Financial technology in the living room. Generated by Stable Diffusion XL Beta FinTech — Financial Innovation and the Internet 2023 Fall Lecture 3 : Internet Technology and Governance (1) Kenji Saito, Graduate School of Business and Finance, Waseda University Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-20 – p.1/48

This class is recorded Using Zoom The recordings could be used for research on (online) learning Transcribed for use and anonymized Will let you know when the necessity arises Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-20 – p.2/48

The lecture slides can be found at : https://speakerdeck.com/ks91 Recording and chat text will be posted at Moodle and Discord Note, however, that chat messages are often unnoticed I have invited you all to the Discord server of the class (continued from the past years) Trial automatic transcription for lectures will be posted at Discord Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-20 – p.3/48

Schedule (provisional) Lecture 1 10/6 Overview of FinTech (1) • Lecture 2 10/13 Overview of FinTech (2) • Lecture 3 10/20 Internet Technology and Governance (1) • Lecture 4 10/27 Internet Technology and Governance (2) on-demand Lecture 5 11/10 The World of Apps (1) Lecture 6 11/17 The World of Apps (2) Lecture 7 11/24 Blockchain (1) Lecture 8 12/1 Blockchain (2) Lecture 9 12/8 Smart Contracts (1) Lecture 10 12/15 Smart Contracts (2) Lecture 11 12/22 Smart Contracts (3) Lecture 12 1/12 Cyber-Physical Society and Future of Finance Lecture 13 1/19 FinTech Ideathon Lecture 14 1/26 Presentations and Conclusions Online presence is possible but not recommended for non-online lectures for interactivity reasons Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-20 – p.4/48

Last Week, We Did . . . Orang Juice Test (free riding service) Changes in the Economy and Labor — How? Tetrad — A Tool for Analyzing Media (Industrial Tools) Gutenberg Galaxy and Its Reversal Future of Monetary-Financial System? Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-20 – p.5/48

Today’s Topics Tetrad : A Tool for Analyzing Media (reprise) Future of Monetary-Financial System? Assignment Review Internet Technology Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-20 – p.6/48

Tetrad : A Tool for Analyzing Media Where media nearly equal industrial tools What haven’t you noticed lately? Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-20 – p.7/48

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? 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 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-20 – p.8/48

Earth-Scale OS (2007)→ Meta Nature Anthropology Informatics Environmental Studies Sociology Business Administration Politics Today Hardware Applications User OS Human Business Financial System Human Business Earth-Scale OS Automation System Earth Earth Near Future (as of 2007) Human Meta-Nature (Highly-automated decentralized social environment) Earth Near Future (as of 2021) Financial Big Crunch . . . future of monetary-financial system . . . is that what you mean?! And academia, of course Interface with “apparatus” is transformed into a dialogue with the automated system “Computer, tea, Earl Grey, hot.” Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-20 – p.9/48

Tetrad of Monetary-Financial System Exchange and consumption Savings and investment Specialization, agricultural/industrial society Inequality, exploitation and bankruptcy Bullshit jobs Meta-Nature 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 2023 Fall — 2022-10-20 – p.10/48

Assignment Review Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-20 – p.11/48

Assignment 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 Please be concise Deadline and how to submit October 17, 2023 at 17:59 JST From Moodle (mandatory) Optionally, you can also post to #assignments channel at Discord So that people can comment on your reports and start discussions more easily Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-20 – p.12/48

Trends and Measures Trends . . . of your reports Measures . . . how to improve the class 23 out of 26 students submitted (as of Thursday afternoon; better late than never) If you don’t see your listed items in the big aggregated tetrad we will see shortly although you thought they were original, did you by any chance submit using image (or PDF/PPT) instead of text so that they cannot be copied and pasted easily? (Just text, please) At Discord, too, please consider sharing by plain-text, as sharing by PDF/PPT means that we have to download your reports and manage files Effects on finance may be a little too conventional (albeit they are good) Considering effects in terms of ENH/OBS/RET/REV is nice There is something there that can be explored more deeply, especially in RET and REV But normally, what everyone knows is 20 years behind (Drucker, 1990) RET and REV seemed difficult to think about (you did pretty good on RET, though) RET in this case : what was made “obsolete” primarily by TV, printing or physical space REV in this case : similar effects as those of TV, printing or physical space Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-20 – p.13/48

