Marc Andreessen on big data, Bitcoin and upending the world of finance

http://www.washingtonpost.com/business/in-his-words-marc-andreessen-on-big-data-bitcoin-and-upending-the-world-of-finance/2014/10/15/8fb050d2-5304-11e4-892e-602188e70e9c_story.html

by aet • 12 years ago

53 72 12 years ago

washingtonpost.com

pptr1• 12 years ago

Marc is extreme smart and talented individual. But when your on Twitter 24/7 and keep on making predictions your gonna be wrong at times. Sometimes you can be wrong in a really big way.

larrys2• 12 years ago

It's a good advertisement for Marc and it serves a marketing purpose of continuing to get him media exposure which is good and keeps him on the radar of entrepreneurs and other VC's and burnishes his image more in the media. So he ends up getting more exposure.

Business wise of course he doesn't have to be right all the time obviously only right enough to have some big scores. Besides people rarely do follow ups detailing the missed predictions and even if they did they would mention the successes that made up for the failures and how that's kind of the VC model.

diminish• 12 years ago

He's simply trying to talk "up" bitcoin, builds a kind of self-fulfilling prophecy. If bitcoin takes off some day, Marc was the guy.

spacefight• 12 years ago

And of course his investments might take off too. Coinbase etc.

idlewords2• 12 years ago

I haven't seen any evidence that he's particularly smart. The guy had an early success that convinced him he can see head and shoulders above others. This turned him into a write-only visionary. Like many such people, he's entertaining to read because of the strength of his convictions, but it's probably a bad idea to take him too seriously.

applecore2• 12 years ago

That's taking a dim view of the man's prolificacy, or maybe I'm not understanding what "write-only visionary" means.

ThomPete4• 12 years ago

I had a discussion with him around inherrent value in currency btc, fiat etc and I was actually quite surprised at how unreflected his view seemed to be.

But I would still consider him a smart guy just not a clairvoyant.

aseem• 12 years ago

“But think about the scenario of a loan officer talking to a prospective client. To software people, that looks like voodoo. The idea that you can sit across the table from somebody and get a read on their character is just nonsense."

This coming a Venture Capitalist...

larrys2• 12 years ago

Agree "this coming from a VC" but at scale it makes more sense to have something like a community rating system (or algorithm) rather than having to make individual decisions face to face. Doesn't mean mistakes can't be made (by either the loan officer or the community or that it can't be gamed but it definitely provides a benefit)

Marc isn't investment in a large number (relatively) of entrepreneurs. He can afford to take the time to incorporate "across the table" into his decision making process.

(If I've misunderstood your point please let me know..)

justincormack• 12 years ago

Either way, loan officers do not talk to clients much any more, it has all been automated. "Computer says no" etc.

misaelm2• 12 years ago

That is mostly the case for consumer loans. For commercial lending, the parametric score is just one factor of the overall underwriting analysis which, among other things, has loan officers talking directly to clients about their businesses.

waterlesscloud• 12 years ago

Thanks in part to software I wrote! I feel like I've made such a useful contribution to society!

abalone11• 12 years ago

Most consumer transactions are weighted with a 3 percent fee.

This is the single most fundamental misunderstanding in the bitcoin camp.

First of all it is only in some countries like the U.S. where fees are in the 2-3% range. Others have regulated that fee away already. In fact, the U.S. just recently regulated debit card interchange down to 0.05% + 21 cents.[1]

Second -- and this is really important -- most of that fee goes back to the consumer in the form of reward programs. That's primarily what they are funding: 1-2% cash back programs, free travel, etc. Not the "100,000 people and 1970s mainframe computers" that Marc describes.

So, the opportunity to lower fees (1) doesn't exist in many places, and (2) where it exists it consists of taking value away from consumers.

So no rational consumer will voluntarily transition over to a lower-benefit instrument. If U.S. merchants really wanted to experiment with the future of "lower fees", just try accepting debit cards only (not credit cards). See how consumer like it. Great for merchants, not so much for customers who want their cashback programs.

