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Internet Technology and Governance (1), Lecture 3 of FinTech

Internet Technology and Governance (1), Lecture 3 of FinTech

Slides I used at FinTech - Financial Innovation and the Internet, Graduate School of Business and Finance, Waseda University, on October 11, 2019.

Kenji Saito

October 11, 2019
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  1. Manifesto of Futurism. Lecture 3 : Internet Technology and Governance

    (1) FinTech — Financial Innovation and the Internet 2019 Fall Kenji Saito Professor, Graduate School of Business and Finance, Waseda University [email protected] Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-11 – p.1/37
  2. The lecture slides can be found at : https://speakerdeck.com/ks91 Lecture

    3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-11 – p.2/37
  3. Schedule (provisional) Lecture 1 9/27 Overview of FinTech (1) •

    Lecture 2 10/4 Overview of FinTech (2) • Lecture 3 10/11 Internet Technology and Governance (1) • Lecture 4 10/18 Internet Technology and Governance (2) Lecture 5 10/25 The World of Apps (1) Lecture 6 11/8 The World of Apps (2) Lecture 7 11/15 Blockchain (1) Lecture 8 11/22 Blockchain (2) Lecture 9 11/29 Other Ledger Technology and Applications (1) Lecture 10 12/6 Other Ledger Technology and Applications (2) Lecture 11 12/13 Cyber-Physical Society and Future of Finance (1) Lecture 12 12/20 Cyber-Physical Society and Future of Finance (2) Lecture 13 1/10 FinTech Ideathon (1) Lecture 14 1/17 FinTech Ideathon (2) Lecture 15 1/24 Presentations and Conclusions Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-11 – p.3/37
  4. Last Week, We Did . . . Information Revolution and

    Society Tetrad — A Tool for Analyzing Media Gutenberg Galaxy Future of Monetary-Financial System? Discussion : Does FinTech Free People? — actually, didn’t Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-11 – p.4/37
  5. Tetrad of Monetary-Financial System (reprise) Exchange and consumption Savings and

    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 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-11 – p.5/37
  6. Amazon Go (reprise) Go where there is food, grab it

    and just take it home (and share it with family members) It’s similar to something we know Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-11 – p.6/37
  7. Toward a New “Hunter-Gatherer Society” Over New and Digital, Automated

    Nature Observe, grasp, set a goal and prepare tools, challenge, take, share × PDCA cycle (agricultural and industrial people’s style) ⃝ OODA loop (hunter-gatherer’s style) (more agile) 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 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-11 – p.7/37
  8. What’s New and Digital, Automated Nature? A conversation in a

    panel discussion at b.tokyo : Economist : Division of labor makes today’s civilization possible, and making even a single pencil requires a lot of people to do the work. Saito : Oh, that’s because the pencils don’t grow on the tree yet, and we will design such a tree (metaphorically speaking). Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-11 – p.8/37
  9. Today’s Topics Assignment Review Internet Technology Lecture 3 : Internet

    Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-11 – p.9/37
  10. Assignment Review Lecture 3 : Internet Technology and Governance (1)

    — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-11 – p.10/37
  11. Exercise 1. “Tetrad of the Internet” (1) Draw a tetrad

    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 Deadline and how to submit October 9, 2019 at 17:59 JST From Course N@vi Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-11 – p.11/37
  12. Trends and Countermeasures Trends . . . of your reports

    Countermeasures . . . how to improve the class 12 out of 21 students submitted (better later than never) Just text, please (I’d copy and paste from the report view) Descriptions of the effects on finance may be a little too conventional Although they are good, but . . . Normally, what everyone knows is 20 years behind (Drucker, 1990) If you agree with what general public say, think, “Yabai (Bad)” (as a researcher) RETRIEVES seemed difficult to think about What was made “obsolete” by the old media (which supported the ideas before the new media) is “retrieved” by the new media In this case, we see what was made “obsolete” primarily by TV or printing Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-11 – p.12/37
  13. Tetrad (group of four) (reprise) 4 questions about a medium

    (= 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? Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-11 – p.13/37
  14. Tetrad of the Internet by You (first 5 excluding pics.)

