 00:56:00,760
payout. 
Now they will get into that 

1049
00:56:00,760 --> 00:56:05,760
level of detail, but in the 
context of a larger quarterly 

1050
00:56:05,760 --> 00:56:09,600
inspection that says Okay. 
I'm going to sample a couple of 

1051
00:56:09,600 --> 00:56:12,000
transactions from your bank and 
you're going to walk me through 

1052
00:56:12,400 --> 00:56:16,600
how this this shows that this 
plan that we've agreed upon 

1053
00:56:16,600 --> 00:56:19,480
together is getting followed on 
a day-to-day basis. 

1054
00:56:19,480 --> 00:56:23,160
And if that sampling comes 
through OK then and we're OK 

1055
00:56:23,160 --> 00:56:25,680
with this plan like EA Plus 
Plus. 

1056
00:56:25,680 --> 00:56:28,560
Or maybe we're not entirely OK 
with the plan, maybe we're not 

1057
00:56:28,560 --> 00:56:31,160
entirely OK with what we've seen
coming out of the bank in the in

1058
00:56:31,160 --> 00:56:34,360
the last couple of months. 
But we certainly don't want to 

1059
00:56:34,360 --> 00:56:36,600
kill the bank because there's a 
community dependent on you. 

1060
00:56:37,560 --> 00:56:40,920
And you haven't done anything 
that is like egregiously out of 

1061
00:56:40,920 --> 00:56:43,920
bounds yet. 
And we'll say, OK, you know, 

1062
00:56:44,120 --> 00:56:46,960
here's a like, here are some 
comments that we have. 

1063
00:56:47,880 --> 00:56:50,560
Some of those comments are like 
kind of on an optional basis and

1064
00:56:50,560 --> 00:56:51,960
maybe we'll put them in a 
spreadsheet here. 

1065
00:56:52,200 --> 00:56:55,120
And here's some like mandatory 
issues and timeline associated 

1066
00:56:55,120 --> 00:56:56,840
with them. 
We want those addressed by the 

1067
00:56:56,840 --> 00:57:00,200
mandatory timeline, like an 
example of a mandatory issue 

1068
00:57:01,200 --> 00:57:03,000
they can. 
You know, many of these records 

1069
00:57:03,000 --> 00:57:07,640
are public, but like a bank 
might be told, hey, we took a 

1070
00:57:07,640 --> 00:57:11,680
look at your Chief Risk Officer.
And that guy, that's not the 

1071
00:57:11,680 --> 00:57:16,000
guy, well you you need you need 
some you know more seasoning in 

1072
00:57:16,000 --> 00:57:18,680
your risk department. 
It takes a while to hire a chief

1073
00:57:18,680 --> 00:57:20,160
risk officer. 
We understand this. 

1074
00:57:20,840 --> 00:57:22,880
So you got nine months. 
Come back in nine months and 

1075
00:57:22,880 --> 00:57:25,000
show us more seasoning in your 
in your risk department. 

1076
00:57:25,520 --> 00:57:29,160
I'm the pain of our displeasure.
And displeasure can mean a 

1077
00:57:29,160 --> 00:57:33,440
variety of things and the like. 
You know, the nuclear option in 

1078
00:57:33,440 --> 00:57:35,760
the case of displeasure is we 
close the bank immediately. 

1079
00:57:36,440 --> 00:57:38,880
Which is what cease and desist 
letter did in that one 

1080
00:57:38,880 --> 00:57:41,480
particular case. 
And that happens very, very 

1081
00:57:41,480 --> 00:57:43,920
infrequently. 
It will happen very, very 

1082
00:57:43,920 --> 00:57:47,040
frequently if you like, 
hypothetically sell your bank to

1083
00:57:47,040 --> 00:57:51,080
an offshore crypto exchange like
and part of the like. 

1084
00:57:51,080 --> 00:57:54,000
Purpose of the cease and desist 
letter is like hey, things no 

1085
00:57:54,000 --> 00:57:58,400
bank should ever contemplate, in
case you do this spelled out 

1086
00:57:58,400 --> 00:58:00,600
explicitly. 
This would be a bad idea. 

