Hi friends,
Happy Friday!
How progress is driving how and how much we pay
Payments are shaping our global economy
Online payments are changing the way we consume by removing frictions. In our globalised capitalistic economy, this creates a lot of value for consumers and producers alike. I cannot allow myself not to quote Ben Thomson’s Bill Gates Line again.
Paypal was probably the first company to make this a reality at scale.
To illustrate this trend, I am sharing another great essay by Packy McCormick. Being extremely objective there, considering I work for Checkout.com, one of Stripe’s main competitors. We are less famous because we focus on large companies rather than startups, but I wish he would do us next: our history and vision are really interesting as well.
You can Packy’s story here: Stripe: The Internet's Most Undervalued Company
One-line summary: “Stripe’s mission is ambitious: to increase the GDP of the internet.”
But this change isn’t as fast everywhere
In some economies, cash is still king. And it does not necessarily dependent on economic maturity.
Example. I am currently staying at my in-laws in Moscow. Russia is quite well-developed in terms of online payments, with a company like Yandex who don’t have much to envy to Google aside of global reach. It is obviously not as integrated into the US credit card ecosystem as other “client” economies, but that is more of a conscious decision than a technological lag.
But, people still love cash. I spent some time yesterday order spare parts to do a full maintenance job on the Xiaomi automatic hoover I had bought to my mother-in-law some time ago - the poor guy is pushed hard. Managed to order everything I needed online on a local website. Checked out - no card payment. They will collect cash at delivery.
This is the case in many economies in the world, for a variety of reasons.
On this subject, I really enjoyed that article by Rest of World: Want to buy a parrot? Please login via Facebook.
“In Bangladesh, there is no Amazon. There is no eBay. If you want to buy a dress or a crested finch from the comfort of your home, you have to use Facebook.”
Consequence: a global effect on prices
The Baumol Effect is something we all experience at a scale of even just a few years, considering how fast technological progress is racing.
Explained simply, it is the fact that some goods and services price is getting higher without any intrinsic reason. The intrinsic cost of some human work or basic resources only changes for opportunity costs reasons.
You then need to add substitution effect and price elasticity in the equation to make the model complete. You can read a good introduction here: What Gets Expensive, and Why?
The extra interesting bit is that this article comes in answer to Patrick Collison’s questions about human progress. Patrick Collison is the CEO of… Stripe. But what matters here is that he is a fascinating futurist. I would pay a lot to lock him up in a debate room with Elon Musk for a few hours.
My conclusion on this is that the more you remove frictions across the global economy, the more you expand your relevant markets. De facto, you also remove frictions on the scope of that consumption opportunity cost we just discussed. It brings us closer to truly global consumption choices, for the better or the worst.
Thanks for reading,
V