These slides were used in the lecture 2 of FinTech - Financial Innovation and the Internet 2020 Fall at the Graduate School of Business and Finance, Waseda University, on October 2, 2020.
Lecture 2 : Overview of FinTech (2) Kenji Saito Professor, Graduate School of Business and Finance, Waseda University Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-02 – p.1/41
required You do need to speak often (we are going to have a lot of dialogue) We will use breakout rooms a lot, but those won’t be recorded unless you do it yourselves (need to be allowed) Keep your Zoom client updated! We might use latest features The recordings could be used for research on online learning Transcribed for use and anonymized Will let you know when the necessity arises Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-02 – p.2/41
and chat text will be posted at Moodle and Discord Trial automatic transcription of the lecturer’s part will be posted at Discord Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-02 – p.3/41
call me either “Kenji” or “Saito-san” I’m more used to them Because a scholar thinks of the first graduate school they see as their parent I my case, it was the Department of Computer Science at Cornell, where we called our professors (giants of CS) by their first names Then I went to Keio where Yukichi Fukuzawa, the founder, is the one and only “sensei” Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-02 – p.4/41
Lecture 2 10/2 Overview of FinTech (2) • Lecture 3 10/9 Internet Technology and Governance (1) Lecture 4 10/16 Internet Technology and Governance (2) Lecture 5 10/23 The World of Apps (1) Lecture 6 10/30 The World of Apps (2) Lecture 7 11/13 Blockchain (1) Lecture 8 11/20 Blockchain (2) Lecture 9 11/27 Other Ledger Technology and Applications (1) Lecture 10 12/4 Other Ledger Technology and Applications (2) Lecture 11 12/11 Cyber-Physical Society and Future of Finance (1) Lecture 12 12/18 Cyber-Physical Society and Future of Finance (2) Lecture 13 1/8 FinTech Ideathon (1) Lecture 14 1/15 FinTech Ideathon (2) Lecture 15 1/22 Presentations and Conclusions Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-02 – p.5/41
schedule of the class What’s FinTech? Concepts of “industrial tools” and “media and governance” All the tools that cannot be produced by one person Financial inclusion/democracy, user experience, and architecture as law FinTech is inherently a game-changer Some examples Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-02 – p.6/41
A Tool for Analyzing Media (Industrial Tools) Gutenberg Galaxy and Its Reverse Future of Monetary-Financial System? Discussion : Does FinTech Free People? Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-02 – p.7/41
October 1, 2020, by a system problem https://www.wsj.com/articles/tokyo-stock-exchange-trading-is-halted-by-system-error-11601515806 A memory failure occurred in one of the shared disk units in the stock trading system, and the failover did not work properly The decision to halt trading was made when it was determined that a mere restart would inevitably cause confusion, including loss of orders Is it about FinTech? → Not particularly (it is about an existing system) I picked this news up for two reasons : Management of Tokyo Stock Exchange had a great press conference CEO articulated management’s responsibility, and CIO spoke clearly from a technical standpoint about the factors that contributed to the accident CIO, Mr. Yokoyama, has a non-engineering background (graduated from School of Political Science and Economics, Waseda University) ← A great example of a manager who understands technology Some talk about decentralization, but it is not a silver bullet Blockchain? Do not be fooled by easy sales talk, and think science! Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-02 – p.9/41
Reading always returns what is previously written Availability Always responds in a finite amount of time Partition tolerance Works even if the network is disrupted ⇒ You cannot have all three qualities at once A blockchain that doesn’t stop (which itself is an easy sales talk) cannot satisfy C Successful distributed systems, such as Facebook, tries to satisfy A while users allow C to be met eventually → This is kind of change digital transformation implies So, the question is like, “De we allow payment or buying stock to be eventually consistent?” Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-02 – p.10/41
Finance When did information revolution happen anyway? Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-02 – p.11/41
(drives small number of people) Behavioral modernity (approx. 50,000∼150,000 years ago?) ↔ hunter-gatherer society Civilization that lives in nature (how civilization obtains and uses energy) 2. Engraving and handwritten letters (drives large number of people) Ancient Mesopotamia (about 5,500 years ago) ↔ agricultural society Civilization that bypasses and directly uses the flow of energy from the sun 3. Mechanical movable type printing (drives machines) Invention by Gutenberg (about 570 years ago) → industrial society Civilization that uses fossil fuels 4. Digital technology (drives computer software; very low cost) Age of microprocessors (about 50 years ago) → ??? society (in transition) Civilization that uses renewable energy? (cf. The Internet Civilization, The Internet Battery Society) Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-02 – p.12/41