Even where lower fees have been forced through regulations (Australia), it did not result in a general 2-3% reduction in consumer prices. Guess what, merchants kept that margin.[2] This is why big merchants like Walmart are resisting Apple Pay in a futile effort to push their own CurrentC, a new instrument that bypasses card networks and deducts directly from your checking account. But guess what: it takes value away from consumers. Exactly the same problem with bitcoin for consumer payments.

This is why it will have an extremely tough time replacing credit cards -- and that's before we even get to the matter of consumer protections. You need a trusted intermediary to be able to enforce chargebacks, which protect consumers against ripoffs. You can't do it with insurance alone; you have to be able to reverse transactions. So by the time you add intermediaries back in, Bitcoin is just another centralized card network with an exotic protocol for moving money. It's the next Discover card, sans card.

There may be more specific niches where bitcoin is useful. But this notion that bitcoin will save us all 3% on purchases is just plain uninformed. And unfortunately it's at the foundation of so much of the investment in this area.

[1] http://www.heartlandpaymentsystems.com/Durbin/What-is-the-du...

[2] https://www.competitionpolicyinternational.com/assets/Hot-Tu...

"Another predictable result is the absence of evidence that consumer prices have fallen as a result of lower merchant discounts. This is not surprising because the cost savings are too small to be measurable with any degree of confidence. However, based on the economics literature on pass- through effects, we believe that it is highly unlikely that consumers have received any significant benefit over the period of time considered given the likely sticky prices and high concentration in the Australian retail sector."

beaner• 12 years ago

most of that fee goes back to the consumer in the form of reward programs.

I don't really buy this. Why not just not have the fees and let prices be lower so that consumers have more cash? Cash is always better.

I assume most people never take advantage of most of their points, essentially sacrificing that 1-2% to the credit card processor. The processor knows this, which is why they do it.

droidist2• 12 years ago

Your last point is true, also rewards and loyalty programs have a lot of influence over people. It's similar to how gamification works in games like FarmVille. People get really into it and want to get more airline miles, level up, etc.

hnnewguy• 12 years ago

Why not just not have the fees and let prices be lower so that consumers have more cash?

For the same reasons that coupons are immensely popular. You can target consumers who have the greatest price elasticity, and take advantage of those with the lowest.

namecast2• 12 years ago

Agreed. And the rewards aren't paid for with the fees charged to the customer; they're paid for with sweetheart deals between the payment processor and reward provider. There's nothing wrong with this even - it's biz dev 101.

As an example: Mastercard (let's say) offers American Airlines cobranding, marketing (in the form of newsletters and emails pushing me to use miles whenever i pay my bill) and service perks (read: lower transaction processing fees) in exchange for frequent flyer points (note - not even dollars, a point is some fraction of a dollar in terms of flight purchasing power) for tickets on flights that would otherwise probably have a seat empty. Nice seats on full flights cost more points, of course. I get these points if I use my card often enough.

I'm fine with this arrangement - both parties are gaining here, and maybe I as a customer get a nice perk occasionally when I finally have enough incidental points saved up to go on a flight - but none of us is under the impression that there's some one to one relationship between fees charged and amount of money paid for redeemable rewards, and I expect that in volume both parties are actually making money off of this arrangement, not sacrificing revenues.

There's also a feedback loop at work here - Mastercard pushes points for American Airlines, more people use American Airlines, more of them end up using the same airline regardless of points due to familiarity and customer stickiness, so Mastercard gets more AA transactions and more fees overall - even though they've dropped the per-transaction fee rate, the increased volume makes up for it...

abalone11• 12 years ago

Why not just not have the fees and let prices be lower so that consumers have more cash?

Exactly what they did in Australia. Except guess what? Didn't result in lower prices. Merchants kept that margin for themselves.

Ahh, macroeconomics.

abalone11• 12 years ago

Why not just not have the fees and let prices be lower so that consumers have more cash?

Chicken-or-the-egg problem. It won't even theoretically lower prices unless everyone switched over and credit cards are dead, but few will adopt it if it means missing out on cashback and other benefits they currently enjoy. (And yes, plenty enjoy them especially savvier, wealthier consumers.)