Tetrad of the Internet by You (collectively) ENH OBS RET REV Important but often overlooked effects Revived because of the obsolescence Metaverse virtual reality Gift economy Mental health issue (Like anxiety and depression) Access to centralized knowledge Photo albums (Instargram) Decentralization? word of mouth Archival of historical records and data Instant global communication Vast information access Interconnectivity Over-reliance on digital infrastructure leading to potential vulnerabilities Spread of misinformation or "echo chambers" Ideology polarization Censorship and misinformation Abuse/bullying and hatred Overwhelming tasks Filter bubble Monopolistic power Constant exposure to advertisements job displacement (replacing human workers) Government regulations No own knowledge Internet addiction Surveillance capitalism Financial frauds/scams Use of any service at any time Fake news Social engineering Loss of privacy and data security concerns Social networking and online communities E-commerce Creativity Competitivity digital nomads Diversity of products and services Financial transactions navigation Equality Information generation Information dissemination Information symmetry Worker collaboration and efficiency Real time updates on current world events Online services Dopamine/Joy from entertainment Loss of physical experiences (As virtual realities or online experiences become commonplace) Physical Media (CDs, DVDs) Manual data storage and record-keeping Physical libraries for research (due to online databases) Localized businesses without online presence Personal storytelling (Youtube and TikTok) Democratization of content creation Work from home Transmission of Specialized Knowledge Individualism Public discussions Generalization freedom of speech Decentralized Revival of niche communities and interests Being connected to everyone in the "tribe" Fax Machines In-person interactions Written letters Yellow Pages Single purpose networks Bank tellers Elite politics Time spent waiting for services Office work Geographic restriction (Borders) Phone cable network (which was made obsolete due the internet) Blue . . . interesting Black . . . suitable Gray . . . controversial (IMHO) Let’s see whether the classi- fication is right or not later Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-20 – p.14/48

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 2023 Fall — 2022-10-20 – p.15/48

T-san’s View Digital Barter Systems: Platforms enable swapping goods/services without traditional currency ⇒ Money functions to solve the challenge of “double coincidence of wants” So, if we can solve the double coincidence of wants in a different way, then we do not need the money Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-20 – p.16/48

T-san’s View Push banks/financial institutions to profit from obscure(unethical?) sources ⇒ That is interesting Does this mean that they “have to” or “necessarily” profit from obscure sources? Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-20 – p.17/48

L-san’s View Service based economy: Nations with robust Internet infrastructure will see an increase in the creation of service-oriented businesses like Uber Eats ⇒ Probably, And these will “necessarily” be automated Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-20 – p.18/48

W-san’s View Challenges for the elderly or areas with limited internet access ⇒ These are important problems But why do you think the elderly are so poor at the Internet? They can book and record TV programs on video “First mile” problem is being tackled Let us not forget to value the user’s perspective Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-20 – p.19/48

T-san’s Comments I like that we spend most of the time focusing on the philosophical side of the matter instead of the technical/info Question on “money” itself, would be a good addition to what we have discussed so far ⇒ Perhaps we will think about it throughout the semester Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-20 – p.20/48

Y-san’s Comments I love coding and aim to work in banking I’m eager to learn how to apply Fintech in the industry, stay current with trends, and develop essential skills ⇒ You also mentioned “De-banking” If banks were to disappear, it would be the ultimate de-banking Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-20 – p.21/48

N-san’s Comments I really enjoyed the class so far The materials are pretty new to me yet very inspiring, particularly the concept of A- and X-thinker (an eye-opening one!) I’m interested to know more about how the new technology will transform financial businesses in the next 5-10 years Since the financial sector can influence people’s and businesses’ decision-making, I think it will play a pivotal role in shaping the future world Will human decisions (financial or otherwise) be influenced or directed by AI without us even knowing that? ⇒ Our decisions may already be unknowingly influenced by something Through all sorts of media We also want to be sensitive to how AI and the people behind it are becoming increasingly influential Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-20 – p.22/48

Let’s Talk ⇒ What would be the side effects of the Internet on finance? Let’s discuss in small groups First, look at the tetrad you made collectively, see if blue, black and gray classification is right and if there are more effects of the Internet Then discuss side effects of the Internet to finance It will help to look primarily at RET (retrieval) and REV (reversal) Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-20 – p.23/48

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 2023 Fall — 2022-10-20 – p.24/48

What’s “Digital”? Represents information by numbers Ex1 : Assigns a number to a character (encoding) (65 (0x41)) (97 (0x61)) (‘0x’ stands for hexadecimal) ASCII (American Standard Code for Information Interchange) / UTF-8 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 (which is far below studio quality today) Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-20 – p.25/48