of the era laid the foundation for credit and finance in that era Age of cuneiform and clay tablets (about 3000 BC) Engrave on (casual contracts), bake (firm contracts) or break (social system for contract cancellation) clay tablets (IMHO blockchain developers can learn much from this age) Age of horse carts and telegraphy (mid 19th century) AMEX (was a horse carriage courier) Western Union (was a telegraph company) Age of the Internet (late 20th to early 21st century) ICT companies expand into finance Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-02 – p.13/41
equal industrial tools What haven’t you noticed lately? Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-02 – p.14/41
any technology or artifact) ENHANCES . . . What does the medium enhance? OBSOLESCES . . . What does the medium make obsolete? RETRIEVES . . . What does the medium retrieve that had been made obsolete earlier? REVERSES . . . What does the medium reverse or flip into when pushed to extremes? – McLuhan, “Laws of Media” Questions that can be asked of any media What are the side effects of the media on people and society? Especially, when a new medium (M1) appears, it would obsolesces some existing medium (M2) that has obsolesced some other medium (M3), so that M3 would be retrieved by M1, as M2 is now becoming obsolete Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-02 – p.15/41
distribution Congestion and accidents EV and self-driving cars ENH REV RET OBS Freedom to move (once lost by horses) Personal space horses, carriages (related industries) Urban living and compact city New medium “retrieves” what was previously made “obsolete” Compact city may be OK, but there is no way horses and carriages can be retrieved by EV or self-driving cars . . . ? Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-02 – p.16/41
Generally, personal mobility fits a person’s body (saddle: return to design starting from the human body) Autonomous driving is also like horse-riding in the sense that human and non-human intellectuals work together to get to their destination Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-02 – p.17/41
reading : McLuhan, “The Gutenberg Galaxy” And how it is being reversed with digital technology Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-02 – p.18/41
view (of the authors) Digital media ENH REV RET OBS Renaissance Handwritten copies (mosaic media) Books as auditory media New medium “retrieves” what was previously made “obsolete” Digital media “retrieves” mosaic media like handwritten copies . . . really? Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-02 – p.19/41
concept unless texts are copied word for word without difference) Scientific methodology (publish papers and have results tested) Nationalism (one standard language, one country) Prepared “movies” (series of photos from one viewpoint) Clear distinction between finished and unfinished “products” (printed copies are the products, handwritten manuscripts are not) Individualism (can carry knowledge personally) Unification of popular culture (massive copies) . . . ⇒ Prepared the industrial society Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-02 – p.20/41
“authors” (social media time lines are like mosaic media) Overturned scientific methodology (automated hypothesis-testing loops for discoveries) Global perspective (connected across borders) Everyone becomes a moviemaker (YouTubers, TikTokers) Obscured finished and unfinished products ⇒ open design Promotion of collaboration (sharing by default) Diversification of cultural events (long tail) . . . ⇒ Preparing for the next society Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-02 – p.21/41
“retrieves” what was previously made “obsolete” Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-02 – p.23/41
Specialization, agricultural/industrial society Inequality, exploitation and bankruptcy Digital currencies, FinTech and beyond ENH REV RET OBS Control and obedience, hierarchy Maximization of profits Moneyless credit system Gift economy Generailzation (of skills), hunter-gatherer society New medium “retrieves” what was previously made “obsolete” Will “gift economy”, “generalization (of skills)” and “hunter-gatherer society” really be retrieved? Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-02 – p.24/41
4USBOHFST %FFQFO 3FMBUJPOTIJQ 4IBMMPX 3FMBUJPOTIJQ $IFDLT CJMMT FUD $BTI CJUDPJO FUD "DRVBJOUBODFTPG BDRVBJOUBODFT FUD "DRVBJOUBODFT 'SJFOETBOE DPMMFBHVFT 'BNJMZ 5SVTU4ZTUFN -PDBM$VSSFODJFT FUD .POFZJT6OOFDFTTBSZ (JWJOH 1BTU 5SFOET 'VUVSF 5SFOET Even in capitalistic society, inside of organization is more communistic Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-02 – p.25/41
means memorable in human history What are some examples of historic companies that will continue to appear in human history textbooks, like forever? Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-02 – p.26/41
Company (1600) One of the first joint-stock companies Historic company today was the starting point of the current corporates Next company memorable in human history? It brings an end to modern joint-stock companies, perhaps? Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-02 – p.27/41
