The following transcript was created using artificial intelligence. There will be some grammatical errors below. 

00:00:31:27 – 00:00:55:15

Richard Carthon: Hello everyone. Welcome to another episode of Crypto Current, your host here Richard Carthon and today I got a very special guest, Daniel Simon. He’s worked on an incredible book talking about FinTech and he’s going to basically share this information with us in all kinds of just deep knowledge and just so much stuff that I’m just ready to learn more about. Absolute pleasure to meet you. Thank you for joining us today.

00:00:55:17 – 00:00:56:13

Daniel Simon: Thanks for having me.

00:00:56:17 – 00:01:00:24

Richard Carthon: Of course, of course. So before we get too heavy into this, how about you give us a little background about yourself?

00:01:01:03 – 00:01:36:24

Daniel Simon: Right. So I’m Daniel P. Simon, I’m the author of The Money Hackers – How a Group of Misfits Took on Wall Street and Changed Finance Forever. By profession, I’m a communications expert and speechwriter and I’ve been on Wall Street for about 20 years, working with the heads of pretty much every bank out there. I’m a speechwriter for people like Mary Shapiro, who’s the former head of the SEC, I’m the speechwriter for Peter Grauer, the chairman of Bloomberg, who also wrote the foreword for the book.

00:01:38:03 – 00:01:38:18

Richard Carthon: Wow.

00:01:38:20 – 00:02:20:10

Daniel Simon: And I’ve written you know, written speeches for the C-suite of pretty much every bank. As I said, I’m not really a finance guy. I never went to you know, I was never a trader or anything. I’m an English and French literature major who just happened to do it. I could have done communications for anyone and I did it in banking and in finance. I just found the world of finance to be fascinating. So with that in mind, I chair what’s called the Communications Board at the Museum of American Finance, so that’s formally on Wall Street. We’re the only museum of finance in the U.S.. China by the way has 22 finance museums, we have one.

00:02:21:03 – 00:02:21:18

Richard Carthon: Wow.

00:02:21:20 – 00:03:02:07

Daniel Simon: And so I chair the communications board at the Museum of American Finance. I run a PR and marketing firm called Vested, which is a global communications firm and our clients are like Morgan Stanley, C. Capital Kassie to Wall Street through the you know, the lead up to the financial crisis and then after that the financial crisis and then this sort of nascent financial technologies, as we used to call it FinTech. Now technology as it, you know, as it transformed the provision of finance, particularly in retail and commercial financial services. So you know, that’s largely my background and that also explains kind of how the book came to be.

00:03:02:20 – 00:03:34:28

Richard Carthon: Yes. And thank you for that background and I mean, the years that you’ve had in it, the speech writing that you’ve had, your knowledge in this space and just access to everyone here. You’ve been with the brightest minds and have been able to truly just take in everything that’s been going on and you’ve basically seen from the beginning of where we were 20 years ago to now in the direction that we’re headed towards the future, which I think is why you know, what you have to share and Money Hackers is going to be very, very important. So you know, what made you decide to write this book in the first place?

00:03:35:08 – 00:04:16:11

Daniel Simon: Well like you said, I had this access to these people, a lot of the people, not all of them. Some of them I had to reach out to cold and say, “Hey I’m writing a book, do you wanna appear in it? Some of those people become you know, good friends since people like Charlie from Cabbage or Polish from Lending Club. But some of them, whether people like John Stein who created Betterment, Adam Dell who’s Michael Dell’s brother and created Charity Money and then sold that to Goldman Sachs. These are people that I knew anyway Ken Lin from Credit Karma. And so you know, for a lot of it, it was just like these are stories that I heard or your conversations that I’d had and it was easy enough for me to kind of piece it all together.

00:04:16:13 – 00:05:17:14

Daniel Simon: I genuinely also think that you know, someone needed to sit down and write the story of how this kind of came to be. I was you know, genuinely concerned that if someone didn’t we would kind of miss a core part of our kind of financial history because very soon there’s gonna be a day where you know, we don’t use cash and we don’t go to an A.T.M.. And you know, you may not go to a bank for something like a mortgage and you know, I felt like unless someone sat down and actually wrote that story, we probably wouldn’t know how we got from something that had been unchanged for several hundred years to this completely brand new world that we were living in. And so this book is designed to kind of explain you know, how we got here from 2008 to where we are today, what sort of mistakes the banks made and what kind of opportunities this cohort of technologists discovered and took advantage of to create the FinTech industry that we know today.

00:05:17:18 – 00:05:47:20

Richard Carthon: Yeah. And I mean just on that note, one of the things you just said that spoke to me a lot. I was just listening to basically how Rocket Mortgage has as you know, it’s a digital online platform that allows you to get your first mortgage and a lot of people have been starting to go to services like that. So they’re getting away from the traditional ways of how you even get money to buy your first house and everything is definitely being more and more digitized. And you know, in the book, you talk about FinTech transforming money itself you know, how has it done so and can you share some examples from the book?