And here's the crazy thing: it doesn't even lower prices in practice. Even where fees have been regulated down, the savings did not get passed on to consumers in the form of lower prices (this happened in Australia). Merchants kept that margin. It just didn't move the needle enough to overcome price stickiness and make an impact at the individual purchase level.. whereas annually 1-2% cashback or other rewards can feel more meaningful.

withdavidli• 12 years ago

Worked in retail for ~10 years. Very few customers ever knew what the average transaction rate was for a merchant, all they see is the total price, a good amount still complained about tax.

So what we have here is most consumers only see themselves getting rewards, nothing on about themselves wanting the best rewards card being the root cause of higher prices.

scenarios:

consumer: sees total price -> easy to calculate 1-2% rewards merchant: sees increase in transaction fees -> increases price

problems for:

credit card companies: getting rid of higher percentage rewards program might cause customers to use competitors cards instead.

merchant: accepting cash/debit only would mean losing sales for those that don't have those mediums available.

consumer: looking for the best deal. I'm the problem, I have about 5 cards, each optimized for a type of spending (restaurants, groceries, gas, foriegn transactions, etc).

Read about rewards causing the increase in transaction fees about 2 years ago, something I never thought about. The problem with increased rewards card is fairly invisible to most. Consumers love better rewards, merchants only sees increasing rates (but I think we're pretty jaded and just accept it or start using things like Square, Level Up, etc. Not thinking about root causes.), credit card companies recoupe losses through higher transaction rates.

rabbyte• 12 years ago

What about consumers that don't take advantage of reward programs? Does it make sense to have an infrastructure doing round trips on value for everyone when not everyone wants it? Are there not considerable inefficiencies in maintaining reward programs over just having straight forward transactions? Could we not build more efficient and automated reward programs into cryptocurrencies for those that want it?

taeric• 12 years ago

What about consumers that pay cash and aren't contributing to the fees?

Probably noise into the system. Also likely, unless you can take advantage of these fees across millions of people (which, by definition an individual cannot), it probably isn't something you can account for.

Consider, the number of stores that can refuse credit cards in an effort to save these fees for themselves is effectively nil. That is, it is worth it to most stores to pay the fees on the transactions that have them and not discount those that do not, versus force all transactions to not have them.

abalone11• 12 years ago

A lower-cost, lower-benefit option? Great idea.

Except it already exists. It's called debit cards. 0.05% + 21 cents. Still has some consumer protections (it can do chargebacks), just not the overhead of rewards. Accepted everywhere.

Just take the word "cryptocurrency" out of whatever you're proposing and you'll see that it's just adding techno-sheen onto what will inevitably be just another centrally-mediated payment network.

ThomPete4• 12 years ago

I agree in general with your sentiment however I am not sure I agree with the details.

First of all credit cards are primarily a US phenomena for a number of reasons, one of the biggest being credit score.

In most of Europe your credit score is defined negatively and not like in the US positively. I.e. you don't have to prove yourself to be credit worthy by paying back debt "they" trust you from the beginning and you can then kill that trust.

In the US you often have to get into this weird setup where you have to build debt to show you are good with money which to someone like me is an absurd logic but non the less it's the logic we have here in the US.

Second. Europe isn't really that advanced in the whole point system. Besides airline miles and perhaps the UK system I am not aware of any broad acceptance of points/coupon systems until recently.

Third of all. The 3% isn't really important when it comes to normal transactions.

Where it matters is in the ability for Bitcoin to 1) be a truly global wire transferable currency (there currently aren't such a thing) and 2) the ability to do micropayment which BTC will allow for

Lastly although the protocol doesn't allow for the puritan version that some of the biggest dreamers hope for, using the protocol as an open payment gateway will be a quantum leap compared to the proprietary systems we have today.

The reason why you need to build in risk with the current system is because you only need to get in one place to compromise it all.

Thats not the same with bitcoin and the very fact that it's build around NOT trusting IMO makes it very different and will be the reason why it could be winning in the long run. But yeah it might take a long long time to get there.