automated Example : Bitcoin If you think of users as shareholders, coins as shares, and miners (validators of transactions) as employees . . . Its program code can be thought of as describing how the organization operates in the business of transferring shares DeFi (Decentralized Finance) movement (← although the word has been invaded by speculators ;)) Open-source autonomous financial toolkit If we generalize, the idea of “law” will change That’s the power of software to begin with Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-02 – p.28/41
of interest among various powers and groups Can a digital currency platform retrieve the stolen digital coins? If yes and it can enforce the law, it is like Judiciary Who decides which action is a crime, who corrects it, who punishes whom? If no and “Code is Law” (stealing was allowed by somewhat buggy code), then Legislation Program code determines the order among people In any case, admins take the role of, well, Administration Order can even be automated with individuals acting according to the rules of an App After the time when the nation separated the legislative, administrative and judicial powers (to avoid large concentrations of authority) . . . We are now living at the turning point of society Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-02 – p.29/41
centric but despotic design is possible (e.g.‘TRON’ (Movie), iOS App Review) Try automating what used to be called the “center” Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-02 – p.30/41
money → Money will soon disappear from our view Different kinds of money, coupons, and point systems can operate behind the scenes Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-02 – p.31/41
like Bitcoin Digitization of the national currencies (“digital JPY” in Japan) MUFG Coin, J-Coin Pay, S Coin, Ginko Pay (OEM) Attempts by communities (e.g. Zen) Attempts by central banks (CBDC : Central Bank Digital Currency) Local currencies, “Cause-Oriented Economy” Beginning of world where a variety of digital currencies are used (◦◦Pay, . . . ) The complexity is not going to be in our minds; we only clarify our policies If we would like to keep Amazon-Go-style experiences Then we don’t even know if it is money that is moving behind the scenes The sharing economy comes in there ⇒ Decline of the monetary economy! Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-02 – p.32/41
investment Specialization, agricultural/industrial society Inequality, exploitation and bankruptcy Digital currencies, FinTech and beyond ENH REV RET OBS Control and obedience, hierarchy Maximization of profits Moneyless credit system Gift economy Generailzation (of skills), hunter-gatherer society New medium “retrieves” what was previously made “obsolete” Will “gift economy”, “generalization (of skills)” and “hunter-gatherer society” really be retrieved? Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-02 – p.33/41
(by the gap between rich and poor) → Sharing economy emerges (which is ultimate form of FinTech) (why?) Lifestyle that operates without specialization (thanks in part to AI and DigiFab) → The degeneracy of economic activities to be taxed Changes in the way the public is served ← Opportunity for us → At that point, money is already declining (disturbance for PO/GO and expansion of NPO/NGO concepts) By advancing the principle of the monetary economy, conversely, accommodation solutions that do not require money are selected, and money rather disappears from the front view → The ideas of “employment” and “separation of buying and selling” collapse “Rulers” do not exist any longer; “consumers” do not exist any longer Specifically, what kind of society is it? → Consider with SciFi prototyping Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-02 – p.34/41
and just take it home (and share it with family members) It’s similar to something we know Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-02 – p.35/41
and prepare tools, challenge, take, share × PDCA cycle (agricultural and industrial people’s style) PDCA : Plan, Do, Check, Action OODA loop (hunter-gatherer’s style) OODA : Observe, Orient, Decide, Act Money doesn’t fit in there The key is how technology can create an “abundant resources” situation “Accommodation” is becoming increasingly important in our society Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-02 – p.36/41
have been mainly Q & A sessions so far today But before going into a deeper discussion session, any questions? Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-02 – p.37/41
freed? Are we not free already? “But specialization is in fact only a fancy form of slavery wherein the “expert” is fooled into accepting his slavery by making him feel that in return he is in a socially and culturally preferred, ergo, highly secure, lifelong position” — Fuller, “Operating Manual for Spaceship Earth” What does he mean? Is there a FinTech example that takes away people’s freedom? Is the opposite possible? Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-02 – p.38/41
of the Internet Write a bulleted list of what the Internet “enhances”, makes “obsolete”, “retrieves” and what it “reverses” into (2) Based on the tetrad you drew, briefly describe how the Internet affects finance Please be concise Deadline and how to submit October 6, 2020 at 17:59 JST From Moodle (mandatory) Optionally, you can also post to #assignments channel at Discord So that your classmates can read your report, refer to it, and comment on it Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-02 – p.40/41
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