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a16z Podcast | The Movement of Money
26 segments available
As companies expand out from the internet into the rest of the economy — the proverbial bits to atoms — “the business models are becoming more complicated, more interesting, more payment based”, observes Patrick Collison, CEO and co-founder of payments platform Stripe, which enables apps/websites to programmatically move money around. But as such companies become “the operating platform for commerce”, we also have an interesting paradigm where people, not governments, are controlling the commerce supply — so “It’s not the money supply. It’s the commerce supply,” argues a16z general partner Alex Rampell. This is especially true as payments become easier, as trust and payments become interwoven, and as online, peer-to-peer marketplaces address information asymmetry. So what does this all mean for advertising as a business model, for trading goods and services directly, or for the future of stores? What does it mean for liquidity, for interest rates as a lever for the economy, and for …the end of cash? And finally, when legacy and emerging non-software businesses are increasingly networked and run on “technologically enabled rails”, what does that mean for geopolitical risk? Collison and Rampell discuss all this and more on this episode of the a16z Podcast, a hallway-style riff on all sorts of money matters.
Segments Timeline
Welcome to the Future of Commerce
In this opening segment, the hosts introduce the podcast and the guests, Patrick Collison and Alex Rampell. They set the stage for a discussion on how companies are evolving in the API economy, focusing on the role of payments in modern commerce and the shift from traditional business models.
"hi everyone welcome to the a6 & Z podcast I am sonal I'm here today with our general partner and fin tech expert Alex rampell and our guest is Patrick Collison who is the CEO and co-founder of stripe ..."
Stripe as the Operating System for Commerce
Patrick Collison shares his vision of Stripe as the operating system for commerce, highlighting how technology is increasingly integrated into various sectors of the economy. He discusses the significance of technology in transforming supply chains and services, emphasizing that software will play a crucial role in the future of commerce.
"recorded a while ago on everything from why marketplace businesses matter to what happens when non software businesses and our economy are increasingly run unquote technologically enabled rails 2 lead..."
The Evolution of Business Models
Collison reflects on the evolution of business models from advertising-based revenue to payment-based systems. He argues that while advertising will remain significant, the core of the economy is shifting towards direct payments, which are essential for sustainable business operations.
"the way we think about it is that as sort of a corollary of software eating the world and is that the economy is sort of increasingly coming to run on technologically enabled rails and it's not necess..."
The Role of Payments in Modern Marketplaces
In this segment, Collison discusses the complexities of modern payment systems, particularly in mobile marketplaces. He explains how businesses need more than just payment processing; they require comprehensive solutions that include identity verification and international transactions to thrive in a global market.
"largely able to rely on advertising if the business model right who is sort of a very basic kind of monetization of the attention and so that's GC and Yahoo and google and facebook and and and so fort..."
Instant Payments and User Experience
Collison highlights the importance of instant payments in enhancing user experience, using Lyft's Express Pay as an example. He illustrates how technology can streamline payment processes, allowing drivers to receive payments instantly, thus improving overall satisfaction and efficiency.
"is people to do interesting things with the with the business models that they don't just need something to turn a credit card number into money in the bank account but they need sort of ancillary fun..."
From Bits to Atoms: The Shift in Commerce
The conversation shifts to the broader implications of technology on commerce, with Collison discussing the transition from digital to physical goods. He emphasizes that as companies expand their reach, their business models become more intricate and payment-centric, reflecting a significant transformation in how commerce operates.
"Express pay where rather than just kind of sending money to their drivers via a bank transfer they can send it instantaneously to their driver is kind of directly over debit card rails and now almost ..."
The Pajama Problem and Consumer Behavior
Collison introduces the 'Pajama Problem,' explaining how consumer behavior is affected by the accessibility of payment methods. He discusses the challenges consumers face when trying to make purchases, particularly when they lack immediate access to their payment instruments, and how this impacts overall commerce.
"not exist yet it was actually around the same time I wrote a TechCrunch article and I coined this term Oh - OH online to offline which by the way is very popular in China I've heard and what's really ..."