But I do welcome your more balanced view on the matter.

awt3• 12 years ago

This is a new take on fees that I hadn't heard before. Your accounting leaves 1-2% left to make up for fraud, which you don't mention (you mention chargebacks and consumer protection, but give no accounting of these costs in the fee structure), and was the main reason given for the fees in all descriptions I'd previously read. I haven't read that deeply on the topic so perhaps you're right.

I would like to point out that the "specific niches" you mention but leave unspecified are far more important, and frankly, dangerous than cheap transactions.

In fact I know of only one "niche" that Bitcoin serves well at all, which is that it provides absolute control over wealth in a way that gold cannot, in addition to providing far superior fungibility.

abalone11• 12 years ago

I mean the wikipedia article on Credit Card Fraud clearly states the average loss is just 0.07%. [1]

I don't know what you've been reading.. perhaps it's an indication of just how off the descriptions have been in these parts?

Chargeback costs are borne by the merchant, by the way, so they don't really impact the fee. I mention them because they require a central, trusted intermediary to enforce them, meaning that it's not just a "detail" for bitcoin to implement later.. If you want to enforce consumer protections, it changes the whole system back into just another "Discover card"-like new network.

[1] http://en.wikipedia.org/wiki/Credit_card_fraud

EDIT: I guess the exact figure's disputed but even at 1% there's plenty of margin for reward programs.

phil213• 12 years ago

Your accounting leaves 1-2% left to make up for fraud

The discount fees in no way pay for fraud. Fraud risk is entirely on the merchant.

Interesting (or sadly?) enough, merchants even pay the discount fee on chargebacks :)

virmundi2• 12 years ago

Fees have to go entirely. That won't help bring down the cost of any given item by 3%. It will make new micropayments possible. This, in turn can lead to sustainable businesses. For example, WhatsApp costs 99 cents a year (first year free). Currently they lose about 30% of that to fees (because of the base load of 21 cents). As a result, there currently is a fundamental minimum for a monthly service at 40 cents. Without fees, you can push that down near 1 cent.

Without fees it would be possible to have a service provide 25 cents worth of value and only be billed per month. Apps that had to use ads before or that had to hope to get bought by bigger companies, could make a reasonable about of money per month. This would lead to permanent jobs.

In the end, assuming your argument that fees == consumer deals, I submit the total value created by a micropayment service will lead to a better life for the average consumer. Therefore, they should drop fees.

abalone11• 12 years ago

You're talking about micropayments. That's cool. That's a niche where bitcoin could be useful. There are transactions that wouldn't be viable with cards today, so no conflict exists.

phil213• 12 years ago

In fact, the U.S. just recently regulated debit card interchange down to 0.05% + 21 cents.[1]

And any consumer using a debit card in the US is not the brightest bulb on the tree. Why shift the fraud risk from the issuing bank to yourself? There is zero benefit for the consumer here, and only helps the banks and merchants.

Yes, some banks will give you a "zero fraud guarantee" but I'd much rather 1) not have my bank account involved in a fraudulent transaction and 2) have the option of simply closing an account during a "difficult customer service event" and tell them to sue me if they think I'm lying. Even using a debit card as a Visa/MC is much better than entering your PIN and using as debit. No chance of someone stealing a PIN either.

Using a debit card removes most of your options as a consumer when dealing with fraud, and greatly expands your attack surface. No thanks.

I actually don't disagree with your premise, but vehemently disagree that using a debit card as a consumer has any benefit whatsoever to you. It's simply shifting risk (however small) onto yourself for zero gain.

If Bitcoin has a place - it would be more as a replacement for wire transfers and international transactions done between relatively trusted parties.

abalone11• 12 years ago

I think you misunderstood me. We are in agreement.

milesskorpen2• 12 years ago

Most Americans prefer not to spend money they don't have. I know this is hard to believe, but debit cards are far more common than credit cards, and are used for 50% more transaction dollars than credit cards: http://www.nerdwallet.com/blog/credit-card-data/credit-card-...

alexqgb• 12 years ago

Rewards programs turn out to have been an extraordinarily shrewd way for credit card issuers to align customer's interests with their own desire to limit the power merchants would otherwise enjoy as the conductors of transactions.