1087
00:58:00,800 --> 00:58:03,160
Well, it's interesting that 
you're you're talking about how 

1088
00:58:03,160 --> 00:58:08,680
regulators maybe are inclined to
move in afterwards, but it's 

1089
00:58:08,680 --> 00:58:12,840
like in in and you know like you
said this it doesn't necessarily

1090
00:58:12,840 --> 00:58:15,800
have to be this bank that we're 
discussing but in this case of 

1091
00:58:15,960 --> 00:58:18,400
of Farmington and Moonstone is 
you have. 

1092
00:58:18,960 --> 00:58:21,680
A bank that according to the 
Federal Reserve, if we believe 

1093
00:58:21,680 --> 00:58:25,360
what they are suggesting, when 
they moved their regulatory 

1094
00:58:25,360 --> 00:58:29,440
oversight from the FDIC to the 
Federal Reserve, they told the 

1095
00:58:29,440 --> 00:58:31,480
Federal Reserve, look, we're not
going to change our business 

1096
00:58:31,480 --> 00:58:32,960
model. 
We're not going to do anything 

1097
00:58:32,960 --> 00:58:34,800
crazy. 
Nothing silly is going to 

1098
00:58:34,800 --> 00:58:35,920
happen. 
We promise. 

1099
00:58:36,200 --> 00:58:40,000
And then they did it anyway. 
And I guess if they're making 

1100
00:58:40,000 --> 00:58:43,440
this promise and it's the only 
promise they have to make, you 

1101
00:58:43,440 --> 00:58:46,560
would expect especially an 
entity as as. 

1102
00:58:46,880 --> 00:58:50,880
Large and important as the 
Federal Reserve to be like, OK, 

1103
00:58:50,880 --> 00:58:54,600
well let's monitor that one 
thing then, but they didn't and 

1104
00:58:54,600 --> 00:58:58,760
you you go like, OK, so is the 
only time that they do this when

1105
00:58:58,760 --> 00:59:01,400
it's too late is that is that 
really just that's the only 

1106
00:59:01,400 --> 00:59:03,080
time. 
In banking, I think that often 

1107
00:59:03,080 --> 00:59:06,960
happens is that there's various 
layered controls and the promise

1108
00:59:06,960 --> 00:59:10,000
itself is a form of control like
the. 

1109
00:59:11,040 --> 00:59:13,960
Like every contract in 
existence, you know, even if 

1110
00:59:13,960 --> 00:59:17,040
there was no legal system to 
enforce a contract, just forcing

1111
00:59:17,040 --> 00:59:19,840
people to come to the table and 
agree, this is the thing we will

1112
00:59:19,840 --> 00:59:21,560
do and this is the thing we will
not do. 

1113
00:59:21,560 --> 00:59:23,840
That creates value because 
there's now mutuality of 

1114
00:59:23,840 --> 00:59:25,800
understanding as to what the 
expectations are. 

1115
00:59:26,280 --> 00:59:29,960
And so even if a promise is not 
monitored, that promise creates 

1116
00:59:29,960 --> 00:59:31,880
value. 
Even if the promise is not later

1117
00:59:31,880 --> 00:59:33,920
for enforced, that promise 
creates value. 

1118
00:59:34,760 --> 00:59:37,280
It is factually not the case 
that this promise will not be 

1119
00:59:37,280 --> 00:59:41,280
enforced and. 
I would hate to doom cast like 

1120
00:59:41,280 --> 00:59:46,720
any particular person, but you 
know, I think that the like 

1121
00:59:46,760 --> 00:59:50,080
again using that the Master and 
Commander example, a British sea

1122
00:59:50,080 --> 00:59:53,440
captain doesn't have to be 
explicitly told the British 

1123
00:59:53,440 --> 00:59:56,200
Empire. 
Not a fan of piracy now, 

1124
00:59:56,200 --> 00:59:59,360
privateer if you wander. 
Into piracy And by the way, we 

1125
00:59:59,360 --> 01:00:01,120
will check. 
If you wander into piracy you 

1126
01:00:01,120 --> 01:00:02,760
will be dealt with most 
severely. 

