In Fifty Days, Payments Innovation Will Stop In Silicon Valley • Hacker News Board

Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley

#151

Post by tptacek » Wed, May 11, 2011, 4:36 PM UTC

olalonde wrote: post #149

tptacek wrote: post #140

Earlier quoted context omitted.

I have a hard time getting too worked up about the prospect of squelching the money transfer company that can't afford 1/10th of 1 FTE to post a bond. That same company can't afford to secure their software (software security for a money transfer application is almost certainly more expensive than the cost of a 500k surety bond). Meanwhile, if you're against basically all licensing and bonding, you're naturally going…

I agree with you on most points. I wouldn't do business with a payment company that can't afford a 500k expense. Requiring insurance for moving furniture is also important to me, I wouldn't let a company move my furniture without them offering a solid warranty. What I question though is whose role it is to impose those requirements, the government or the customer? I believe it should be the customer's role. > Persona…

Ok, meanwhile, we're howling at the moon about requirements that are, in the scheme of how the government already regulates mundane businesses, totally business-as-usual.

If you don't believe in regulations at all, you don't believe in this regulation. Fair enough!

But if you're basically happy that we have an FDA and an FDIC and an NTSB and an FAA (as artificial examples; substitute your favorite California regs bodies): how is it unreasonable or surprising that California would want money transfer companies bonded? You can't build back porch decks without bonding. You can't move pianos without bonding. You can't sell cars without a license bond. But we want people to move cash without them?

Reasonable people, I suppose, can disagree about whether the bar for accepting and moving cash from people should be as high as the bar for re-siding a garage. But I don't think reasonable people can call the bar a conspiracy against the public.

Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley

#152

Post by yoyar » Wed, May 11, 2011, 4:37 PM UTC

jonknee wrote: post #144

yoyar wrote: post #52

So, 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…

> All of a sudden they'll be breaking the law unless they hand over half a million to the government. Or put up a few coins for a surety bond. If you're a financial startup and your investors don't trust you enough to put up bond money, you should probably find a different niche (or investors).

So, we assume they're going to commit some type of fraud or crime up front so they have to submit to posting bond, but the investors are supposed to trust them with another half million. Or, as you put it, a few coins. Wow, in your world a half million is a few coins. You live in a universe different than mine.

Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley

#153

Post by yoyar » Wed, May 11, 2011, 4:50 PM UTC

aduric wrote: post #121

yoyar wrote: post #52

So, 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…

If said company was truly innovative and satisfies the interests of consumers, I'm sure it won't have much trouble raising the cash necessary to continue being a law-abiding citizen.

The implication of what you are saying is that the half million for this startup company will present no extra hurdle and will have no impact on their ability to compete and get started (as you stated it "won't have much trouble").

This begs the question: what amount would be a barrier to entry into the market, 1 million, 10 million? Is there any amount of regulation and cost that you would consider a barrier to entry into the market? If as you imply a half million is not a barrier ("no trouble"), why is not a barrier, why is not a hurdle?

Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley

#154

Post by hugh3 » Wed, May 11, 2011, 4:51 PM UTC

natrius wrote: post #135

eropple wrote: post #122

Earlier quoted context omitted.

Sure is! A great reason to use a rapidly inflationary currency with no promises of stability or reliability. Oh, wait. Those are reasons not to use it. My bad.

You've mixed up deflation and inflation.

Slow deflation at first, rapid inflation eventually. That tends to be how bubbles work.

(Not to be confused with physical bubbles, which are the other way around...)

Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley

#155

Post by dpatru » Wed, May 11, 2011, 4:51 PM UTC

nupark2 wrote: post #92

dpatru wrote: post #70

Earlier quoted context omitted.

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'…

An unregulated market will spawn entities that provide the services it needs. Information and resource asymmetry are not easily overcome; how is your argument any different than a naive assessment of economics that fails to take into account the impact of information asymmetry on the decisions of otherwise rational actors?

> Information and resource asymmetry are not easily overcome;

The best way to "overcome" information and resource asymmetry is through a free market. In particular prices and word-of-mouth/"the Internet" do this work as well as possible. If a company does a good job for a good price, its fame will quickly spread. If it rips off customers, its infamy will quickly spread. No need for government to get involved a priori, although government can get involved in fraud prosecutions and to help defrauded victims get their money back.

> how is your argument any different than a naive assessment of economics that fails to take into account the impact of information asymmetry on the decisions of otherwise rational actors?

Not sure what you mean by this, but free market competition and innovation through new/better services is a way rich societies increase wealth. Government regulation just slows down the process.

Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley

#156

Post by lookofevil » Wed, May 11, 2011, 4:56 PM UTC

olalonde wrote: post #138

tptacek wrote: post #133

Earlier quoted context omitted.