In other words, payment tech that makes life easier for sellers without driving a wedge between credit card companies and buyers is going to suffer opposition from two directions at once. Here again, the winning play comes down to satisfying the end user first.

abalone11• 12 years ago

I couldn't have put it better myself. If you look at the history of Visa & interchange fees, they've gone UP precisely because banks are competing to deliver more benefits to their customers. The "lower fee" advocacy is mainly coming from merchants. It's easy to sell a lower-fee system to merchants. But Marc Andreessen needs to ask: what's in it for consumers?

DenisM5• 12 years ago

Cash-backs are effectively loyalty programs with the card issuer.

Couldn't we replace them with merchant's own loyalty programs instead? Merchant would issue loyalty points to the user, redeemable for future goods and services. They would lose money, but gain repeat business, so it's good for them. The users would get their cash-back value, so they are happy as well. For example during slow times of the year my favorite steak place kicks back 100% of the steak price, to be used by the end of the lull period (Jan 1st - Apr 15th).

There could be also a secondary market for loyalty points - even if you're going home and don't plan to come back to the same Hawaiian restaurant, you could sell your points to someone fresh off the boat.

Then the restaurant owner could even moderate traffic by selling/buying his own loyalty points on the secondary market, replacing groupon and their likes. Exciting stuff!

abalone11• 12 years ago

Also a good idea. Also already exists. In various forms for decades.

What would be cool is an easier way to sign up for and manage merchant loyalty programs..... but that doesn't require a new payment method.

(Not sure about the secondary market though.. that seems to be an intentional choice on the part of merchants, not a technical limitation.)

sanswork3• 12 years ago

Why would I want to collect points at dozens of retailers instead of collect points at one that I can use across the board? Even with secondary markets all your doing is multiplying the effort and lowering the likelihood of ever collecting enough for a payoff.

milesskorpen2• 12 years ago

most of that fee goes back to the consumer in the form of reward programs.

This really isn't true. The VAST majority of Americans don't use credit cards — debit cards are 3-4x more common – and thus aren't earning any rewards. In fact, the rewards for affluent Americans are subsidized by the less well off. A pretty sad state of affairs.

7Figures2Commas• 12 years ago

“There is a growing idea in Silicon Valley that there are sources of data on consumer behavior we can use to predict creditworthiness. These will be completely different than the traditional approach to credit ratings, which are tremendously imprecise and ‘laggy.’ PayPal can do a real-time credit score in milliseconds, based on your eBay purchase history — and it turns out that’s a better source of information than the stuff used to generate your FICO score.

Traditional credit ratings are "tremendously imprecise"? That's an insane statement. FICO is a proven model and has weathered multiple business cycles. Virtually all of the alternative models being experimented with today haven't. A lot of these models are going to fall apart when the current environment, which has seen record low credit default rates, changes.

I'd love to see a $50,000 auto loan or $400,000 mortgage approved on the basis of eBay purchase history alone.

“The hypothesis is that there are many other similar sources of consumer data: credit card bills, social-network behavior, potentially even search history. Lots of people, both in the big Internet companies and at start-ups, are trying to get at these large pools of data and figure out new ways to do scoring. What they all have in common is that they are all being done outside of banks.

Notwithstanding the fact that credit payment history ("credit card bills") is factored in to a FICO score, a couple of things should be pointed out:

1. Many of the companies trying different models are doing so in an attempt to serve thin file borrowers. Not surprisingly, established players like Fair Isaac aren't sitting around twiddling their thumbs. They have their own solutions for these borrowers, like the FICO Expansion Score. Just because startups don't want to pay for somebody else's solution doesn't mean they're the only ones innovating.

2. Credit scoring has never been a core bank function so Andreessen's comment about this taking place outside of banks makes no sense and raises the question: does he even know what he's talking about?

“The minute any of these new credit vehicles can show any level of repeatability and reliability, the hedge funds come in and provide the funding. Hedge funds are very comfortable with analytic models. If you have sufficient stability, you can get leverage.”

The hedge funds are looking for yield. Putting aside the fact that a lot of this money is going to dry up when the interest rate environment changes, the hedge funds are less interested in analytic models and more interested in demand. In other words, it's about customer acquisition. An underwriting model alone won't cut it; you need to be able to find the borrowers.