1127
01:00:03,200 --> 01:00:06,320
That is the most basic thing 
that anyone who is a British sea

1128
01:00:06,320 --> 01:00:09,680
captain. 
You know who has grown up in the

1129
01:00:09,680 --> 01:00:12,560
English countryside at their 
family estate and has the proper

1130
01:00:12,560 --> 01:00:15,960
breathing to walk into a court 
of Admiralty understands about 

1131
01:00:15,960 --> 01:00:19,520
the world that they live in. 
But if piracy is actually 

1132
01:00:19,520 --> 01:00:24,200
discovered on behalf of a behalf
of a Navy ship that is flying 

1133
01:00:24,200 --> 01:00:27,760
the flag of the British Empire, 
everyone involved will be dealt 

1134
01:00:27,760 --> 01:00:31,160
with. 
Most freaking severely so that 

1135
01:00:31,160 --> 01:00:35,600
for 1000 years no one forgets 
that one does not do piracy 

1136
01:00:35,600 --> 01:00:38,000
under the British flag. 
Now what could possibly happen 

1137
01:00:38,000 --> 01:00:41,040
to bankers who have wandered 
into doing extremely non 

1138
01:00:41,040 --> 01:00:44,040
prudential things with with 
banks under their control? 

1139
01:00:44,440 --> 01:00:47,160
One could only speculate. 
They're ex bankers. 

1140
01:00:48,240 --> 01:00:50,400
They just don't do banking, just
don't do banking in the US 

1141
01:00:50,400 --> 01:00:52,080
anymore. 
I think is the real solution 

1142
01:00:52,080 --> 01:00:57,200
here. 
That has not historically been 

1143
01:00:57,200 --> 01:01:01,800
the only punishment that can get
handed out to people who have 

1144
01:01:01,920 --> 01:01:05,080
done not wonderful things to the
banking system. 

1145
01:01:05,400 --> 01:01:08,040
Yeah, but it's been a while 
since we sent anyone to prison 

1146
01:01:08,040 --> 01:01:11,520
for that drug. 
Yeah, you want to do the like 5 

1147
01:01:11,520 --> 01:01:14,040
minute versions of stable stable
coins as payment method 

1148
01:01:14,360 --> 01:01:16,440
technology. 
My anti crypto cryptocurrency 

1149
01:01:16,440 --> 01:01:19,280
bias because I prefer my 
databases to be vast databases 

1150
01:01:19,280 --> 01:01:21,680
and not slow databases. 
Let's like factor out 

1151
01:01:21,680 --> 01:01:23,760
cryptocurrency out of the stable
coin discussion entirely. 

1152
01:01:24,360 --> 01:01:26,720
Let's say we live in the Harry 
Potter universe and someone 

1153
01:01:26,720 --> 01:01:30,640
comes up with a way to compete 
with like physical exchange of 

1154
01:01:30,640 --> 01:01:33,360
Nuts and Galleons. 
And they say there's new spell 

1155
01:01:33,520 --> 01:01:36,000
and you can wave your magic wand
and it instantly transfers money

1156
01:01:36,000 --> 01:01:39,520
from point A to point B at a 
arbitrarily low cost. 

1157
01:01:40,080 --> 01:01:42,960
Isn't this going to like 
outcompete the Wizards who use 

1158
01:01:42,960 --> 01:01:46,000
their Visa credit card? 
And the answer is, well, it 

1159
01:01:46,000 --> 01:01:48,520
competes on like multiple 
dimensions with Visa credit 

1160
01:01:48,520 --> 01:01:51,600
cards and with bank transfers in
the UK or elsewhere in the 

1161
01:01:51,600 --> 01:01:53,840
wizarding world. 
And with buy now, pay leader and

1162
01:01:53,840 --> 01:01:56,440
all the other things that wizard
has access to, including 

1163
01:01:56,720 --> 01:01:58,640
potentially other magic spells 
that could be developed in the 

1164
01:01:58,640 --> 01:02:00,080
future. 
And just the fact that it's 

1165
01:02:00,080 --> 01:02:03,960
instant and just the fact that 
it is low cost is not 

1166
01:02:03,960 --> 01:02:05,560
competitive with some of the 
other things. 

1167
01:02:05,560 --> 01:02:08,000
Because like a credit card can 
make your cost of using it 

1168
01:02:08,000 --> 01:02:10,040
actually negative when you 
factor in rewards. 

1169
01:02:10,440 --> 01:02:13,080
You know the magic spell doesn't
have like explicit semantics 

1170
01:02:13,080 --> 01:02:16,040
around getting refunds. 
And you like plausibly if you 

1171
01:02:16,040 --> 01:02:18,280
are buying something from a 
company that you've never used 

1172
01:02:18,280 --> 01:02:21,160
before where you just googled 
the name of the product, ended 

1173
01:02:21,160 --> 01:02:25,200
up on this random shop. 
It looks like a website, but can

1174
01:02:25,200 --> 01:02:26,120
I trust them? 
Really. 

