Financial technology in the living room. Generated by Stable Diffusion XL Beta FinTech — Financial Innovation and the Internet 2023 Fall Lecture 2 : Overview of FinTech (2) Kenji Saito, Graduate School of Business and Finance, Waseda University Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-13 – p.1/40

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 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-13 – p.2/40

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) Let me do it again now through Zoom chat Trial automatic transcription for lectures will be posted at Discord Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-13 – p.3/40

I would like to remind you . . . Please 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 2023 Fall — 2022-10-13 – p.4/40

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 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-13 – p.5/40

Last Week, We Did . . . Brief(?) self introduction of the lecturer and a demo that A-thinking can be automated 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 Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-13 – p.6/40

Today’s Topics Orange Juice Test 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? Discussion : Does FinTech Free People? Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-13 – p.7/40

FinTech Intrinsically “Destroys” It’s possible to maximize profits through an engineering approach under the current rules of financial capitalism (cf. financial engineering) But FinTech is inherently a game-changer, changing rules and creating changes that make traditional financial capitalistic society obsolete Blows the foundation itself New technology allows us to bypass the old ways The impact of this on “the foundation” is immeasurable Ex1 : YouTube, Uber, Airbnb Separation from ownership of broadcasting stations, vehicles or real estates Ex2 : Visa ↔ AMEX brand holder, issuer, acquirer Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-13 – p.8/40

Examples Let’s see if you can come up with examples of FinTech Since it is so commonplace today, there will be an example of something that is not so common as a discussion topic Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-13 – p.9/40

Discussion: Zero money for passengers to pay to travel Let’s say, within a town How do you achieve it? It cannot be done? But this is also an orange juice test https://www.intercom.com/blog/the-orange-juice-test/ Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-13 – p.10/40

Changes in the Economy and Labor — How? Forms of Credit/Finance and Communications But More Broadly . . . Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-13 – p.11/40

Forms of Credit/Finance and Communications Information storage and dissemination platforms 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 2023 Fall — 2022-10-13 – p.12/40

But More Broadly . . . Security by the State Money Market (division of labor) Specialization of Expertise support support support DX finance issue taxes "Individual Perspective" and "Individual Construction" "Individual Perspective" and "Individual Construction" "Individual Perspective" and "Individual Construction" Automation, efficiency, inclusion and democratization To Unspecialization! Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-13 – p.13/40

Tetrad : A Tool for Analyzing Media Where media nearly equal industrial tools What haven’t you noticed lately? Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-13 – p.14/40

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 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-13 – p.15/40

Example : Tetrad of Automobiles Movement (faster and farther) Geographical 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 2023 Fall — 2022-10-13 – p.16/40

Honda UNI-CUB (the tetrad of the previous page is correct) 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 2023 Fall — 2022-10-13 – p.17/40

The Gutenberg Galaxy : The Making of Typographic Human Further 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 2023 Fall — 2022-10-13 – p.18/40

Tetrad of Printing Replication (homogeneous and many) Fixed point of view (of the authors) Censorship and out-of-print Digital media ENH REV RET OBS Renaissance Handwritten copies (mosaic media) Books as participatory 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 2023 Fall — 2022-10-13 – p.19/40

Gutenberg Galaxy (typography) Birth of the concept of “authors” (meaningless 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 2023 Fall — 2022-10-13 – p.20/40

Reverse Gutenberg Galaxy (digital media) Destruction of the concept of “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 2023 Fall — 2022-10-13 – p.21/40

Future of Monetary-Financial System? Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-13 – p.22/40

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 2023 Fall — 2022-10-13 – p.23/40

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 capitalistic society, inside of organization is more communistic Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-13 – p.24/40

By the way, What is a historic company? Here, historic 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 2023 Fall — 2022-10-13 – p.25/40

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 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 2023 Fall — 2022-10-13 – p.26/40

DAO (common noun) Distributed/Decentralized Autonomous Organization Organization whose management is automated Example : Bitcoin (Generalization would be a smart contract that hires humans) 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 2023 Fall — 2022-10-13 – p.27/40

Technology Changes Politics What’s politics? Coordination and organization of conflicts of interest among various powers and groups Example : 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 2023 Fall — 2022-10-13 – p.28/40

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 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-13 – p.29/40

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 2023 Fall — 2022-10-13 – p.30/40

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, DCJPY) 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 2023 Fall — 2022-10-13 – p.31/40

Tetrad of Monetary-Financial System (reprise) Exchange and consumption Savings and investment Specialization, agricultural/industrial society Inequality, exploitation and bankruptcy Bullshit jobs 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 2023 Fall — 2022-10-13 – p.32/40

What Goes On As money and finance sharpen, “exchange/consumption” stagnates (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 2023 Fall — 2022-10-13 – p.33/40

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 2023 Fall — 2022-10-13 – p.34/40

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) 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 2023 Fall — 2022-10-13 – p.35/40

Do you have any questions so far? Actually, it should 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 2023 Fall — 2022-10-13 – p.36/40

Discussion : Does FinTech Free People? Why should people be 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 2023 Fall — 2022-10-13 – p.37/40

Assignment Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-13 – p.38/40

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 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-13 – p.39/40

See You Next Week! Lecture 2 : Overview of FinTech (2) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-13 – p.40/40