Also, Andreessen seems to be viewing hedge fund participation as some sort of meaningful validation. Looking at hedge fund performance it should be obvious that most hedge funds are not "smart money" by any stretch of the imagination. When the current market turns, a lot of them will lose their shirts just as they did in 2008 betting big on junk like subprime mortgage-backed CDOs.

“Bitcoin is like technology that’s arrived from Mars, and so regulators don’t know what to do with it. That’s a good thing. What a lot of financial technology entrepreneurs will tell you is that if you’re going to innovate in financial services, you want to do something so new and so different that the existing regulatory system doesn’t know how to react to you. That is your window of opportunity.

This is silly and untrue. In early 2013, FinCEN issued guidance for virtual currencies, and the IRS weighed in earlier this year. Not surprisingly, just because Bitcoin is "new" and "different" doesn't mean that the standard rules and regulations don't apply, as some have learned the hard way[1].

[1] http://www.usatoday.com/story/news/nation/2014/09/04/bitcoin...

ThomPete4• 12 years ago

FICO score forces you to take on debt to show you are good with money. The US is debt ridden to the extreme.

Make of that what you want.

ohazi• 12 years ago

"Debt" in name only, perhaps. You don't need to pay a cent in interest to build up a very good FICO score. A credit card used correctly (paid in full at every statement) is plenty.

graycat3• 12 years ago

"Bank regulation tends to backfire"

Warning: <rant>

Hmm ..., let's see: As I recall, in the 1920s some "unregulated banks" were a major part of the mechanism that caused the US economic boom of the 1920s, the stock market crash of 1929, the banking crisis soon afterward, i.e., runs on the banks, catastrophic shrinking of the money supply, massive price deceases, massive unemployment, bankruptcies, the Great Depression in the US, the US slowing buying from Europe, the Great Depression spreading to Europe, the great economic stress in Germany, the rise of Hitler for a command economy, which actually did get the German economy going again, WWII, the deaths of maybe, what, 50 million people, maybe 100 million, ah, why sweat over few tens of millions of people more or less (right, Marc?), and, then, some really severe laws for the regulation of banks.

We said, "never again will the banks do that to us". Indeed, from now on the banks will be creatures of the US Federal Reserve.

But, in 2008, with not enough regulation, the banks did it to us again. Hurt a lot of people, and we got some more banking regulations. BTW, we are still cleaning up the mess the banks left behind, once again, in 2008.

Paulson, Bernanke, etc. remembered with full clarity and had no doubts: "Your banking regulator is sitting right here, and if you don't take this money you will be declared capital deficient on Monday morning. ... You will not leave here before you sign the paper in front of you." Paulson, Bernanke were just determined, as immediately was Congress, that the US banks would not fail; there would be liquidity; the banks would be well capitalized with plenty of reserves with no doubts; there would not be runs on the banks; AIG could be $85 billion in the hole and cause no problems, etc.

Bernanke was just determined not to be the Fed Chair who presided over the second Great Depression, e.g., from banking regulation failures.

Marc, in the US, we regulate the banks. The US Federal Reserve, etc. has the banks by the short hair, holds on with a tight grip, and just will not let go. Marc, are we learning, now? Are we getting some clarity about banking "regulation"?

In many ways, in social and psychological capital, the US is still recovering from the severe damage and losses of the Great Depression and WWII: People that lived through those years, and many didn't, often suffered horribly and, thus, did some relatively poor parenting, passing on a lot of really strong anxieties and not nearly enough in security, insight, social, psychological, emotional, artistic, and intellectual capital. The anxieties led to stresses led to depression, incapacitation, more stresses, more depression, clinical depression, a huge range of social problems, including some suicides. I know far too much about what I am describing. We're talking big deficits in social and psychological capital passed from parents to children. We have not recovered yet. It appears that full recovery will take a few more generations. E.g., I can believe that a tribe in Brazil that never saw civilized people is generally much happier than people in the civilized countries that went through the Great Depression and WWII. Those tribes have no banks, bubbles, and Great Depressions.