1175
01:02:26,920 --> 01:02:29,880
Then you wouldn't be inclined to
like magically wave your wine at

1176
01:02:29,880 --> 01:02:34,600
them and transfer money over. 
Or we define the semantics of 

1177
01:02:34,600 --> 01:02:38,200
the spell as being like you wave
your magic wand and money moves 

1178
01:02:38,200 --> 01:02:41,880
from point A to point V Is there
a subscription capability built 

1179
01:02:41,880 --> 01:02:43,920
into this magic spell? 
No, because we didn't put that 

1180
01:02:43,920 --> 01:02:46,240
in the magic. 
And like being able to build 

1181
01:02:46,240 --> 01:02:49,600
someone on a subscription basis 
is enormously useful for a huge 

1182
01:02:49,600 --> 01:02:53,360
variety of commerce, from like, 
you know, buying magazines to 

1183
01:02:53,880 --> 01:02:56,920
storing a payment method so that
your checkout experience in the 

1184
01:02:56,920 --> 01:02:59,880
future doesn't have to involve 
like, explicitly invoking that 

1185
01:02:59,880 --> 01:03:02,680
payment method at all. 
And indeed, some of the best 

1186
01:03:02,680 --> 01:03:06,640
payment methods in the world. 
A lot of axes don't do very well

1187
01:03:06,640 --> 01:03:09,720
with respect to the store thing 
and they introduce friction. 

1188
01:03:10,200 --> 01:03:13,680
And again, like we can science 
out that friction, how much it 

1189
01:03:13,680 --> 01:03:15,960
costs businesses and it turns 
out it costs a lot of money. 

1190
01:03:16,200 --> 01:03:18,960
And so, like there are 
businesses that would say, even 

1191
01:03:18,960 --> 01:03:22,760
if you like, hypothetically had 
the magic wand available, we 

1192
01:03:22,760 --> 01:03:26,680
would get more money supporting 
Visa and paying for the payments

1193
01:03:26,720 --> 01:03:29,600
via the payments ecosystem than 
we would in taking free magic 

1194
01:03:29,600 --> 01:03:32,720
wand payments. 
The free magic wand isn't free. 

1195
01:03:32,720 --> 01:03:36,480
You have to be a member in good 
standing of Wizarding Wizarding 

1196
01:03:36,480 --> 01:03:38,360
Britain to get a magic wand 
issued to you. 

1197
01:03:38,800 --> 01:03:40,800
And it turns out that the number
of people in the world we have 

1198
01:03:40,800 --> 01:03:44,360
magic wands is canonically like 
very small, and the number of 

1199
01:03:44,360 --> 01:03:46,480
people who have payment 
instruments available to them is

1200
01:03:46,480 --> 01:03:51,280
very large and the like. 
If you are, you know, Amazon, 

1201
01:03:51,520 --> 01:03:53,840
and you have a team of very 
smart people that are in charge 

1202
01:03:53,840 --> 01:03:57,200
of like prioritizing 800 payment
methods in the world and saying 

1203
01:03:57,360 --> 01:03:59,080
which one of these should 
actually make it on to the 

1204
01:03:59,080 --> 01:04:02,960
Amazon.com website? 
Like plausibly you would think 

1205
01:04:03,320 --> 01:04:07,160
like magic wands. 
There's like 10,000 people in 

1206
01:04:07,160 --> 01:04:09,960
Britain that have them. 
Those are very small portion of 

1207
01:04:09,960 --> 01:04:12,320
our book of business relative to
like buy now, pay later. 

1208
01:04:12,520 --> 01:04:15,120
I will prioritize magic wands 
very low on my stack. 

1209
01:04:15,560 --> 01:04:18,040
And then the people holding 
magic wands are like, well this 

1210
01:04:18,040 --> 01:04:20,440
kind of sucks. 
I can't use it to pay money on 

1211
01:04:20,440 --> 01:04:22,480
Amazon even if it were free and 
instant. 

1212
01:04:22,640 --> 01:04:24,960
I can't use it to buy a burger 
at McDonald's even if it were 

1213
01:04:24,960 --> 01:04:26,360
free and instant etcetera, 
etcetera. 

