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

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

#161

Post by nupark2 » Wed, May 11, 2011, 5:18 PM UTC

randallsquared wrote: post #82

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…

Do you have any examples from reality where [an unregulated market spawning entities that provide trusted rating services] has happened? http://en.wikipedia.org/wiki/Underwriters_Laboratories http://en.wikipedia.org/wiki/Consumer_Reports

These are both government regulated non-profits. Compare to the BBB.

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

#162

Post by r00fus » Wed, May 11, 2011, 5:23 PM UTC

hnsmurf wrote: post #80

Every company in Silicon Valley is actually a Delaware corp anyway..

Every company doing business in California needs to have a license to operate here (and obey State laws). No easy loopholes here.

Companies mainly choose Delaware because Delaware is efficient and well-known for processing of paperwork and legal matters.

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

#163

Post by JoshTriplett » Wed, May 11, 2011, 5:27 PM UTC

tzs wrote: post #139

His argument makes no sense. He says that 43 other states have such regulations, so that if you want to do business nationally you have to get licensed in each, at costs ranging from less than California's new cost to more than California's new cost. So what is the significance of California making it 44 states? I doubt a new payment system that only works in a handful of states has much of a chance, so if regulation…

The difference: if you start a business in California, you have to care about California law, and federal law, but not necessarily any other states' laws. Similarly, Internet businesses don't legally have to collect sales taxes for states other than their home state (and most don't make the mistake of putting their HQ in a state with sales taxes), though various states have attempted to (illegally) claim otherwise.

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

#164

Post by olalonde » Wed, May 11, 2011, 5:28 PM UTC

lookofevil wrote: post #157

olalonde wrote: post #93

Earlier quoted context omitted.

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.

> 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.

Do you think the government would do a better job at providing CAs or rating eBay sellers? Do you think the government is somehow immune to fraud?

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

"I'm sure Walmart customers really care about the quality of products they buy at Walmart."

Walmart offers what customers want: cheap prices at the cost of lesser quality. Luckily we are still free to buy low quality products, because the government might "fix that" someday.

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

#165

Post by DavidSJ » Wed, May 11, 2011, 5:31 PM UTC

jeffb wrote: post #120

lutorm wrote: post #73

Earlier quoted context omitted.

... whose exchange rate against the dollar has gone up by a factor of 6 over the past weeks? If you had any debt nominated in Bitcoin, you'd be screwed.

You wouldn't be screwed if your business operates in Bitcoins, and your customers pay you in Bitcoins. If you take out a loan for 100 Bitcoins, you will still owe 100 Bitcoins, regardless of the USD exchange rate. If you aren't dealing in USD, it doesn't matter how much value the USD loses. Similarly, if you had debt denominated in USD, it wouldn't matter how much value the Zimbabwe Dollar or Weimar Republic Mark los…

The dollar has not reduced in value by a factor of six in the last few weeks. Nearly all of the change in the USD/BTC exchange rate is due to a reevaluation of the real value of bitcoins.

So even if you did all your business in them, it's likely prices would have fallen substantially in the last few weeks, and you would be screwed, per the grandparent.

That said, the source of BTC's volatility right now is precisely the fact that few people are doing business in them, and nearly all demand for them is speculative.

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

#166

Post by tptacek » Wed, May 11, 2011, 5:37 PM UTC

lookofevil wrote: post #156

olalonde wrote: post #138

Earlier quoted context omitted.

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…

I'm curious why someone thought this was an invalid point (I just modded it up). Aren't the principles involved in staking money for insurance, because you might cause damages that you can't repay personally, pretty much the same as those involved in staking a bond because your business might damage its customers?

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

#167

Post by arethuza » Wed, May 11, 2011, 5:45 PM UTC

anamax wrote: post #125

bugsbunnyak wrote: post #87

Earlier quoted context omitted.

You were alive three years ago; no? AIG, "AAA" rated CDOs, any of that ringing a bell?

You weren't paying attention. The ratings were issued by companies that had been given a monopoly by govt. Securitized mortgages were a creation of govt. The idea that you're missing is regulatory capture combined with govt encouraging transactions that didn't make economic sense otherwise. (One of the underappreciated consequences of RC is that it amplifies "private" bad behavior and shuts out good behavior.)

"govt encouraging transactions that didn't make economic sense otherwise"

More like the companies selling mortgages were desperate to get the loans off their balance sheets so that they could release the capital for new mortgages. As they didn't keep the mortgages for very long the level of risk they were accepting was low so they didn't do much checking on whether people could actually pay or not - they really didn't care.

I remember comparing my experiences of first getting a mortgage 20+ years ago where it was a difficult thing to do with how younger colleagues described things immediately before 2008 and things were totally different - they were giving mortgages to pretty much anyone who asked not because the government made them (I'm not in the US) but because it made them a lot of money!

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

#168

Post by olalonde » Wed, May 11, 2011, 5:46 PM UTC

tptacek wrote: post #151

olalonde wrote: post #149

Earlier quoted context omitted.

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 bod…

Don't mistake me: I do not think there is any sort of conspiracy going on and I actually believe the government's intentions are good. I simply believe they are wrong in how to achieve those intentions.

> 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?

I might seem pretty emotional about this, but in fact I'm not even American ;). Among the things you mentioned, I only know about the FDA and I do think Americans would be better off without it, for pretty much the same reasons I outlined previously (as a side note, I believe Health Canada bases its own regulations on the FDA). Milton Friedman explains it better than I can here: http://www.youtube.com/watch?v=OazixMEY9I0

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

#169

Post by slewis » Wed, May 11, 2011, 5:47 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?

dpatru might be using definitions you don't agree with but he/she is still positively contributing to the discussion. Seems on topic to me, just highly abstracted: what are possible systemic solutions to the article's issue? So I've upvoted dpatru's comments that were in the negative.

Thanks for the discussion, very interesting!

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

#170

Post by jonknee » Wed, May 11, 2011, 5:49 PM UTC

yoyar wrote: post #152

jonknee wrote: post #144

Earlier quoted context omitted.

> 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.

Fraud or criminal elements are not required. Old fashioned screw ups and security lapses do the job of losing other people's money just fine too. The bond requirements are just a method of basic consumer protection. Money transfers are a serious business with serious consequences, if your investors don't trust you with either the funds for the bond or the payments on a surety bond, you really are in the wrong business.

A surety bond means you only have to pay a small portion of the total. It's similar to insurance. You pay a company with larger resources to vouch for you in case you have a problem. Instead of ponying up (the refundable) $500K you pay something like $25k. You don't get it all back if you close up shop, but you didn't need to put much capital out there. This is how a lot if not most licensing bonds work.