The Great Recession? Still a lot of people are not yet back to work, and that situation is well known to lead to more in abused wives, abused children, alcoholism, drug abuse, crime, infant mortality, divorce, and suicides, little results like those. Marc, you can understand wrecked families, right?

It seems that banking regulation is just crucial unless, of course, we want to kill tens of millions of people a few times each century. Ah, let's don't just mince words, kill a few hundreds of millions of people a few times each century? More? Sure, maybe more! Right, Marc?

Sure, I know; I know; we can agree that the dangers of unregulated banks won't last very long. I mean, that is, don't you see, another WW will mean we no longer need any more banking regulations, or coal, natural gas, oil, cars, houses, plastics, trash pickup, clothes, schools, hospitals, restaurants, smart phones, libraries, the Internet, venture capital firms, venture partners, or people -- there won't be anymore people, puppy dogs, kitty cats, birds, etc.

Gee, "Look, Ma, no more banking regulations! Ma? Ma? Are you there, Ma? Ma, where are you? Ma!!!!"

Thank you Marc. Your knowledge of finance, banking, and economics is showing through with great clarity!!!!!!

Gee, I thought that we were all supposed to understand financial bubbles, the Great Depression, etc. by, what, somewhere in middle school? Marc, did you skip middle school? Maybe you'd want to go back, sit in the front row, and pay attention? And put away your mobile devices.

Unregulated banking? I'd rather give chunks of plutonium to naughty 8 year old boys just to see what they could do with it.

Marc, unregulated banking is the fast way to the end of at least human life on earth. Wouldn't be very good for your deal flow or venture returns either!

Sorry to be so negative: 50 million, maybe 100 million, dead, the suffering of my ancestors and my wife's ancestors who went through the Great Depression and WWII and the Cold War tend to make me a little, just a little, shall we say sensitive on this subject. But, I'd rather be sensitive and negative than silent and dead. Right, it's just my opinion, and YMMV. </rant>

maxerickson• 12 years ago

The Federal Reserve system was established in 1913, in response to some earlier crises.

The primary banking related response to the depression was the Glass–Steagall Act:

http://en.wikipedia.org/wiki/1933_Banking_Act

It established the FDIC and curtailed speculative investment at commercial banks. There were some provisions giving the Fed some more powers and encouraging banks to become members, but those were at least as much about establishing lending facilities as they were about regulation.

graycat3• 12 years ago

Agreed. But in practice the larger banks have no choice but to become Member banks so that in effect they are creatures of the Fed.

1913? A story went we didn't want to have to depend on J. P. Morgan again!

To concentrate on the crucial bigger picture, I omitted mention of Glass-Steagall or its revisions that helped bring on 2008.

So, banks are regulated on their reserve ratios, etc.

My post boils down to a dirt simple but still basically correct: For banking regulated good, unregulated bad, very bad. For something this important, something dirt simple but still correct has some advantages.

uptown2• 12 years ago

Is it possible to believe in the blockchain, but be on-the-fence about bitcoin? I realize they're presently pretty tightly linked, but I see the blockchain technology as the new concept holding tremendous promise.

DennisP• 12 years ago

You probably need some kind of currency with value to compensate the miners, but sure, there's all sorts of technological development going on. I'm partial to Ethereum myself.

awt3• 12 years ago

Not if you understand Bitcoin. What is stored in the blockchain? If something else were stored in the blockchain, what would be the motivation to do the work necessary to add new blocks?

uptown2• 12 years ago

I could think of all other sorts of exchange of value, within a network, that wouldn't be tied to bitcoin.

rdlecler1• 12 years ago

Does anyone know what the rest of the article covers?

jeffreyrogers• 12 years ago

Over the last few weeks I've noticed an increasing amount of interest in Bitcoin and related technologies (P2P, blockchain, distributed computing, etc.) with the overwhelming majority of voices saying that this is something revolutionary.

But doesn't it make more sense to try to solve your problem in the simplest way possible? I'd argue that there is rarely a case in which a bitcoin-like solution is the simplest way to solve whatever problem you're faced with (baring the problem bitcoin was intended to solve of course).

Marc Andreessen on big data, Bitcoin and upending the world of finance

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