1214
01:04:26,360 --> 01:04:29,280
I guess I should use the other 
800 things that are competing 

1215
01:04:29,280 --> 01:04:31,760
for my attention. 
So that is the problem with 

1216
01:04:31,760 --> 01:04:35,080
stable coins in a nutshell. 
It has been reported that 

1217
01:04:35,080 --> 01:04:39,440
stablecoin volumes are 
increasing massively and this is

1218
01:04:39,560 --> 01:04:42,800
a sign of real user adoption. 
I often think that 

1219
01:04:42,800 --> 01:04:46,760
cryptocurrency says our slow 
databases are publicly available

1220
01:04:46,840 --> 01:04:50,120
and this allows you to verify 
facts about them is greatly 

1221
01:04:50,120 --> 01:04:53,440
oversold. 
If this is true, then we are 

1222
01:04:53,440 --> 01:04:56,360
getting information about 
without loss of generality, like

1223
01:04:56,360 --> 01:05:01,080
the FTX bankruptcy at a time 
which is not the same time as 

1224
01:05:01,080 --> 01:05:03,400
those relevant facts were 
published to the relevant 

1225
01:05:03,400 --> 01:05:06,080
blockchains, which should give 
people some pause about how 

1226
01:05:06,080 --> 01:05:08,800
reliable the information is and 
how comprehensive and how many 

1227
01:05:08,800 --> 01:05:10,320
people are looking at it, et 
cetera, et cetera. 

1228
01:05:10,360 --> 01:05:13,880
But let's say, hypothetically, 
many people involved 

1229
01:05:13,880 --> 01:05:16,400
professionally in stable coins 
believe that stable coins are 

1230
01:05:16,400 --> 01:05:19,400
helping to bank people who are 
on the edges of the, you know, 

1231
01:05:19,400 --> 01:05:22,800
global financial system. 
Like maybe they are being used 

1232
01:05:22,960 --> 01:05:26,800
quite a bit for dollar 
denominated transfers of value 

1233
01:05:26,800 --> 01:05:29,560
in various countries and without
loss of generality, Africa. 

1234
01:05:29,720 --> 01:05:31,080
That's the thing that exists in 
the world. 

1235
01:05:32,440 --> 01:05:34,720
The edges of the financial 
system are kind of the edges of 

1236
01:05:34,720 --> 01:05:38,640
the financial system by nature. 
And sort of the oldest story in 

1237
01:05:38,640 --> 01:05:41,440
tech is that things start at the
edges of the ecosystem. 

1238
01:05:41,440 --> 01:05:46,360
This is Clayton Christensen's 
creative destruction thesis. 

1239
01:05:46,360 --> 01:05:49,720
Like work it worse is better 
happens in various places and 

1240
01:05:49,720 --> 01:05:51,760
existing incumbents don't look 
at those various places. 

1241
01:05:51,760 --> 01:05:54,120
And then eventually the thing 
that was was worse becomes 

1242
01:05:54,120 --> 01:05:56,280
better in almost all the places 
and takes all the market share. 

1243
01:05:56,360 --> 01:05:58,920
You can believe that stable 
coins are going to take all the 

1244
01:05:58,920 --> 01:06:00,600
market share and payments in the
United States. 

1245
01:06:00,680 --> 01:06:03,880
There are some pretty huge, 
like, structural reasons why 

1246
01:06:03,880 --> 01:06:05,520
that is extremely unlikely to 
happen. 

1247
01:06:05,840 --> 01:06:08,120
Not least of which the United 
States government has an 

1248
01:06:08,120 --> 01:06:12,640
enormous stake in payments in 
the United States and would like

1249
01:06:13,040 --> 01:06:16,320
viscerally oppose that in a of 
ways and would be a competitor 

1250
01:06:16,720 --> 01:06:19,400
that has a lot more advantages 
going to it than any random 

1251
01:06:19,400 --> 01:06:23,120
stablecoin team has. 
And often you hear like central 

1252
01:06:23,120 --> 01:06:27,080
bank digital currency like OK, a
government backed stablecoin 

1253
01:06:28,240 --> 01:06:32,080
would be a really commanding 
entrance in the, you know in the

1254
01:06:32,080 --> 01:06:34,000
payments market in a particular 
country. 