00:05:47:23 – 00:06:33:16

Daniel Simon: Sure. Yeah I mean, I think one of the things that’s really interesting, by the way Rocket Mortgage is a you know, is an interesting example because actually Rocket Mortgage is the baby company of Quicken Loans, which was a more traditional mortgage lender. And so you know, they learned the lesson with Rocket Mortgage that other banks had not, which was to sort of rebrand something you know, play into that FinTech experience and build something. It’s sort of like they were one of the first to do it and if you look at something like Marcus by Goldman Sachs you know, that’s actually what a lot of the more successful banks have done is they’ve kind of set up these kind of skunkwork technology arms that are all digital or mobile or whatever.

00:06:33:18 – 00:07:36:00

Daniel Simon: I think one of the great ironies about how money is being transformed is  about the payment experience, right? I think that the more ubiquitous the technology becomes, the less obvious the payment experience becomes. I mean, it wasn’t that long ago that we all took Uber, right? Knows many things about ride hailing that I think iis fascinating, you know. The fact that you know, you can look at the rating system and you can look at the geolocation system that enables taxis to know exactly where you are and you can pre negotiate a rate, all of this sort of stuff is fascinating. But I think one of the most understated or underwritten things about the Uber experience is the elimination of payment. And I think people don’t pay enough attention to that. I mean, living in New York you know, paying for a taxi was probably one of the most friction filled experiences that you were going to have on a daily basis. It, you know, it was, almost always going to end up in a fight. Like where are you going? Why do you care?

00:07:36:25 – 00:07:37:10

Richard Carthon: Right.

00:07:37:12 – 00:07:59:12

Daniel Simon: Because I need to know whether I’m going in that way. No, that’s not what the rule says sir. You have to take me where I want to go. Okay, how are you going to pay? What business is it of yours if I pay? You know, are you going to pay me in cash? I don’t have cash, I only have a card. But the company takes so much money out of my book. That’s not my problem. Like that, you’d have that conversation like two or three times in a day.

00:07:59:14 – 00:07:59:29

Richard Carthon: Yeah.

00:08:00:01 – 00:08:43:04

Daniel Simon: It just became sort of normal. So the idea that you know, the idea that they’re actually all of that payment conversation is removed, you get in you, you arrive at your destination, you get out and you’ve never had to take out your wallet, your card, phone, you didn’t have to pay for anything. I think one of the pieces of that experience that people don’t realize is actually one of the best parts of the whole Uber experience and the same thing is true when I order my stop, I really don’t want to be standing around in line. So I think one of the ways that money is transformed or the payment transformed is that they’re made invisible. The fact that we don’t actually have the transaction experience. You know, I always say people love buying things, but they hate paying for them.

00:08:43:14 – 00:08:43:29

Richard Carthon: Yep.

00:08:44:01 – 00:09:02:15

Daniel Simon: You know, the buying experience as it is you know, it gives you all kinds of endorphins and makes you feel great, makes you feel in control. Your paying experience is just friction, just pain and misery. I think one of the things that this technology has done is that it’s made the pain and experience invisible.

00:09:02:17 – 00:09:39:07

Richard Carthon: Yeah. And I mean, actually that leads into another question I was going to have. You talked about how frictionless everything is and one of the first things that came to my mind as you were speaking through that is things have become more transactional in the sense of you’re taking away the stress of the negotiation piece, right? Everything when you were talking about the taxis, having to get in to negotiate you know, price, where I’m going, why you should take me anyway. Why this is even a conversation, that’s just out the door. And now it’s just like a, “Here’s my service, let me pay and let’s keep moving. And you know, with everything that you just talked about you know, what do you think is the next big friction point in FinTech?

00:09:39:09 – 00:10:41:24

Daniel Simon: As the payment piece has become more invisible, as the transaction piece just kind of disappeared, the experience is actually a lot more about a relationship and about service. So it used to be that the bank’s only job or financial services provider’s job was to move money around, like that was their entire job. But as that has become essentially invisible, essentially it’s become commoditized. The question is what are you doing for me. And that idea about something that’s transactional commodity versus something that’s relational and an experience, I think is one of the big changes that’s happened in financial services over the last 10 years. And you see that in every area of financial services, right? So it’s about savings. You know, it used to be enough that you could charge me just for the saving, right? So things like security, like you keep it literally eating back to it’s a wonderful life right. Why did you have a bank? It’s because it was safer than keeping the money in a mattress.

00:10:41:26 – 00:10:42:11

Richard Carthon: Right.

00:10:42:13 – 00:11:47:21

Daniel Simon: So that was a very transactional experience, a very basic experience. Today all of that is taken for granted. And so you see with savings apps like Stash and Digit, what they’re offering is an experience and AI on top to help you maximize your saving or give you you know, or gamify your saving, give you you know, endorphin rush for saving. Can you add on top of a very transactional experience? If you look at Robo Advisory for example, you know, that whole Welsh front and betterment, their proposition is that you know, it shouldn’t cost you 100 basis points to invest. And so it puts enormous pressure on traditional financial services advisors like wealth advisors, wealth managers to kind of prove their value by offering additional services. So I would just say you know, actually the irony is that as the experience becomes more seamless, in order to justify their fees, financial services providers have to offer something you experience, something additional of value and that’s broadly very good.

00:11:48:03 – 00:11:48:18

Richard Carthon: Right.

