Who is John Galt?
In Fifty Days, Payments Innovation Will Stop In Silicon Valley
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Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley
#62Doesn't all regulation stifle innovation? If I wanted to sell a homes in a skyscraper made of papier-mâché, building codes would prevent me from doing that. But that's not necessarily a bad thing: the first time someone leaves their soldering iron on while they're not using it, the building burns down and we have five hundred dead families on our hands. "Innovators" tend to think about the good aspects of their ideas…
No I don't think most regulations are good for society in aggregate, including building codes. What if we had software codes to make sure we write secure software, would that be a good or a bad thing?
Take this payments law for example. Its intended objectives are admirable but I don't believe it will accomplish them nor benefit consumers in the long run.
By artificially imposing a high barrier to entry (licensing fee), the consequence will be to encourage the formation of monopolies.
Furthermore, payment companies will have a lesser incentive to secure their service or build a reputation of trust since consumers will be led to believe that "all payment companies must be secure since they are all approved by the government". What was once an important competitive advantage will lose a lot of its importance.
There are probably other perverse effects I could think of but my point is that things are much more complex than they might seem.
Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley
#63Here in Europe, PayPal (which is acting like a bank) had to get a banking license (like any other bank). As far as I know they didn't go bankrupt yet, so it can't be a wholly bad thing. If I drive a vehicle that acts like a car, I need a drivers license. If I run a service that acts like a bank I need a banking license. I really don't see a problem here.
> I really don't see a problem here.
I tend to agree. Surety bonds have been effective for a long time to ensure completion of services in case of fraud or failure on the part of a contractor or service provider. States have been requiring surety bonds for many kinds of licensed professions for years, building contractors being a big one.
Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley
#64What does this mean for systems like Facebook Credits?
Nothing. Facebook credits are not a money transfer system, it's whats known as a 'closed loop' system. If they opened it up so that anyone can take a payment with a facebook credit and receive dollars then they would start to fall under the money transfer arrangements and would require these restrictions. I don't think $500k is much of a barrier to them getting into this business however...
Can't anyone build a Facebook app that takes payment in Facebook credits, and then cash out that payment into dollars?
Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley
#65Can this affect Bitcoin, and if so, how?
Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley
#66Earlier quoted context omitted.
Nothing. Facebook credits are not a money transfer system, it's whats known as a 'closed loop' system. If they opened it up so that anyone can take a payment with a facebook credit and receive dollars then they would start to fall under the money transfer arrangements and would require these restrictions. I don't think $500k is much of a barrier to them getting into this business however...
Can't anyone build a Facebook app that takes payment in Facebook credits, and then cash out that payment into dollars?
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Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley
#67Doesn't all regulation stifle innovation? If I wanted to sell a homes in a skyscraper made of papier-mâché, building codes would prevent me from doing that. But that's not necessarily a bad thing: the first time someone leaves their soldering iron on while they're not using it, the building burns down and we have five hundred dead families on our hands. "Innovators" tend to think about the good aspects of their ideas…
Government regulation is in just about every case either not needed at all or better provided through non-coercive institutions. Since government innovates more slowly than private industries, government regulation tends to become outdated, going from common-sense prudence to arbitrary burden on innovation. For example, right now the Mississippi River in the US is flooding, destroying many homes. This is a huge loss partly because homes are very expensive. Maybe it would make sense to have some housing constructed of paper-mâché, not try so hard to resist disaster, but instead concentrate on making it cheap to rebuild. Government building codes prevent this kind of innovation.
Regulation reflects a lack of creativity. It says, "There is no other way to do this." But maybe there is another way and the politicians just can't think of it. They shouldn't be allowed to limit other, more enlightened people.
The above assumes that regulations are honestly designed to promote the public good, a dubious assumption. Often I suspect that regulation is designed to protect influential but inefficient businesses against competition.
Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley
#68Earlier quoted context omitted.
And most startups don't go into banking. Seriously, if you're going into that kind of business you should have that kind of money behind you.
Why is banking (specifically money transfering) different than other kinds of business? Seems to me that money transfer is a particularly easy business for the market to regulate. A failed money transfer is a lot easier to spot than, say, a dangerously defective physical product.
A fraudulent one isn't though.
You're also dealing with especially sensitive data, life ruining data if it gets into the wrong hands.
Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley
#69So, a new startup comes along, and things are going well. The have new, innovative ideas that satisfy the needs of consumers. They manage to get a few hundred thousand dollars from a VC so that they keep operating for another 6 months. This startup offers a service that is cheaper, safer, quicker and generally more efficient that what is currently available. All of a sudden they'll be breaking the law unless they han…
I generally agree. What most people often don't realise is that a lot of regulations that are allegedly in place to protect to consumer are actually there to prevent established interests.
This is particularly true of licensing. The standards for licensing and the like are often co-opted by the industry/profession being licensed. As such, they use licensing to raise the barrier to entry, effectively limiting competition.
One example that comes to mind is that the aestheticians in Texas at one point were fighting to require people that do threading to get a license. I believe said license would require thousands of dollars and hundreds of hours to obtain. Ultimately, there was absolutely nothing about threading the license at all. I am not sure if this law was ever passed, but it is merely on example of licensing works in practice to hurt competition, raise prices, and hurt the consumer.
Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley
#70Doesn't all regulation stifle innovation? If I wanted to sell a homes in a skyscraper made of papier-mâché, building codes would prevent me from doing that. But that's not necessarily a bad thing: the first time someone leaves their soldering iron on while they're not using it, the building burns down and we have five hundred dead families on our hands. "Innovators" tend to think about the good aspects of their ideas…
I wouldn't go as far as to say all regulation stifles innovation. A completely unregulated market may very well stifle innovation also - i.e., when consumer trust of that market is so low as to discourage economic activity. That is a rather extreme case, though. I think the more relevant point is that all regulations have overhead - even ones that don't charge a $500K bond. This is something governments sometimes see…
An unregulated market will spawn entities that provide the services it needs. This includes security and trust. Insurance companies, for example, are entities that people trust to protect them against loss. Rating agencies are entities that people trust to provide risk assessment.
The difference between non-coercive (private) entities and government is that non-coercive entities adapt better. So, for example, if you're planning to transfer billions over many years with one bank, you'd want the bank to have all kinds of security. But if you just want a quick, cheap way to transfer 25 cents in a micro payment over the web, you probably don't care if the startup "bank" you use has a $500K bond.