1255
01:06:34,760 --> 01:06:37,880
You say OK well a government 
backed payment payment method 

1256
01:06:38,200 --> 01:06:42,480
like sometimes they are and 
every payment method is 

1257
01:06:42,480 --> 01:06:45,200
government backed to a greater 
or lesser extent because every 

1258
01:06:45,200 --> 01:06:47,200
banking system is government 
backed to greater or lesser 

1259
01:06:47,200 --> 01:06:48,840
extent. 
Brock it out for a moment. 

1260
01:06:50,160 --> 01:06:54,200
In some countries like the 
government has either through 

1261
01:06:54,200 --> 01:06:56,480
first party or through public 
private partnership brought 

1262
01:06:56,800 --> 01:06:59,720
brought a really compelling 
payment method to market and 

1263
01:06:59,720 --> 01:07:01,360
that payment method has gained a
lot of share. 

1264
01:07:01,520 --> 01:07:03,600
We talked about India, Brazil 
for example. 

1265
01:07:04,000 --> 01:07:06,880
In other countries the 
government has like brought out 

1266
01:07:06,880 --> 01:07:09,920
a payment method and nobody 
cared and nobody came and you 

1267
01:07:09,920 --> 01:07:13,480
still use, you know, debit cards
or interbank payments or yada 

1268
01:07:13,480 --> 01:07:14,960
yada. 
In those countries, does the 

1269
01:07:14,960 --> 01:07:18,760
slow database make government 
payment method better or worse? 

1270
01:07:19,360 --> 01:07:22,680
I contend that anywhere you can 
use a slow database, you can use

1271
01:07:22,720 --> 01:07:25,440
a fast database and it will have
all the benefits of the slow 

1272
01:07:25,440 --> 01:07:28,560
database but be faster. 
People in crypto have often 

1273
01:07:28,560 --> 01:07:30,960
said, Patrick, you are being 
unfair. 

1274
01:07:31,520 --> 01:07:34,400
The slow database allows you to 
have this be an entirely 

1275
01:07:34,400 --> 01:07:36,480
trustless system and trustless, 
and this is a good thing. 

1276
01:07:37,360 --> 01:07:39,800
Trustlessness is not generally 
considered a good thing by the 

1277
01:07:39,800 --> 01:07:42,840
kind of people who make central 
bank payments systems. 

1278
01:07:43,600 --> 01:07:49,120
So it seems extremely unlikely 
to me that the like product 

1279
01:07:49,120 --> 01:07:52,840
features around trustlessness or
product features around an 

1280
01:07:52,840 --> 01:07:57,200
intense concern for privacy will
be features of like future 

1281
01:07:57,360 --> 01:08:00,000
central bank delivery payment 
systems in most countries that 

1282
01:08:00,000 --> 01:08:02,480
are of interest to listeners. 
That bit about privacy is 

1283
01:08:02,480 --> 01:08:05,960
interesting. 
Plausibly we care a lot about 

1284
01:08:05,960 --> 01:08:11,040
privacy and you know, but 
plausibly society cares a lot 

1285
01:08:11,040 --> 01:08:15,000
about other things too. 
And so you know, like every 

1286
01:08:15,000 --> 01:08:17,920
other concern and value and 
instrumental will that we have 

1287
01:08:17,920 --> 01:08:19,479
these existing trade-offs with 
each other. 

1288
01:08:19,640 --> 01:08:22,120
People in crypto don't believe 
this, but the, you know, 

1289
01:08:22,120 --> 01:08:26,359
institution that is credit cards
in the United States are fairly 

1290
01:08:26,359 --> 01:08:29,279
privately protecting by default 
relative to a lot of other 

1291
01:08:29,279 --> 01:08:32,000
things you could do. 
Like for example, you can buy 

1292
01:08:32,000 --> 01:08:34,000
things on a credit card without 
necessarily having to give your 

1293
01:08:34,000 --> 01:08:36,600
address that didn't used to be 
true about checks. 

1294
01:08:36,840 --> 01:08:38,800
They had your address printed on
them by default. 

1295
01:08:40,040 --> 01:08:45,840
And you can you know, often have
like semi pseudonymous 

1296
01:08:45,840 --> 01:08:49,960
identities using various payment
methods where that did not used 

1297
01:08:49,960 --> 01:08:55,680
to be very capable. 
And so in like future payment 

1298
01:08:55,680 --> 01:08:58,439
methods that got lots of share 
in the world, like privacy will 

1299
01:08:58,439 --> 01:08:59,960
be one thing you can offer to 
users. 