00:11:48:21 – 00:12:15:16

Daniel Simon: I think that’s a good trend, right? You shouldn’t have to just spend a fortune. It shouldn’t be very expensive and costs you a lot of money to invest in the stock market, it should be very easy and very cheap. And if you’re paying more than the absolute minimum or free, if you’re looking at something like

Robin Hood or now you know, Charles Schwab, which just went to free trading, E-Trade. If you’re looking to pay any more than free, you know, you have to be asking as a customer well, what are you doing for me?

00:12:15:18 – 00:12:16:03

Richard Carthon: Yep.

00:12:16:05 – 00:12:53:16

Daniel Simon: You’re giving me additional advice, you’re giving me additional help, you’re looking at me as a whole person. So that’s the direction the financial services are moving and it’s a very good one. In terms of the friction points, you know, I think some of the basic stuff, like how we split a pizza has been sold and I actually think that you know, there are some interesting areas that mostly relate to quite sociological things that are going on in our nation right now that I think FinTech can be a part of. I was for a very brief period of time the FinTech liaison for the Michael Bloomberg presidential campaign.

00:12:54:19 – 00:12:55:04

Richard Carthon: Okay.

00:12:55:06 – 00:13:41:03

Daniel Simon: So I got to touch on some of the policy issues because I thought that FinTech really can help to bridge some of the biggest issues, right? So what’s this current crisis exposing for us? Well, it’s accentuating a wealth gap that was happening 20, 30 years, it was accentuating a wage gap. We have income volatility that disproportionately impacts minority communities and lower income communities. And you know, FinTech can help solve some of those problems, right? So real time payments, so getting people paid in real time, fractional share ownership, so getting people access. If wages effectively stagnate and assets increase, then we need people to have more access to assets.

00:13:41:09 – 00:13:41:28

Richard Carthon: Right.

00:13:42:10 – 00:14:38:16

Daniel Simon: So you know, there isn’t really a silver bullet solution, except for just a more, frankly, a more progressive policy approach at government to try and make sure that the world is a bit fairer. You know, and that’s about minimum wage policy, clamping down on the worst of shift work, taxing gig economy platforms, properly you know, overseeing enormous money you know, monopolies like Amazon. But in the absence of progressive policies, you know, FinTech can at least help more people access you know, increasing asset values more easily and get people paid more quickly and give people better access to credit because of course, poorer people use credit differently than wealthy people.

00:14:38:18 – 00:14:39:03

Richard Carthon: Right.

00:14:39:05 – 00:15:12:01

Daniel Simon: People like me use credit to buy things that we can’t fight off one go to like a house or a pool, but your average person uses credit just to smooth over the peaks and troughs of the income volatility that their gig work or shift work job is forcing on them. And so you know, more responsible access to credit or real time payments. These are, that to me, the next real frontier. It’s not about how you and I split a pizza or how the drone you know, gets the sushi into my mouth or whatever.

00:15:12:03 – 00:15:12:18

Richard Carthon: Right.

00:15:12:20 – 00:15:40:27

Daniel Simon: I think like that’s you know, the basics. We were very far behind in this country in financial services. Buying something like Europe, it was only a couple of years ago that you could really start to split a check with your friends or rent with your friends. Banking apps sucked in this country for a long time, we didn’t have contactless payment in this country for a long time. You know, five years ago if you had gone to Europe and you know, gone out for dinner, you’d have thought you’d gone to Mars or something. So far advanced.

00:15:41:14 – 00:15:41:29

Richard Carthon: Right.

00:15:42:01 – 00:15:56:01

Daniel Simon: But for the most part, we’re sort of catching, we’ve sort of caught up to that. And so for me, it’s not the luxury stuff that we need to now think about, it’s the more fundamental socioeconomic things that I think FinTech needs to get involved in.

00:15:56:03 – 00:16:43:13

Richard Carthon: I agree. And that’s why I think when you think of you talked about the wealth gap, you talked about opportunities and building assets and everything else. FinTech clearly is a way that a lot of those things can be addressed. Just like you said, it’s not a silver bullet, it’s not going to just instantly fix everything, however, it’s some of the first steps to actually address those issues, instead of constantly talking about things. There are actual things within FinTech that we can apply, kind of like some of the examples you just said that can quantify and give people opportunities to progress. And one of the things that in your book it touches on the thinking behind FinTech and you know, ideas like hedonic adaptation and democratization and how it’s having a dramatic effect on the entire banking and finance industry. Can you just dive into that just a little bit more?

00:16:44:16 – 00:17:43:09

Daniel Simon: Sure. I think that you know, so it really goes back to 2008. So in 2008, I was in New York and I stood outside Lehman Brothers and I watched people leaving with their stuff in boxes. And so in 2008 for me, that meant the financial crisis and it did for a lot of the people in New York. There were a lot of people, predominately on the West Coast who in 2008 did not mean the financial crisis. Yes, there was this thing going on over there called the financial crisis, but 2008 will always be the year that for example, you know, the iPhone App Store is launched or you know, Facebook hit 100 million users or Google and Amazon and these sort of you know, Web 1.0 pioneers thought to really make an absolute fortune. And so the banks and the technologists learned two fundamentally different conclusions, and drew two different conclusions at the same time.