Why require bonds for anything? Bonds aren't going to keep construction companies from committing fraud. They won't keep movers from making off with people's goods, or folding up shop when they get in traffic accidents. For that matter, why require millions of dollars of insurance coverage to work on infrastructure projects? It won't keep me from committing fraud, if that's my real goal.

I have nothing against private insurance. I have something against laws which make it mandatory. I think people should be free to decide for themselves what risk they are willing to take. For instance, the choice to do business with a relatively unknown payment service which offers low transaction fees or great customer support, at the risk of losing money.

So you're against the requirement to carry car insurance?

What happens when someone runs over you with a car and they have no liability or personal injury protection with which to compensate you for your medical bills and they have no money and therefore are judgment proof? Too bad, so sad? Shouldn't have been walking down the street?

Yes, this happens now, but now it's a criminal act to drive a car without insurance so you're breaking the law by potentially putting other people at risk.

Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley

#157

Post by lookofevil » Wed, May 11, 2011, 4:57 PM UTC

olalonde wrote: post #93

urbanjunkie wrote: post #75

Earlier quoted context omitted.

"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." Do you have any examples from reality where this has happened? Are insurance companies and ratings agencies really trusted agencies that…

All those work on the principle of trust despite not being regulated: - http://en.wikipedia.org/wiki/Certificate_authority - eBay feedbacks - http://www.escrow.com etc. Furthermore, magazines, blogs and retail store all act as rating agencies in some ways. Magazines have a strong incentive to only recommend quality products since their reputation is at stake. The same goes with retail store. They make sure they sell…

CAs suck and are unaccountable. Any of them can (and many of them have) issue a certificate for a site to an attacker.

eBay feedbacks can be gamed and I generally don't trust them.

Escrow services work, but they are generally regulated.

Your retail store example is laughable. I'm sure Walmart really cares about the quality of its products.

Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley

#158

Post by jbooth » Wed, May 11, 2011, 5:08 PM UTC

lhnn wrote: post #126

ra wrote: post #74

Earlier quoted context omitted.

Thanks for clarifying. I'd like to add that this is a good practice in the financial industry, and isn't a bad thing at all. It's consumer protection. And, $500k is actually a pretty low figure for this type of 'bond'. For example, in Australia I believe you would need a banking license (or a guarantor with a banking license) which requires a deposit of at least $40M in to an escrow account which is managed by the ce…

I'd like to say this should not be legislated, and people should choose who to do business with on their own. If they offer the government a bond to cover losses, then people might go to that business instead of some startup. OTOH, perhaps I don't care when all I'm investing in my "Silicon Valley Facespacecash" bank is $20. Another reason to use alternative currencies...

While we're at it, why have contract law? People should be able to figure out on their own who's likely to keep their word, and the market will punish those who break it.

Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley

#159

Post by dpatru » Wed, May 11, 2011, 5:11 PM UTC

tptacek wrote: post #147

dpatru wrote: post #141

Earlier quoted context omitted.

> Private companies have killed, enslaved, tortured, kidnapped, etc. There are a tremendous amount of examples of private companies being coercive. These are instances of private companies acting like governments. What characterizes private companies is that they do not use coercion (except of course when it's justified as in enforcing voluntary agreements and protecting property.) So for example, the original post w…

I like the argument that says that when things are good, they are acting like private companies, but when they're bad, they're acting like governments; ergo, private companies good, governments bad. Can we officially acknowledge that this part of the thread --- which is notionally about bonding requirements for money transfer companies, but is now discussing torture --- has officially gone off the rails?

The whole point of this thread is about whether bonding should be required by threat of force (or torture) by government. Advocates of government regulation claim yes. Opponents claim that there are better, non-violent ways in which consumers are protected. The issue is precisely the use of force. Nobody is saying that bonding is bad or that private rating agencies could not require bonding as a condition of endorsement.

Re: In Fifty Days, Payments Innovation Will Stop In Silicon Valley

#160

Post by nupark2 » Wed, May 11, 2011, 5:16 PM UTC

dpatru wrote: post #155

nupark2 wrote: post #92

Earlier quoted context omitted.

An unregulated market will spawn entities that provide the services it needs. Information and resource asymmetry are not easily overcome; how is your argument any different than a naive assessment of economics that fails to take into account the impact of information asymmetry on the decisions of otherwise rational actors?

> Information and resource asymmetry are not easily overcome; The best way to "overcome" information and resource asymmetry is through a free market. In particular prices and word-of-mouth/"the Internet" do this work as well as possible. If a company does a good job for a good price, its fame will quickly spread. If it rips off customers, its infamy will quickly spread. No need for government to get involved a priori…

If a company does a good job for a good price, its fame will quickly spread.

So what happens when that company is bought out by new owners, starts skimping on product safety, and 1,000 people die before the market notices?

If 1,000 people die, is the company held liable by the government?

If people band together to enforce preventative measures in the community (even through private means), such that such a thing doesn't happen again, have they created a regulatory government?