The Costco Problem: Waiting in Line
In this segment, Collison describes the 'Costco Problem,' where long wait times deter customers from completing purchases. He emphasizes that improving the payment experience is crucial for retaining customers and discusses how technology can alleviate these frustrations in retail environments.
"actually means the Commerce doesn't happen because I don't have my payment instrument or I don't have my payment types stored within an app or within a retailer or something like that the other proble..."
The Future of Retail and Customer Experience
Collison speculates on the future of retail, questioning the necessity of physical stores in light of technological advancements. He discusses how customer experience will evolve, with businesses needing to adapt to new consumer expectations driven by technology and convenience.
"cases is the thing going to come to me and that's a relic of the past limitations like we might have new things possible now absolutely and like what what does it mean to transact with Costco and and ..."
Technological Diffusion Across Industries
The discussion concludes with Collison addressing the broader trend of technology permeating various industries. He highlights how sectors traditionally not associated with technology are now leveraging it to solve complex problems, showcasing the transformative power of tech in everyday services.
"we've found they're very attuned to just what makes this better for the customer those companies come to us and say hey we want to enable this too we know that this isn't necessarily easy given our ex..."
The End of Cash: A Virtuous Cycle
The conversation shifts to the decline of cash as a payment method, with Collison explaining how the comfort with digital payments has fostered the growth of cashless marketplaces. He discusses the historical context of credit and how it has paved the way for modern economic interactions, creating a cycle that further diminishes the role of cash.
"broadly and in so many sectors and kind of parts of the economy that people really don't traditionally expect we're all sort of familiar with the most prominent examples in the form of the ride-sharin..."
Negative Yields and Economic Policy
Collison addresses the phenomenon of negative yielding government bonds and its implications for monetary policy. He explores the challenges of holding cash in a low-interest environment and discusses potential government strategies to stimulate the economy, including the concept of 'helicopter money' and its effects on consumer behavior.
"cycle I was actually talking to somebody who asked me why in the world do so many bonds now government bonds have negative yield and I'm starting explaining to them maybe like why not test to take out..."
The Shift in Commerce Control
The discussion highlights a paradigm shift where individuals, rather than governments, are increasingly controlling the commerce supply. Collison and Rampell analyze the implications of this shift for economic stability and the potential risks associated with decentralized commerce in a globalized economy.
"engage in so you know there's a legitimate case that cash like a lot of people want cash to go wait like the people that want cash to stay or the drug dealers and the people that are the members of th..."
Interest Rates and Economic Growth
Rampell questions the traditional view of interest rates as the primary driver of economic growth. He suggests that the real constraints on innovation and wealth creation may stem from human capital and geographic factors, rather than merely the cost of capital, prompting a reevaluation of economic policy.
"bearer properties of cash so that as we see kind of macro and I policy change the up you have as someone just like holding money you don't substantially diminish having said that you know the thing th..."
Geopolitical Risks in a Global Economy
The conversation delves into the geopolitical risks associated with centralized commerce and supply chains. Collison warns of the dangers of relying on foreign markets for essential goods, using the example of food production in the U.S. and the potential consequences of global conflicts on trade.
"just circle back to original point where it's less about interest rates themselves I think being the primary lever here or the thing I was wondering about under the drive over is our house prices the ..."
The Interconnectedness of Global Systems
Collison and Rampell discuss the complexities of interconnected global systems and the risks of cascading failures. They reflect on historical events, such as the annexation of Crimea, to illustrate how unexpected geopolitical actions can disrupt global commerce and highlight the fragility of modern economic interdependencies.
"it's not just payments it's everything I mean you see this with Crimea where Putin annexes Crimea part of the sanctions that the United States government passed to kind of penalize Putin is to say tha..."
Global Connectivity and Policy Interplay
This segment delves into the intricate relationship between domestic and foreign policies in a globally connected economy. Collison discusses how events like Russia's invasion of Crimea can disrupt economic stability, highlighting the challenges posed by the interconnectedness of monetary and fiscal policies across nations.
"example of that is we have the quote unquote kind of system of the global economy and then some surprising kind of action happens in us like Russia invades Crimea which is really not something that ha..."