00:17:43:27 – 00:18:30:01

Daniel Simon: You know, the banks decided innovation is dangerous and the second thing they learned was that the mass market was dangerous. So they were innovating with things like credit derivatives credit, default swaps, these complex asset classes. They were also doing things with real algorithmic trading, electronic trading. And when the world went to hell in a handbasket, you know, they decided that innovation is dangerous. These technologists have taken us in a wrong direction, we should just stick to what we do really well and P.S. the mass market is dangerous. We extended credit into these communities that couldn’t afford it, people went and got three houses and they, you know, and now they’re bankrupt and we end up carrying the can. We got all these defaults, right?

00:18:30:13 – 00:18:30:28

Richard Carthon: Right.

00:18:31:00 – 00:19:18:05

Daniel Simon: So I think that the banks decided in 2008 you know, innovation dangerous, mass market dangerous. Technologists looked at a platform like Facebook, an ecosystem like Facebook, like Google, like Amazon, they looked at the growth of those platforms, they looked at a platform like the App Store and what they saw was a rich opportunity for innovation. And they also saw the dreams of Web 1.0 coming true. That is to say you know, what they used to say on the West Coast, URL, ubiquity first, revenue later. So when you know, when the 90s, when the dot com bubble was around and we were saying, you know, “It’s going to transform the world.” And you know, “There will be ubiquity first and revenue later”, they weren’t wrong, they were just you know, 10 years too early.

00:19:18:07 – 00:19:18:22

Richard Carthon: Yeah.

00:19:18:24 – 00:20:13:03

Daniel Simon: But by 2008, this stuff is starting to come true. Companies like Facebook, companies like Google, companies like Amazon are making absolute gobs of money and so they drew the opposite conclusion. Now is the time to innovate and there’s money to be made in the mass market. There’s money to be made by going very broad. And so the banks were doing the opposite, they were going narrow and they were going upmarket to a smaller subset of technically more profitable and safer clients. And you know, what FinTech is about is largely been about provisioning financial services for the mass market, so making the cost of these services cheaper and enabling more people to get into it. So you think about something like a wealth front or a betterment, just use investing, or a Robin Hood with trading. You know, it used to be you needed $25,000, $50,000 to get into the stock market.

00:20:13:05 – 00:20:13:20

Richard Carthon: Right.

00:20:13:22 – 00:20:20:01

Daniel Simon: And you had to be comfortable spending a lot of money with a financial advisor to manage your money.

00:20:20:03 – 00:20:23:07

Richard Carthon: There’s a big barrier to entry.

00:20:23:09 – 00:20:31:26

Daniel Simon: A huge barrier to entry and most of these technologies you know, they’re not free, they’re incredibly cheap and they’re deliberately aimed at serving the mass market

00:20:31:28 – 00:20:32:16

Richard Carthon: Right.

00:20:33:15 – 00:21:07:22

Daniel Simon: Cabbage was built, you know, as a lending company and you think of it as a small business lending, but their definition of small business is very small. Well I mean, it’s Amazon margins and they kind of built up around the Amazon ecosystem. So you see you know, it really is about making money at a very large scale on very small numbers and in the last few years you’ve seen every bank has launched a robo adviser. Morgan Stanley bought E-Trade. Goldman Sachs launched Marcus. And so they’ve clearly learned that lesson that there’s money to be made and this idea about democratization.

00:21:08:13 – 00:21:08:28

Richard Carthon: Right.

00:21:09:00 – 00:21:20:03

Daniel Simon: Of finance, Is not just the right thing to do to extend you know, the power of the financial industry to everyone, it is also a way to make money.

00:21:20:13 – 00:21:21:09

Richard Carthon: For sure.

00:21:21:15 – 00:21:30:15

Daniel Simon: And that’s the way to win, that’s the dream. If the banks can make money by making services better and cheaper and more self-explanatory for more people.

00:21:31:09 – 00:22:18:19

Richard Carthon: No doubt. And just going back to that reoccurring just issue over the years of barriers to entry and understanding as you said, getting to that mass and there’s just so much more opportunity cause if you have 100 hundred million people giving you $10, as opposed to having a million people giving you whatever, like those numbers can truly like work in your favor if you’re doing it right. And they’re also starting to see we are living in a world of access. We have technology, like if there’s anything that you want to know about the world right now, you can ask Google, you can ask whatever search engine that you have, you can get the information. Whereas before, it was like it was coveted, the information would be held close to the chest and you would need to pay for access to be able to do certain things, where now, that’s just not the case.

00:22:18:21 – 00:22:20:00

Richard Carthon: And so you know, go ahead.

00:22:20:02 – 00:22:23:15

Daniel Simon: Touching on a point there about financial literacy, right?

00:22:23:21 – 00:22:24:06

Richard Carthon: Yeah.

00:22:24:08 – 00:22:54:18

Daniel Simon: Because like the way I always think about it, it’s like the financial industry private 2008 was a bit like the Catholic church before the Gutenberg Bible, right? Everything was in Latin. You could kind of go in right? The banks looked like churches, very high ceilings, you could kind of go in, they spoke a language you didn’t understand. You know, there was a ritual you know, APR and you know, hocus pocus, stuff that you couldn’t really make any sense of. You weren’t supposed to because it wasn’t for you.

00:22:54:20 – 00:22:56:27

Richard Carthon: They needed somebody to interpret it for you.

