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Overview of FinTech (2), Lecture 2 of FinTech

Overview of FinTech (2), Lecture 2 of FinTech

Slides I used at FinTech - Financial Innovation and the Internet, Graduate School of Business and Finance, Waseda University, on October 4, 2019.

Kenji Saito

October 04, 2019
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  1. Manifesto of Futurism.
    Lecture 2 : Overview of FinTech (2)
    FinTech — Financial Innovation and the Internet 2019 Fall
    Kenji Saito
    Professor, Graduate School of Business and Finance, Waseda University
    [email protected]
    Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-04 – p.1/37

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  2. The lecture slides can be found at :
    https://speakerdeck.com/ks91
    Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-04 – p.2/37

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  3. Before I forget
    . . .
    Please call me either “Kenji” or “Saito-san”
    I’m more used to them
    Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-04 – p.3/37

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  4. 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 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-04 – p.4/37

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  5. Last Week, We Did
    . . .
    Objectives, overview and 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
    Alibaba Group and Yahoo! JAPAN Group as examples
    Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-04 – p.5/37

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  6. Today’s Topics
    Information Revolution and Society
    Tetrad — A Tool for Analyzing Media
    Gutenberg Galaxy
    Future of Monetary-Financial System?
    Discussion : Does FinTech Free People?
    Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-04 – p.6/37

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  7. Information Revolution and Society:
    Toward the Future of Finance
    When did information revolution happen?
    Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-04 – p.7/37

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  8. Information Revolutions and Civilizations
    1. Spoken language (first industrial tool) (drives small number of people)
    Birth of humankind (approx. 50,000∼70,000 years ago?) ↔ hunter-gatherer society
    Civilization that lives in nature
    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 2019 Fall — 2019-10-04 – p.8/37

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  9. Forms of Credit/Finance and Communications
    Information storage and dissemination platform forms the basis for credit and
    finance
    Age of cuneiform and clay tablets
    Engrave on, burn or break (social system for contract cancellation) clay tablets
    (IMHO blockchain developers can learn much from this age)
    Age of horse carts and telegraphy
    AMEX (horse carriage courier)
    Western Union (telegraph company)
    Age of the Internet
    ICT companies expand into finance
    Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-04 – p.9/37

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  10. Tetrad : A Tool for Analyzing Media
    What haven’t you noticed lately?
    Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-04 – p.10/37

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  11. Tetrad (group of four)
    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 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-04 – p.11/37

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  12. Tetrad of Automobiles
    Movement (faster and farther)
    Geographical distribution
    Congestion and accidents
    EV and self-driving cars
    ENH REV
    RET OBS
    Freedom to move
    Personal space
    horses, carriages (related industries)
    Urban living and compact city
    New medium “retrieves” what was previously made “obsolete”
    But if compact city is OK, there’s 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 2019 Fall — 2019-10-04 – p.12/37

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  13. Honda UNI-CUB
    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 2019 Fall — 2019-10-04 – p.13/37

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  14. Gutenberg Galaxy :
    The Making of Typographic Human
    And how it is reversed with digital technology
    Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-04 – p.14/37

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  15. Tetrad of Printing
    Replication (homogeneous and many)
    Fixed point of view
    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
    Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-04 – p.15/37

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  16. Gutenberg Galaxy (typography)
    Birth of “authors”
    Scientific methodology
    Nationalism
    Prepared “movies”
    Clear distinction between finished and unfinished “products”
    Individualism
    Unification of popular culture
    .
    .
    .
    ⇒ Prepared the industrial society
    Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-04 – p.16/37

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  17. Reversed Gutenberg Galaxy (digital media)
    Destruction of “authors”
    Overturned scientific methodology
    Global perspective
    Everyone becomes a filmmaker
    Obscured finished and unfinished products ⇒ open design
    Promotion of collaboration
    Diversification of cultural events
    .
    .
    .
    ⇒ Preparing for the next society
    Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-04 – p.17/37

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  18. Future of Monetary-Financial System?
    Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-04 – p.18/37

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  19. Tetrad of Monetary-Financial System
    ENH REV
    RET OBS
    New medium “retrieves” what was previously made “obsolete”
    Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-04 – p.19/37

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  20. Tetrad of Monetary-Financial System
    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 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-04 – p.20/37

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  21. Iceberg Model of Trust
    o$SFEJU.POFZp
    8BUFS4VSGBDF
    5SVTU
    8FBLFS
    4USPOHFS
    .POFZ
    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 capitalist society, inside of organization is more communistic
    Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-04 – p.21/37

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  22. By the way,
    What is a historic company?
    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 2019 Fall — 2019-10-04 – p.22/37

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  23. Historic Companies Today and Tomorrow
    Example :
    British East India Company (1600)
    One of the first joint-stock companies
    Historic company today was the starting point of the current corporates
    Next company in human history?
    It brings an end to modern joint-stock companies
    Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-04 – p.23/37

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  24. DAO (common noun)
    Distributed/Decentralized Autonomous Organization
    Organization whose management is automated
    Example : Bitcoin
    If you think of users as shareholders, coins as shares, and miners 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
    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 2019 Fall — 2019-10-04 – p.24/37

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  25. Technology Changes Politics
    What’s politics?
    Coordination and organization of conflicts of interest among various powers and groups
    What if the platform could retrieve the stolen coins?
    If it can enforce the law, it is like Judiciary
    Who decides which action is a crime, who corrects it, who punishes whom?
    If “Code is Law” then Legislation
    Program code determines the order between people
    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
    . . .
    We are now living at the turning point of society
    Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-04 – p.25/37

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  26. Earth-Scale OS (2007)
    We don’t think of computer OS as 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 2019 Fall — 2019-10-04 – p.26/37

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  27. Amazon Go
    Shoppers are not conscious of the existence of 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 2019 Fall — 2019-10-04 – p.27/37

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  28. Various Digital Currencies Are Going to be Used
    Global currencies 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)
    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
    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 2019 Fall — 2019-10-04 – p.28/37

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  29. 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 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-04 – p.29/37

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  30. What Goes On
    As money and finance sharpen, “exchange and consumption” stagnates
    → Sharing economy emerges (which is ultimate form of FinTech)
    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 2019 Fall — 2019-10-04 – p.30/37

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  31. 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 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-04 – p.31/37

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  32. Toward a New “Hunter-Gatherer Society”
    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)
    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 2019 Fall — 2019-10-04 – p.32/37

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  33. Do you have any questions so far?
    Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-04 – p.33/37

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  34. Discussion : Does FinTech Free People?
    Why should people be freed? Are we not free already?
    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 2019 Fall — 2019-10-04 – p.34/37

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  35. Assignment
    Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-04 – p.35/37

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  36. 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 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-04 – p.36/37

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  37. See You Next Week!
    Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-10-04 – p.37/37

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