The Monopoly Dilemma in Technology
Rampell addresses the competitive landscape of technology companies, particularly in Europe. He discusses the perception of monopolies, the jealousy towards successful American tech firms, and the implications for innovation and consumer benefits, emphasizing that competition is crucial for preventing complacency in the tech industry.
"there's no concept of building a local technology company doesn't make any sense and as you actually as the world is flat for in terms of distribution of technology you have these little cliques that ..."
Trust and Information Asymmetry in Marketplaces
In this segment, the conversation shifts to the role of trust and information asymmetry in modern marketplaces. Collison uses the example of hiring a plumber to illustrate how technology can bridge information gaps, enabling consumers to make informed decisions and facilitating smoother transactions in peer-to-peer marketplaces.
"necessarily have sufficient competition because they're being evil I'm to quote the Google phrase never attribute to malice that which can be attributed to stupidity there was a comment that I use a l..."
Solving Information Problems with Technology
Collison discusses how technology can address significant information problems in various industries. He emphasizes the potential for peer-to-peer models to enhance economic efficiency by reducing reliance on centralized systems, ultimately leading to a more dynamic and responsive economy.
"now like if you want to go get a plumber to fix your toilet there's an asymmetry of information like what's wrong with my toilet I don't know I don't know how to explain that canonically and then I do..."
Marketplaces as Solutions to Information Gaps
This segment focuses on the transformative power of marketplaces in solving information gaps. Collison argues that by enabling direct connections between service providers and consumers, marketplaces can create a more efficient economy, allowing for better resource allocation and addressing the challenges posed by traditional hierarchical structures.
"to solve but you see it done vertical by vertical you don't have any any horizontal services market place despite the fact that Amazon's trying to do that but like I think you'll see hundreds of these..."
The Value of Time in Service Transactions
Collison illustrates the concept of perceived value in service transactions through a thought experiment involving locksmiths. He highlights how information asymmetry can distort consumer perceptions of value, emphasizing the need for transparency and trust in service-based marketplaces to ensure fair pricing and satisfaction.
"problem you have and so marketplaces are kind of an alternate cut on this where it's like well we can pursue much more peer-to-peer much less centralized model and in the same way that the internation..."
The Role of Money in Marketplaces
The conversation shifts to the fundamental question of why money matters in marketplaces. Collison discusses the evolution from barter to fiat currency, emphasizing that money serves as a trust mechanism that facilitates transactions. He argues that liquidity and trust are crucial for the success of marketplaces, enabling efficient exchanges of goods and services.
"actually happy you give him a tip he worked for 12 hours you're paying for incompetence and this is the problem of the information chasm or the information asymmetry which is when you create this obje..."
Trust and Payment Interconnection
This segment delves into the intertwined nature of trust and payment systems. The speakers reflect on the historical context of eBay and the necessity of reliable payment methods for successful transactions. They discuss how trust in payment systems fosters a more efficient marketplace, allowing for quicker and more reliable exchanges.
"right part of what ended the great leap forward in China you know it wasn't sort of a technological innovation and it was a change in the coordination model where people got to farm their own plots I ..."
Money as a Scorekeeping Mechanism
Collison presents a philosophical perspective on money, describing it as a scorekeeping mechanism that tracks value creation. He contrasts different economic systems, discussing the limitless potential of money compared to more restrictive systems. This segment emphasizes the optimistic view of economic growth and innovation as we continue to evolve.
"marketplace successful and why you have Network effects take hold but it's the trust that I know that something will actually happen and therefore I'm willing to give up the payment but they're also i..."
The Future of the Internet and Marketplaces
The discussion concludes with reflections on the future of the internet and the potential for new businesses to emerge. Collison and Rampell explore the idea that we are still in the early stages of innovation, with many opportunities ahead. They highlight the growing recognition among traditional companies of the importance of software-enabled experiences in shaping the economy.
"distributive or redistributed or apportioning oriented system right or we could have one more like money where it's inherently limitless right just it is numbers and I think that's in some way more op..."