00:22:56:29 – 00:23:37:24

Daniel Simon: Yes. You know, there had to be someone to intermediate between you and God or you and your money and that was very much engineered complexity. It was engineered complexity on the part of the Catholic church in the 14th century and it was engineered complexity on behalf of the financial industry in the 20th century. This stuff is way too complicated, you’ll never be able to understand it, you know. And you know, what compound interest is really not that hard to understand, that’s pretty basic math. Actually, most of this stuff was pretty easy. I mean one of the things that you know, the tech did well is, you know, the genius of someone like Steve Jobs is that you know, he wanted to make things beautiful, intuitive and simple, right?

00:23:38:03 – 00:23:51:17

Daniel Simon: And so you know, before she passed away, my 94 year old grandmother was like Facetiming. Now she would have never been able to use a, you know, mid 80s computer, she wouldn’t have been able to code anything, but you know the iPhone made it so she didn’t have to.

00:23:51:19 – 00:23:52:04

Richard Carthon: Right.

00:23:52:06 – 00:24:04:12

Daniel Simon: You know and so that’s something John Stein once said to me that I think is very powerful he said you know, “Financial literacy is bullshit, it’s all just a matter of user design.”

00:24:04:14 – 00:24:04:29

Richard Carthon: Yeah.

00:24:05:01 – 00:24:46:00

Daniel Simon: He’s right. Why is it you don’t need to know how electricity works the switch on the light? You know and you don’t have to know how to wire a computer to be able to use an iPhone, but you know, in order to be able to get mass access and to be able to get the most number of people using it you know, they made it as simple as they possibly can. Why is finance even talking about financial literacy? What was the only industry that says you have to be smart enough to be able to use us? And it’s kind of gross. And so you know, one of the things that I really love about some of the things in FinTech is how simple and intuitive it becomes to the point that you don’t even have to think about it, right?

00:24:46:02 – 00:24:46:17

Richard Carthon: Right.

00:24:46:19 – 00:25:28:02

Daniel Simon: I mean, you know, Amazon, I’ve got a couple of things on subscription with Amazon, right? Amazon knows that I buy certain brand of toothpaste and they know the regularity with which I buy that toothpaste cause they use a lot of processing power and sometimes it’s a little scary and creepy, but quite often they’re like, “Do you want to say 20 percent by subscribing to this thing you’ve already proactively had to think about buying 50 times?” and I’m like, “Yeah, why not?” Well something like Stash and Digit basically does the same thing with your money. They see when you got five cents or 20 cents or a dollar fifty you’re not going to care about, based on what your spending patterns are and they just take it and put it in your savings account.

00:25:28:04 – 00:25:28:19

Richard Carthon: Right.

00:25:28:21 – 00:25:46:29

Daniel Simon: I didn’t have to learn about compound interest. I didn’t have to go to school. I didn’t have to become a better saver or a more responsible saver, I had to, you know, download one app and link it to my account using Clyde, I mean it really couldn’t be more simple .

00:25:47:01 – 00:25:47:16

Richard Carthon: Right.

00:25:47:18 – 00:25:58:11

Daniel Simon: And so we’re finally getting to a place now in finance where we stop punishing the customer for not knowing enough about how to use our product. The only industry where you could get away with that shit.

00:25:58:13 – 00:25:58:28

Richard Carthon: Right.

00:25:59:00 – 00:26:36:11

Daniel Simon: Every other industry, if you had any other industry you know, you sold a brand of car, but it was you know, the steering wheel turned the opposite way from every other steering wheel, the stick shift was in the roof you know, and you had to train your people to use it, no one would buy the car you would go out of business, right? Like it’s that simple. Only finance can get away with saying, “You’re too stupid to use our products.” And I’m glad to say that’s coming to an end. So when we talk about these ideas of democratization, access inclusion and an education or literacy you know that’s part of it.

00:26:36:14 – 00:27:19:00

Richard Carthon: Right. And you know, I think you brought up a ton of great points. And one of them that really stuck out to me is just, just like you said, it’s the interface that’s changed by making an easier, more intuitive interface for all these quote, unquote complexes or things that people wouldn’t really understand. You could still ultimately achieve what you need. “Hey you say you’re not good at saving money? Download this app, it’s going to do it for you.” “Hey you say you don’t know how to start trading stocks and just putting a little bit away, so you can start putting into the market,” “Hey just put this auto thing on here and it’s going to do it for you.” Like the interface has changed in that access and which is giving a lot more people access to opportunity. And going back just a little bit, you talked about.

00:27:19:02 – 00:27:22:11

Daniel Simon: And by the way, just one other point about inclusion.

00:27:22:13 – 00:27:22:28

Richard Carthon: Yeah.

00:27:23:00 – 00:27:28:08

Daniel Simon: When you make an electronic interface instead of a human interface, you take away a lot of innate bias.

00:27:28:10 – 00:27:29:10

Richard Carthon: Yeah, exactly.

00:27:29:16 – 00:28:50:27

Daniel Simon: And that unfortunately is another factor that’s being inherent and systemic inside and it’s very timely right now. Systemic inside the financial services is a long history of redlining and a long history of perhaps unconscious bias, not necessarily overt racism, but in you know, just unconscious bias, not just towards people of color, but women for example, with regards to small business lending and other things like that. So you know, when you see the information to the technology, you see the decision making and the processing to the technology. Now obviously, there’s risks about how you write the algorithm and you have to be very thoughtful about what you put into the computer because you only get out what you put in. But for the most part you know, certainly the technology, the interface being a computer, has responsibly extended credit, responsibly extended the ability for housing, responsibly extended the ability to get into the stock market without some of those unconscious or innate biases that you know, you might have found in your local bank manager from 30 years ago.