1300
01:09:00,560 --> 01:09:03,479
Candidly, I think the financial 
industry is largely going to 

1301
01:09:03,479 --> 01:09:05,880
say, well, we shouldn't, we 
certainly shouldn't do stupid 

1302
01:09:05,880 --> 01:09:08,760
things With regards to privacy, 
Actually, I don't know that all 

1303
01:09:08,760 --> 01:09:11,080
teams will necessarily decide 
that there apparently are some 

1304
01:09:11,080 --> 01:09:13,760
payment methods that broadcast 
every transaction to a world 

1305
01:09:14,120 --> 01:09:17,920
rebuild feed by default. 
That strikes me as a extremely 

1306
01:09:17,920 --> 01:09:21,000
crazy decision. 
But like firms have made it in 

1307
01:09:21,000 --> 01:09:27,279
the past but like most users 
their revealed preference is 

1308
01:09:27,279 --> 01:09:30,880
that they don't make decisions 
in life based on what maximizes 

1309
01:09:30,880 --> 01:09:34,120
for like privacy advocates view 
of their privacy. 

1310
01:09:35,080 --> 01:09:38,600
They use Google for their for 
their e-mail not because they 

1311
01:09:38,600 --> 01:09:40,840
believe that nobody will ever be
able to read their e-mail at 

1312
01:09:40,840 --> 01:09:44,359
Google but because like Gmail 
has a better client because 

1313
01:09:44,359 --> 01:09:47,840
Google is a trusted brand name. 
I think privacy advocates 

1314
01:09:47,880 --> 01:09:50,960
probably don't appreciate the 
fact that like Google is better 

1315
01:09:50,960 --> 01:09:54,680
at securing your e-mail from 
both a random hacker and from 

1316
01:09:54,760 --> 01:09:57,680
you know, a legitimate 
government authority than Jay 

1317
01:09:57,680 --> 01:10:00,600
random host is from as securing 
your e-mail in those cases 

1318
01:10:00,600 --> 01:10:03,040
because they will have Google's 
resources backing up the 

1319
01:10:03,480 --> 01:10:05,760
response to a subpoena versus 
like Jay random host. 

1320
01:10:06,840 --> 01:10:11,080
But so stable coins at taking 
over the world of payments. 

1321
01:10:11,280 --> 01:10:14,160
I don't see it willing to be 
wrong willing to look at 

1322
01:10:14,160 --> 01:10:16,680
evidence. 
You know, TikTok guys, we are 10

1323
01:10:16,680 --> 01:10:19,280
plus years into this and a lot 
has happened in payments in the 

1324
01:10:19,280 --> 01:10:24,760
last 10 years and very little 
has happened in the, you know, 

1325
01:10:25,160 --> 01:10:30,120
10s of billions of dollars 
invested effort to make slow 

1326
01:10:30,120 --> 01:10:34,160
databases the future of it. 
So if you want to change my 

1327
01:10:34,160 --> 01:10:37,000
mind, you are welcome to publish
evidence to the Internet and I 

1328
01:10:37,000 --> 01:10:39,280
will look at it. 
But you got to get people 

1329
01:10:39,280 --> 01:10:42,680
actually using the thing. 
And if you don't, well then, you

1330
01:10:42,680 --> 01:10:45,040
know there's a lot of fun toys 
in the world. 

1331
01:10:45,040 --> 01:10:47,800
I like computers built out of 
Redstone in Minecraft as much as

1332
01:10:47,800 --> 01:10:51,080
the next guy. 
They will have 0% market share 

1333
01:10:51,080 --> 01:10:53,560
in all Cloud Workshop workloads 
in the future. 

1334
01:10:53,720 --> 01:10:58,200
It's actually funny because we 
are almost exactly today, four 

1335
01:10:58,200 --> 01:11:01,720
weeks out from the very first 
from the nine year anniversary 

1336
01:11:01,720 --> 01:11:03,440
of the first stable coin being 
issued. 

1337
01:11:03,800 --> 01:11:08,760
The very first tethers were 
issued in November of 2014, like

1338
01:11:08,760 --> 01:11:11,440
November 9th or something. 
We're almost exactly 4 weeks out

1339
01:11:11,440 --> 01:11:15,440
from the nine week anniversary. 
They used to have a merchant API

1340
01:11:15,440 --> 01:11:18,640
that was taken out at like month
6 for their stable coin. 