    ENH OBS RET REV Trade (through E-commerce), Education/ Knowledge (due to ease of information), Global coverage, Smart-phone sales/ use of smart phones, Networking and Real time communication, Everyone becomes a "publisher" Social life imbalance - isolation, Lack of creative thinking, “Too much information" Negative/Foolish acts like anarchy, racism, superstitions etc. , Augmented Reality (restricts human interrelation), Bad Eye-Sight (other harmful disorders), Unwanted addictions (like gambling, gaming, pornography) Social interaction (even if virtual), Transparency, “Power in the hands of few” (Intellectual), Text-based exchange of information Face-to-face interaction, Retailers (due to online shopping),Time/distance limitations, Middlemen (like travel agents), Letters/Newspapers/Books/Textbook publications Communication; personal and enterprise Decentralization Custom information retrieval Marketing efficiency (consumer data plus delivery) Labor mobility - remote work, digitized files, digital media (data collection, photography, audio/video) Nationalism (through global cultural flattening) Suburbanization (potentially, as retail declines and data-driven delivery services increase) Media channelization and monopoly Telecom monopolies Personal media ownership (1980s started home video era, now purchased "cloud" media can be removed by host) Craftsman economy "Public Square" of free opinion sharing Brick and mortar retail Newspapers, print media Traditional advertising revenue channels Film, television Telephone communication Letter mail Clerk related jobs Communication Globalization / Cross-Border Activities Sharing Economy Education Innovation Security Automation Analogue Economy Manual/ Labor Force Money Telegraph Printing/Press Traditional/Physical Retailer Individuality Freedom Digitalization Digital Payment AI IoT Blockchain-based Technology Rules and Regulation on Digitalization Privacy (On the Data) Digital connectivity (email) Knowledge creation and sharing (search engines, forums) Self-expression (through blogs, social media) Collaboration (Wikipedia) Sense of community (from pastoral/agricultural society) Decentralization of authority away from governments, religions, etc Formation of "tribes" with common interest (subreddits) Information glut -> proliferation of fake news Doxxing (mob mentality) Ironically, social isolation and degeneration of social skills Book publishers (physical creation of media) Libraries (physical consumption of media) The postal mail industry (physical correspondence) Individualism Church, king, government as one true source of information, hence power Mass communication( conveying different financial information &news on the Internet) Enhance development of big data No information barriers (be transparent withall the information and built trust quickly) Enrich life and spare time (meet new friends online) Work efficiently & effectively (financialcapital operation; accountants transfer money at office rather than counter) "Dark forces" (a cradle of instability and terrorism, like Pyramid scheme) violate privacy (personalinformation leaking) Work 7×24 (no rest foremployee engaging on the free money trade for higher profit) Stagnation on business (machine can not deal with all the problems, and sometimes need manual intervention) Limited by electricity (allthe business relying on electricty. can not imagine when blackouts happen… ) Unemployment crisis (bank teller replaced by AI and Intelligent counter) Sources integration (data collection tobusiness use like credit system) Daily-life convenience ( buying financialproducts on app/ using electronic money) Reduce pollution & paperless office (fill out the electronic form) Adapting to buyer's market & improve quality (adhere to the customer in the first place; constantly improve the services for long-term profit) Widen channels of spreading information (It's kind of like innovation. Traditional banking system, for instance, has to open arms to other marketing channels (like set up an official website for their customers, interact with customers actively in subscription, etc.) New career (online wealth manager) Interest rates liberalization (prevent from vandalizing financial market order because of the sudden decrease- interest rate) New form of currency (bitcoin..) Changing of leading role (In old days, clients ask the financial institution to apply for credit cards or loans.) Stepping out of the comfort-zone (In old days, without competetion, banking never worried about their marketing) Rely on paper (working with software instead of handwriting/sending mails instead of posting letters/using digital money instead of paper money) Information asymmetry (no interest rates liberalization) Money laundry Important but often overlooked effects Revived because of the obsolescence Blue . . . Suitable Black . . . Not suitable or al- ready mentioned Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-11 – p.14/37
  15. For reference: Tetrad of the Internet by Saito End-to-End, best

    effort Human network Commons, neutrality and diversity Cyber crimes, fake news Firewalls, network divisions Echo chambers, no privacy ENH REV RET OBS Hunter-gatherer society (generalization) Versatility of individuals, holacracy Credit systems and gift economy Agricultural or industrial society (specialization) Control and obedience, hierarchy Profits and monetary economy Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-11 – p.15/37
  16. Internet Technology What’s “digital”? ← Let’s ask What’s “communication”? What’s

