Why Fintech could only happen now.
“So if that’s the duration, what would be the spread, Mr. Mirolli?”
I’m sitting in my masters program and the room is silent — and not because I don’t know the answer. The professor has just run us through pricing algorithms on a Bloomberg Terminal for the 30 Year Bund and all I can think about are Mesopotamian Cowry Shells from 3000 B.C. It’s a Tuesday, and I’ve just gotten a glimpse at the future of commerce.
“The Internet is taking us back to Cowry Shells.”
Of course I didn’t say this out loud, though I hardly felt I needed to. If you’ve paid attention to the tech community at all, or are a subscriber to weekly blogs like The Fintech Feed (now the Greater Than One blog) , you’ve heard of this burgeoning sector of startups called Fintech; an anagrammed catcall for financial technology companies (think PayPal, Square, Stripe, TransferWise, etc.).
So why Fintech?
And I don’t mean, “Daniel, why do you write a weekly email blog about Fintech?”
I mean, why is Fintech — this space that combines rebellious bravado against Wall St. and the “October Sky” chops of scrappy building — even a thing? And why didn’t we see it sooner?
For some, this sector began in December of 1969 but for the rest of us it came in the late 80's early 90's.
Remember this noise? Was anyone else greeted with nostalgic chills listening to that?
That’s the Internet at version 2.0 — not Web 2.0 but version 2.0, the one that came after connected servers and mass-market modems. First there were server networks, then this crap, then message boards and social communication, and then —
…maybe it’s better if I show you.
A Brief History Of The Internet
That’s better. *raises coffee mug to Scannable and whiteboards everywhere*
So the Internet began as a collection of servers built by DARPA, Universities, and O.N.’s (read: Original Nerds). A really cool thing with not a lot of immediate impact in the very early days. Then we got the mass market modem and a distributed network and….
BOOM — Facebook! The Internet, now connected and global, could begin disrupting the first, best tool our species ever had — communication. Forums, message boards, “You’ve Got Mail”, the DotCom rise and crash, the trudging along of social networks until classic Web 2.0 and Digital Telecom cemented its place as a new medium (Ha! puns). We simply moved from a few subsidized entities (DARPA and Uni’s) to organic peer networks (forums) to social networks to B2C networks (Telecom).
Now, at the risk of sounding like a curmudgeon, I admit that I probably should have drawn the red line higher on scope of impact. Communication has changed, but not nearly as much as people think. The Internet didn’t give us all ESP. We still talk, write, draw (or post) pictures and share them with others. But the scale at which we can do this is now global. Picture a tribal fire several millennia ago, with people crowded around the most popular story teller or cave painter. We’ve given everyone that seat.
Fintech is no different.
First come individuals. Then many individuals form a group. Then the group communicates and becomes a community. And then the community begins to trade — ideas, goods, services, favors, coupons, bonds.
The community trades value.
This is how sociology has progressed for millennia. We’ve seen an explosion in enterprise software companies, from Signpost to Google for Business, enabling valuable communication and raising a collective finger to LotusNotes. Don’t make the mistake of thinking that Slack’s meteoric rise and fintech’s investment nearly doubling in 2015 have nothing to do with each other. They are correlated by us.
Adam Ludwin wrote an amazing piece back in May on this platform about the proliferation of the Blockchain in the coming era of fintech. There’s a part towards the end that I haven’t been able to ignore.
Joking about buying mobile minutes aside, this is incredibly important. It’s why I couldn’t answer my professor. Fintech is about communicating in value. Words mean different things to different people but language is our base currency of communication.
Fintech takes that one step further. There is very little that is objectively valuable. We, collectively, communicate what is valuable to us. Fintech allows for our personal subjectivity to be our collective objectivity. This coupon for that concert ticket. This Hulu subscription for that Netflix one. Your Swaption for my 30Y Bund.
There will be plenty of articles (and listicles like this one) about the unbundling of banking, the evolution of regulations and tax code, and cross-border capital flows without the use of FX. But don’t let anyone tell you we couldn’t have seen fintech coming. That we couldn’t have seen it sooner.
We did see it sooner. We saw it before there was Internet. We saw it in Mesapotamia at the birth of money. The Internet evolves like we do.
Agriculture. Server architecture. Industrial revolution. Software containers.
Food is cheaper. Clothes are cheaper. Information is cheaper. Phone service is cheaper. It lowers risk. It raises cooperation.
The Internet helps us be more human.
And Fintech? It’s just the next step.