00:28:50:29 – 00:28:51:14

Richard Carthon: Right.

00:28:51:16 – 00:28:58:17

Daniel Simon: By the way let me just, one final point on that. If there was a bank in your neighborhood because you know, the other thing we have is banking deserts.

00:28:58:19 – 00:28:59:04

Richard Carthon: Yeah.

00:28:59:06 – 00:29:41:25

Daniel Simon: In this country again, not necessarily an overtly racist decision, but just say, a ruthlessly corporate decision because of the cost of infrastructure to build a bank, put a branch, service a branch versus what they’re going to get out of the market. You’ve ended up with entire swathes of this country that are just woefully underserved by the traditional banking industry. You put that on a cell phone and it doesn’t matter. You build the infrastructure in one place and you put it on a cell phone, it doesn’t matter if you’ve got a bank branch and now your bank can be everywhere. So you know, inclusion is a key part of this democracy and access angle of FinTech.

00:29:42:05 – 00:30:03:18

Richard Carthon: Right. Which and I think this leads right into what I think is what I’m calling right now, “The Great Equalizer,” which is what came out of the 2008 financial crisis, which is cryptocurrency. So in your book you know, you addressed the rise of cryptocurrency and you start with Charlie Shrem’s story. Can you tell us a little bit about Charlie and how he helped shape crypto today as we know it?

00:30:03:29 – 00:31:26:13

Daniel Simon: So this is the first thing to say about me and I’m not a crypto expert, I just play one on TV. Charlie, you know, I think most people know the story of Charlie Shrem. Charlie you know, created BitInstant, which was one of the first cryptocurrency exchanges. He did that with backing from the Winklevoss twins. You know, who’ve gone on to obviously be enormous names you know, in the crypto space. Was busted for his involvement in the Silk Road. I mean he wasn’t specifically on the Silk Road, but he was making crypto currency exchanges for people that he knew were in Silk Road and he ended up saving four years in prison in Pennsylvania. I say he’s a fascinating character and he’s become a close friend of mine. You know, I was the first guy to interview him when he came out of prison and then I interviewed him again for the book and then he put me on his podcast. So in many ways, he was a poster child for the kind of early Wild West nature of crypto, it’s opportunities, its sort of explosive opportunities and its associated risks. You know, whether it’s the sort of financial, his was legal, but it was almost like a metaphor for the kind of you know, Wild West is the way to think about it. You know, people getting insanely rich, people losing all their money overnight. All that’s called a trinity.

00:31:26:15 – 00:31:27:00

Richard Carthon: Right.

00:31:27:02 – 00:31:41:24

Daniel Simon: He had a very volatile life because of his involvement. So in many ways, he’s the perfect guy to sort of tell that story or to tell that story through.

00:31:42:09 – 00:31:42:24

Richard Carthon: Definitely.

00:31:42:26 – 00:32:20:03

Daniel Simon: Well you know, what I would say about blockchain and crypto. You call it “The Great Equalizer. You know, because there is very much embedded within it. This idea of decentralization, this idea of equalization of taking you know, the levers of power from out of the hands of the powerful. And you know, I think what’s interesting to me, being a financial guy is that the people who have most adopted crypto, as well as brought the underlying blockchain and Ethereum technologies have been financial services companies.

00:32:20:06 – 00:32:20:21

Richard Carthon: Yeah.

00:32:20:23 – 00:32:58:14

Daniel Simon: So if it weren’t for the you know, sort of there’s this tension between the sort of the anarchic vision of the people that got into it. But I will tell you and this might disappoint some of your listeners, but you know, the reality is we’re not for the participation. In some cases, the full throated participation of people like Blythe Masters, but also people like Barry Silber from Digital Currency Group you know, taking institutional money and putting it into this. If it were under the JP Morgan created a crypto desk, you know, this would not have got much beyond the kind of a weekend science project, you know what I mean?

00:32:58:16 – 00:32:59:01

Richard Carthon: Yeah.

00:32:59:03 – 00:33:14:00

Daniel Simon: So what we have right now is a kind of an interesting marriage between the people who would seek to kind of you know, disintermediate to decentralize and the very people they’re trying to disintermediate and decentralize.

00:33:14:24 – 00:33:30:26

Richard Carthon: Yeah. And you know, when you look at who’s using the underlying technology of cryptocurrency and blockchain, I mean of cryptocurrency, it’s blockchain and you see a lot of banks actually starting to implement blockchain technology and I think you actually address some of this in your book.

00:33:31:19 – 00:34:05:09

Daniel Simon: That’s why Blythe was the most unlikely face of blockchain. Jane you know, having been the CFO JP Morgan’s investment bank, having been part of JP Morgan for 20 plus years, having created the credit default swap would be part of the team that created the credit default swap. She is the poster child for everything Charlie isn’t. She’s the poster child for you know, institutional banks and she’s got a lot of love. And she’s sat on all the right committees and she’s you know, she’s still a misfit by virtue of the fact that she’s a woman. And she was a pushy woman.