    “network”? What’s “TCP/IP”? Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-11 – p.16/37
  17. What’s “Digital”? Represents information by numbers Ex1 : Assigns a

    number to a character (encoding) ̖(65 (0x41)) ̰(97 (0x61)) ASCII (American Standard Code for Information Interchange) If you want to convert uppercase to lowercase, add 32 (0x20) to the letter Ex2 : Audio CD (sampling and quantization) ← Do you know what CD is? Stereo 44.1kHz sampling and 16bit quantization Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-11 – p.17/37
  18. Advantages of “Digital” Common means of communication → low-cost common

    base Put everything in a USB flash drive, put everything on the web “Put anything on it” is the whole idea of USB (Universal Serial Bus) to begin with Improvement of transmission quality → No degradation of information Degradation occurs during sampling and quantization, but does not occur after that Concealment or proof of communication → Encryption or digital signature Public key cryptography More efficient transmission → Packet communication, compression Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-11 – p.18/37
  19. How Information is Communicated Communication between human minds Expressed and

    conveyed Digitization determines the amount of information and conveys it efficiently But some things are always lost Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-11 – p.19/37
  20. What’s Internet? Foundation for communication in which digital information is

    exchanged Social / requirement aspect Network of networks Technological / functional aspect What’s communication? What’s network? Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-11 – p.20/37
  21. Can Humans and Dogs Communicate? photo by nikoretro Those who

    think they can Those who think they cannot Why? Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-11 – p.21/37
  22. Definition? Communication 1. The exchange of thoughts, messages, or information,

    as by speech, signals, writing, or behavior. 2. Interpersonal rapport. — “The American Heritage Dictionary” It’s undeniable that you feel that humans and dogs feel close to each other . . . Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-11 – p.22/37
  23. Human-Dog Communication Lecture 3 : Internet Technology and Governance (1)

    — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-11 – p.23/37
  24. Mechanism of Communication Lecture 3 : Internet Technology and Governance

    (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-11 – p.24/37
  25. Enviroments and Communication Photo by SLU Madrid Campus Can humans

    communicate with each other in any environment? We use signals under water The meaning is conveyed What can you change? What has to remain unchanged? Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-11 – p.25/37
  26. Protocols and Layers Lecture 3 : Internet Technology and Governance

    (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-11 – p.26/37
  27. Definition? Protocol 1. The forms of ceremony and etiquette observed

    by diplomats and heads of state. 2. Computer Science A standard procedure for regulating data transmission between computers. — “The American Heritage Dictionary” Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-11 – p.27/37
  28. Network and OSI Reference Model OSI : Open Systems Interconnection

    Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-11 – p.28/37
  29. Networks and a Relay Lecture 3 : Internet Technology and

    Governance (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-11 – p.29/37
  30. Definition? Network 1. An extended group of people with similar

    interests or concerns who interact and remain in informal contact for mutual assistance or support. 2. Computer Science A system of computers interconnected by telephone wires or other means in order to share information. — “The American Heritage Dictionary” Sorry for the obsolete definition Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-11 – p.30/37
  31. Railway Model of Networks In the railway model, “×× line”

    is a network Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-11 – p.31/37
  32. Railway Model and a Relay "SFMBZTUBUJPODPOOFDUTUIF OFUXPSLT "OFUXPSLJTEJSFDUMZ DPOOFDUFECZBUSBJO -"/

    3BJMT 5P[BJ-JOF 8BTFEB4U &YJU 8BTFEB6OJW 8BTFEB 3BJMT .JUB-JOF .JUB4U ̖ ,FJP6OJW .JUB 3BJMT ɹ0UFNBDIJ4U .JUB-JOFc5P[BJ-JOF Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-11 – p.32/37
  33. Railway Model and TCP/IP 3BJMT 5P[BJ-JOF 8BTFEB4U &YJU 8BTFEB6OJW 8BTFEB

    3BJMT .JUB-JOF .JUB4U ̖ ,FJP6OJW .JUB 3BJMT ɹ0UFNBDIJ4U .JUB-JOFc5P[BJ-JOF *1DPOOFDUTTUBUJPOT 5$1DPOOFDUTUXPFYJUT 5$1 *1 Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-11 – p.33/37
  34. TCP/IP Lecture 3 : Internet Technology and Governance (1) —

    FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-11 – p.34/37
  35. IP Does Not Guarantee Does not guarantee packet delivery No

    performance or reliability requirements for lower layer networks No lower limit, and no upper limit ← Easy to enter, and does not hinder development Does not guarantee packet delivery order Can cope with congestions and faults by changing the route TCP recovers from errors Resend packets and/or rearrange the order Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-11 – p.35/37
  36. Railway Model and TCP/IP (Story of students sending scrolls) 3BJMT

    5P[BJ-JOF 8BTFEB4U &YJU 8BTFEB6OJW 8BTFEB 3BJMT .JUB-JOF .JUB4U ̖ ,FJP6OJW .JUB 3BJMT ɹ0UFNBDIJ4U .JUB-JOFc5P[BJ-JOF *1DPOOFDUTTUBUJPOT 5$1DPOOFDUTUXPFYJUT 5$1 *1 Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-11 – p.36/37
  37. See You Next Week! Lecture 3 : Internet Technology and

    Governance (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-11 – p.37/37