Guillaume’s blog

Everywhere now there is the dawning consciousness among thoughtful minds that this age contains elements not understood or contained within the working rules of the older systems of government, economics, sociology, or even religion, and that it is due to new principles that have to be introduced into the base and can in no wise be met by a change in the superstructure of society. Even more remarkable, almost incredibly to those who have been hitherto lost voices crying in the wilderness, is the swiftly growing volume of agreement that it is the obsolete and dangerous monetary system that, primarily, is at fault. [...] All are agreed that here at least change is inevitable, the only doubt indeed now being whether any part of the system, which through a lack of imagination as to what might have been is still apt to be described as having “worked well in the past”, can survive into the future.

This was not written in 2008 in the wake of the great financial crisis, it was written in 1934 by Frederick Soddy in his book The Role of Money. Here are many of us, almost 70+ years later saying the same thing. I really hope we don’t have to wait another 70 years.

The move your money campaign has got a lot of visibility recently. Although the actual benefits of moving your money can be discussed, it seems pretty clear that it can’t be bad either for community banks and credit unions, since it will effectively do the job of breaking the big banks that the government seems unable to do.

Whether you agree or not with the impact of moving your money to smaller financial institutions, you will certainly agree that doing so is difficult.

If we put aside the transfer of loans, and focus on deposits, in particular checking, one hurdle is the fact that you may have given out your bank account number to a number of third parties for direct debit of various subscriptions: card insurance, health insurance, mortgage, etc.

How then can we make moving your money (almost) a one-click operation?

It seems to me that virtual bank account numbers may be an appropriate solution. A bank institution would issue virtual bank account numbers that you would configure to forward debit/deposit requests to a real bank account number. When you want to move your money, you would open a new bank checking account, transfer you funds to this new account, then re-map the virtual bank account # to the new account.

Such a virtual bank account scheme may also be used for managing relationships and preventing unauthorized access to your funds: you may be issued as many virtual bank account numbers as you wish and use each of them for each service provider who you want to automatically debit you. This way, you may decide to turn off a virtual account if you fail to stop the relationship with the provider in other ways.

A service provider providing virtual bank accounts could provide a centralized view of the automatic debit/deposit that you have agreed to, in VRM fashion.

I follow both FriendsClear and LendingClub on Twitter. They are both peer-to-peer lending services, the first one focuses on the French market and the second one focuses on the US marked. I find their Twitter icon a bit too similar. Is it just me?

Over breakfast this morning, I read Chapter 3 of SuperFreakonomics: Unbelievable Stories About Apathy and Altruism. The chapter mentions among other stories, the Ultimatum game and the Dictactor game, and their criticism of John List. Where many economists see in these games the proof that humans are altruistic by nature, John List only see the effect of selection bias (non-do-gooders not participating), scrutiny (doing good because you are being watched), and context in lab experiments.

Excerpts from the chapter:

Most giving is, as economists call it, impure altruism or warm-glow altruism. You give not only because you want to help but because it makes you look good, or feel good, or perhaps feel less bad

If John List’s research proves anything, it’s that a question like ‘Are people innately altruistic?’ is the wrong kind of question to ask. People are people, and they respond to incentives. They can nearly always be manipulated – for good or ill – if only you find the right levers

My opinion

I tend to hope in humans’ altruistic nature, but I’d rather bet on their ability to be ‘manipulated’ (wrong word) into being so, provided the right incentives.

One powerful incentive is publicity of one’s actions. A paper I read more than a year ago titled Donors to charity gain in both indirect reciprocity and political reputation, runs an experiment that supports the idea that people tends to donate more when they know that their donations are public information. If scrutiny of participants to an experiment gives them incentives to be more altruistic, then I don’t conclude that people are not altruistic, but that we should promote the use of public spaces where people’s actions can be judged by others and accounted for in a way that can be easily consumed by everyone. This means providing quantitative expressive forms, or quantitative derivatives of qualitative forms, and in general it means opening up data to credibly complement the traditional economy with a knowledge-like economy (for lack of better term).

I noticed that Dropbox seems to have no marketing or product management people in their team. They’ve automated that role it seems with their feature request voting system. Details of the voting scheme below:

Dropbox feature request voting system

Just finished reading this paper: Surfing a web of trust: Reputation and Reciprocity on CouchSurfing.com.

Below are my notes.

Trust is still a local phenomenon:

whether a person will vouch for another is strongly localized on the network – depending primarily on the closeness of the relationship, followed by indirect yet still local ties

declared trustworthy, on CouchSurfing can best be predicted based on the direct interaction between the two individuals: their friendship degree, followed by the overall experience from surfing or hosting with the other person, and also how the two friends met.

Declared trustworthiness (vouches) seems less reliable than computed trustworthiness based on contextual information such as the friendship degree, type of friendship and how the two friends met:

there are indications that vouches may be given too freely. [...] For example, many of the vouches were exchanged between individuals who had met through CS meetings [...] these vouches artificially inflate the trustworthiness of those who have the benefit of living in cities with many CS meetings

Another reason behind the high rate of vouching may be its public nature. It can be awkward for friends to not give or reciprocate a vouch, even if privately they have reservations about the trustworthiness of the other person.

I started this list of opposites to articulate the transition from our traditional economy to the knowledge economy. The knowledge economy is becoming increasingly important, but let’s not kid ourselves, it has still a long way to go to overtake the traditional economy. Although this transition will accelerate further, the two economies will cohabit for a long time and people will have to work/play in both, but an increasing number of people will be able to thrive by being only part of the knowledge economy.

Please suggest yours in the comments.

I tried a few money management queries on hunch today. Hunch is a service that lets anyone create automated decision assistants for others to use.

I have to say that there are currently not many questionnaires I found useful, but it seems to me there is a largely untapped potential for financial institutions and other players focused on financial consumer eduction to help consumers make decisions. I think these questionnaires could be particularly useful if they can be combined with financial calculators.

Here is a sample of the “hunches” I tried:

• Which savings account should I use?
• Shoud I use a bank or credit union?
• Which type of savings account should I get?
• Should I use a credit or a debit card?

I wonder what liability risk there is with such questionnaires and whether they fall under specific regulations.

Some excellent metaphors for explaining some Wall-Street business models:

• Arsonist/Fireman (AIG): You get paid to start the fire, then you get paid even more to stop it. Video
• Arsonist with fire insurance (Goldman): You make sure you’ll get paid when your house burns, then you burn it down. Document

The two can work together very well.