00:34:06:29 – 00:34:07:14

Richard Carthon: Yeah.

00:34:07:16 – 00:35:01:18

Daniel Simon: At a time when you didn’t find any pushy women in finance and for that regard, she’s an outsider. Even as an insider, she’s an outsider. I think that, yeah I talked to her a lot about this, I think that’s why she was drawn to it. Because the interesting thing about crypto, well sorry, blockchain and Ethereum is that they offer enormous efficiency gains. And so even as they also promised some sort of decentralization, they offer efficiency gains. So the risk for the movement, if you think of it as a social movement, the risk is that you know, the original goals get perverted in the name of just the greater efficiency, help all these central or counter parties of these you know, exchanges and banks and these people who were designed to be distance mediated, just helping them do their jobs. Plus, you see this in a little bit with the rise of central bank digital currency, right?

00:35:01:20 – 00:35:08:23

Daniel Simon: So you see CBDC. You know, central banks do not want a decentralized cryptocurrency.

00:35:11:04 – 00:35:11:19

Richard Carthon: No.

00:35:11:21 – 00:35:24:21

Daniel Simon: They’re not looking for blockchain, sorry for Bitcoin or you know, a blockchain. Like they want the cryptography you know, they want the ease, they want all of the technology and they don’t want the idea, they don’t want to lose control.

00:35:24:24 – 00:35:33:08

Richard Carthon: Right. They don’t want the decentralization side of it, but they want the centralized version of all the good stuff that cryptocurrency has to offer.

00:35:33:14 – 00:35:33:29

Daniel Simon: Yeah.

00:35:34:01 – 00:35:46:13

Richard Carthon: And actually even like just feeding on that question is like, when you think about Facebook and what they did with Libra, like do you think it’s inevitable that other big techs gonna continue to enter this space and try to kind of do the same thing that they’re trying to implement?

00:35:46:20 – 00:36:02:18

Daniel Simon: I don’t know. I mean, Covid is throwing everything for a loop. You know, I always say that you know, “What’s the one thing that Donald Trump and Maxine Waters can agree on?” And it’s like they don’t like Facebook, right?

00:36:02:21 – 00:36:03:06

Richard Carthon: Yeah.

00:36:03:08 – 00:37:03:21

Daniel Simon: So I think that if you look at the start of this year we went in and there was a bunch of cryptocurrency regulation in front of Congress. And like I said, I’m not a crypto expert, I don’t follow it every single day. And I think one of the reasons that there was this raft of cryptocurrency regulation in front of Congress this year was because of Libra and because you know, they were just sort of caught flat footed and they thought, “Well Christ, we don’t even have a way to regulate this.” There’s no way to define you know, crypto currencies versus crypto commodities versus crypto assets. And now you know, Facebook is sitting here in front of us with a proposal for a, you know, a global currency that they are like, “Oh my God.” So I think it’s been a wake up call. And it’s also a wake up call for a lot of you know, ECB’s talking about you know, CBDC and a lot of others you know, financial institutions, governments, the established institutional framework.

00:37:03:23 – 00:37:59:18

Daniel Simon: If you think about you know, the post-war consensus, the Bretton Woods, the United Nations, the World Bank, the World Health Organization, you know, down to the banking systems, the swift payments rails, there is a giant infrastructure in place that this threatens. And I think you know, when Facebook came out, it shook a lot of people out of their stupor about the potential. Now how they respond to it, how quickly they respond to it, what they do, what their response is, whether it’s to try and do stuff themselves or to regulate what’s in front of them will vary from place to place. And like I said, coronavirus has kind of put all of this you know, on the backburner for now, but it is obviously going to be a fascinating space to watch. I mentioned earlier in this conversation that you know, the Internet wasn’t wrong, it was just too early.

00:37:59:20 – 00:38:00:05

Richard Carthon: Yeah.

00:38:00:07 – 00:38:25:25

Daniel Simon: And I think that you know, blockchain and Ethereum, you know we talked of Italic in the book and I think you know, Ethereum and small contracts and you know, this stuff that Michael Casey gets out of bed in the morning for I think has enormous potential. I just think it’s like the Internet, it’s like we’re in 1998. Like you can probably parallel it when did like Tim Berners Lee come up with the Internet is only like 1988.

00:38:26:06 – 00:38:26:21

Richard Carthon: Yeah.

00:38:26:23 – 00:38:36:24

Daniel Simon: By 1998, we had enormous hype. So that’s like 2008. Satoshi Nakamoto white paper comes out, like we’ve had this hype.

00:38:36:26 – 00:38:37:11

Richard Carthon: Right.

00:38:37:13 – 00:39:07:21

Daniel Simon: There’s something called the Gartner Hype Cycle. I don’t know if you’ve seen it, but it has the sort of this peak of inflated expectations followed by the trough of despondency and then you have this long period of kind of making it work and I think that was the Internet, right? I mean you know pets.com, we had some famous explosions, AOL. Lots of stuff went wrong, but the promise of the Internet, right? Which was like this is going to fundamentally revolutionize commerce and the way that businesses operate. It’s real you know.

00:39:07:23 – 00:39:08:08

Richard Carthon: Yeah.