1341
01:11:19,080 --> 01:11:21,480
Yeah, and don't forget the 
ability to trade Bitcoin for 

1342
01:11:21,920 --> 01:11:23,960
U.S. dollars. 
I never forget gas. 

1343
01:11:24,560 --> 01:11:29,240
So I think we are all peas on 
the pod with respect to our 

1344
01:11:29,240 --> 01:11:31,360
views on Tether here. 
But just for those in the 

1345
01:11:31,360 --> 01:11:36,240
audience who don't know, I once 
said that Tether is the internal

1346
01:11:36,240 --> 01:11:39,560
accounting system for the 
largest fraud since Bernie 

1347
01:11:39,560 --> 01:11:43,000
Madoff. 
I think I wrote that in 2019 

1348
01:11:43,000 --> 01:11:44,560
after years of looking into 
them. 

1349
01:11:45,240 --> 01:11:46,440
That is obviously untrue right 
now. 

1350
01:11:46,440 --> 01:11:47,800
They're bigger than Madoff 
approvals. 

1351
01:11:48,880 --> 01:11:52,320
But yeah, I don't know the 
tether was necessarily the first

1352
01:11:52,320 --> 01:11:53,440
stable coin. 
I think there were a few 

1353
01:11:53,440 --> 01:11:56,400
abortive attempts at like basis 
coin, etcetera before that. 

1354
01:11:56,400 --> 01:11:59,800
But be that as it may, they're 
far and away the largest stable 

1355
01:11:59,800 --> 01:12:04,160
coin. 
To the enduring irksomeness, how

1356
01:12:04,160 --> 01:12:07,560
do you say that in English? 
It irks legitimate businesses 

1357
01:12:07,560 --> 01:12:09,480
that are attempting to bring 
stable coins to market. 

1358
01:12:09,760 --> 01:12:11,720
That like the largest stable 
coin in the world that's 

1359
01:12:11,720 --> 01:12:15,120
operated by criminal conspiracy.
And that the largest stable coin

1360
01:12:15,120 --> 01:12:18,440
in the world is per the people 
at the legitimate competitors. 

1361
01:12:18,720 --> 01:12:20,880
Like essentially counterfeiting 
the US dollar and then 

1362
01:12:20,880 --> 01:12:24,960
exchanging that for the reserves
of the people who are attempting

1363
01:12:25,320 --> 01:12:28,680
pretending a little bit of both 
at different times to comply 

1364
01:12:28,680 --> 01:12:33,960
with all the rules. 
So yeah, I don't expect Tether 

1365
01:12:33,960 --> 01:12:37,640
to continue being the largest 
stable coin in the world for 

1366
01:12:37,640 --> 01:12:39,840
forever. 
I also don't expect them to stay

1367
01:12:39,840 --> 01:12:44,040
out of present for forever. 
Madoff got what, 17 years before

1368
01:12:44,040 --> 01:12:47,520
getting substantially more years
as a guest of the United States 

1369
01:12:47,520 --> 01:12:50,480
government. 
I expect they will eventually 

1370
01:12:50,480 --> 01:12:53,480
get what is coming to them and 
it won't be a 5.025% on a two 

1371
01:12:53,480 --> 01:12:59,600
year T bill on the reserves. 
I think that wraps us up. 

1372
01:12:59,640 --> 01:13:01,920
Thank you very much for joining 
us, Patrick. 

1373
01:13:02,200 --> 01:13:04,680
I highly recommend everyone 
listening check out Patrick's 

1374
01:13:04,680 --> 01:13:06,880
newsletter, Bits About Money, 
which we'll link in the 

1375
01:13:06,880 --> 01:13:10,000
description and on the website. 
And just one more time, thank 

1376
01:13:10,000 --> 01:13:12,000
you very much for joining us. 
Thanks so much for having me, 

1377
01:13:12,000 --> 01:13:13,840
folks. 
You can find me around the 

1378
01:13:13,840 --> 01:13:17,040
Internet, send Patio 11 in most 
of the places, including 

1379
01:13:17,040 --> 01:13:19,240
Twitter, Slash X and whatever 
they call it these days. 

1380
01:13:20,160 --> 01:13:24,480
And if you like these topics, I 
write weekly or biweekly about 

1381
01:13:24,480 --> 01:13:25,760
them at bits about money.com.