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 Do you know what bus is? 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 (we will have a chance to take a deeper look at it in later class) More efficient transmission → Packet communication, compression One single physical communication medium shared by multiple uses at the same time Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-20 – p.26/48

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 2023 Fall — 2022-10-20 – p.27/48

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 2023 Fall — 2022-10-20 – p.28/48

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 2023 Fall — 2022-10-20 – p.29/48

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 2023 Fall — 2022-10-20 – p.30/48

Human-Dog Communication Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-20 – p.31/48

Mechanism of Communication Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-20 – p.32/48

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 2023 Fall — 2022-10-20 – p.33/48

Protocols and Layers Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-20 – p.34/48

Definition? Protocol 1. the official procedure or system of rules governing affairs of state or diplomatic occasions 2. the original draft of a diplomatic document, especially of the terms of a treaty agreed to in conference and signed by the parties 3. a formal or official record of scientific experimental observations 4. Computing a set of rules governing the exchange or transmission of data between devices — “Oxford Dictionary of English” Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-20 – p.35/48

Network and OSI Reference Model OSI : Open Systems Interconnection Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-20 – p.36/48

Networks and a Relay Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-20 – p.37/48

Definition? Network 2. a group or system of interconnected people or things a complex system of railways, roads, or other routes: the railway network a group of people who exchange information and contacts for professional or social purposes: a support network . . . a number of interconnected computers, machines, or operations: a computer network . . . — “Oxford Dictionary of English” Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-20 – p.38/48

Railway Model of Computer Networks In the railway model, “×× line” is a network (hopefully someday this map will look familiar for everyone) Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-20 – p.39/48

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 2023 Fall — 2022-10-20 – p.40/48

TCP/IP Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-20 – p.41/48

Railway Model and TCP/IP Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-20 – p.42/48

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 new development for improvements 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 2023 Fall — 2022-10-20 – p.43/48

Railway Model and TCP/IP (Story of students sending scrolls) Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-20 – p.44/48

Story of Students Sending Scrolls (1/3) Background — Waseda and Keio Univ. Two among the best private universities in Japan These two universities are known for their rivalry and matches in baseball and other sports known as “ ” (first characters of Waseda, Keio and match), although Keio students would often call it “ ” ;) For undergraduates, classes may have to be cancelled for students to go cheer on the baseball team Story The head of the Keio cheerleading squad sends a letter of challenge in the form of a traditional scroll to the head of Waseda’s cheerleading squad It is a very long scroll that has to be untied from Keio’s Mita campus, slipped into Mita Station on the Mita Line, and then slipped out from Waseda Station on the Tozai Line to reach the Waseda campus so that the head of Waseda’s cheerleading squad can read it This is a metaphor of stream communication over the Internet as we do it via Zoom at the class Two ways TCP (Transmission Control Protocol) . . . Don’t miss reading every word of it (e.g. browsing a web page) UDP (User Datagram Protocol) . . . Well, it’s a long scroll, and it’s okay if it’s missing parts (e.g. Zoom) Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-20 – p.45/48

Story of Students Sending Scrolls (2/3) Story – continued Either way, inside the entrance of Mita Station, there is a photocopier, which copies just part of the scroll at a time, and students pass through the ticket gate with one fragment each in their hand Each fragment is sequentially numbered from the top of the scroll Students are not familiar with the railway network, and when they ask the station staff how to get to Waseda, they are told to go to Otemachi, so they do Students ask again at Otemachi Station (router), and are told to change to the Tozai Line When they arrive at Waseda Station, a student operates a scanner/printer before the exit, scanning the fragments in numerical order and outputting a long scroll on the printer, and students pull it to the Waseda campus Now, some students may get lost on the way What would you do? Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-20 – p.46/48

Story of Students Sending Scrolls (3/3) Story – still continued TCP Students pick up their receipts (with fragment #) at Waseda Station and take them back to Mita Station At Mita Station, if a receipt is not returned, it is assumed that the fragment was not delivered, and another student is sent out with the fragment UDP Why do we care if some students get lost? (They are grown up, and we are certain that they will make it to their home) Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-20 – p.47/48

See You Next Month! Next week, the class will be on demand I will provide video and slide materials, and open a Q & A forum for discussion Enjoy Culture Day Holiday (Nov 3) Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-20 – p.48/48