00:39:08:10 – 00:39:34:14

Daniel Simon: Peacock’s launching this month, we’ve got a 5th streaming service. You know, we totally transformed content in the way that you know, AOL, Time Warner got up 22 years ago and said would happen. They just said it was going to happen in five years and it took 22. I think when we look at blockchain and DLT, you know, that’s we’re going to be looking at the same kind of timeline. It’s gonna take 20 years.

00:39:35:02 – 00:40:29:27

Richard Carthon: Yeah. And time is of the essence in the sense of what I think would have taken 10 to 15 years of where crypto and blockchain was headed, Covid sped up the process because now there’s a lot more attention on the space, there’s a lot more money starting to flow into it, there’s a lot more people trying to figure out how can we implement this sooner because they’re starting to see the opportunity and just all the different ways that this can revolutionize visions that they have in place for the future. And one of the things that I kind of wanted to wrap up with because man, you have absolutely gave us a ton to think about especially, in the FinTech space and just so much to unpack and I think this a great reason why people need to go pick up your book because it’s just so much as you just go deep into in this space. You know, what is a final thought that you want to leave with all of our listeners here today?

00:40:30:05 – 00:40:39:09

Daniel Simon: I would leave you with this thought about the non-triviality of FinTech. So that is the point I made about the socioeconomic stuff.

00:40:39:11 – 00:40:39:26

Richard Carthon: Right.

00:40:39:28 – 00:40:53:03

Daniel Simon: I think this crisis you know, particularly for certain communities, communities of color, minority communities, immigrant communities. I’m an immigrant myself. I think you know, it’s a double crisis, right? There’s a health crisis and there’s a wealth crisis.

00:40:53:10 – 00:40:53:28

Richard Carthon: Right.

00:40:54:01 – 00:41:13:17

Daniel Simon: And one is laying it on to the other, right? So poorer communities, the frontline workers, they’re more likely to get exposed to this horrific virus, but they’re also you know, no one came out and said, “Our central workers need to earn $25 an hour.” Right?

00:41:14:18 – 00:41:15:03

Richard Carthon: Yeah.

00:41:15:05 – 00:42:20:14

Daniel Simon: No one said that in this country, which is incredible, right? We said, “Thank you for your service” and we clapped and we bang pots and pans and then we continue to treat these people like shit and they are the only reason that we have anything right now and that we’re not in total anarchy. And if minimum wage in New York had kept up with the price of rent, in New York, which is a relatively progressive place, it would be $22 an hour. You know, we have an eviscerated middle class and we have a financial crisis. Before the crisis, 50 percent of Americans didn’t have $500 in emergency savings, so half of the country could not absorb a shock of more than $500. And you imagine what that is like today. We are about to face a tidal wave of evictions, as government stimulus runs out. And as some people in the government feel that we’ve already been too generous with welfare and unemployment, so we have some major, major policy issues in this country.

00:42:20:16 – 00:43:06:19

Daniel Simon: I think that we can’t solve them all without you know, more government intervention and Congress needs to step up and do its job and look after the people that sent them. However, one of the reasons that I was very excited about the very short lived Michael Bloomberg campaign and I was very happy to be involved as a FinTech liaison is because I think that there is a lot of FinTech can offer that is nonpartisan, that both Republicans and Democrats can get behind. Things like real time pay. The idea that people should get paid for a day’s work because if you’re gonna make them do shift work and you going to make them work in all kinds of odd hours and you’re gonna say, “Actually you don’t need to come in for the next two days” and therefore shove enormous income volatility onto them, the least you can do is pay them for the work that they did.

00:43:07:05 – 00:43:40:24

Daniel Simon: If we are going to live in a world of gig economy and shift work where essentially an underclass of people you know, service a smaller fraction of wealthy people, those people are going to need access to credit in a different way from the way that wealthy people need credit. And right now, there isn’t good credit options for people. A significant proportion of our population about 20 percent are still unbanked or under banked, they’re not even served.

00:43:40:26 – 00:43:41:11

Richard Carthon: Right.

00:43:41:13 – 00:44:55:26

Daniel Simon: In the traditional financial services industry. They operate in a cash economy. More Americans own a cellphone than own a bank account. So you know, we have to tackle the problem and be unbanked and the underbanked. So I think that you know, what I would just say is there’s a lot of fun stuff in this book. The first story we talk about is Venmo. When we think of Venmo, you immediately think about splitting a pizza with your friends. There’s a lot about FinTech that is about making you know your reader’s life easier, if they’re a relatively you know, affluent white collar worker in an urban environment. But you know, at its heart, FinTech is about making the power of the financial services industry and finance is a very powerful technology that can enrich many, many people. Making it more accessible and giving it to more people, extending it more fairly and without bias. And that’s really what FinTech to me is about. That’s what I get passionate about and I think that’s my last thought. There’s still a lot more to do in some areas that touch on some stuff that we’re talking about in the news today, like you know, evictions, like wealth, like income inequality.

00:44:58:24 – 00:45:36:08

Richard Carthon: And I think that is an absolute great way to wrap up this episode because there is so much just between inequalities and all the various ways that they are taking form. And then what are the ways that we can actually start to address them and do something about it in FinTech is definitely a first step and I think you do a solid job of being able to dive into this book and describe one how we got here, how we can do better and start to address some of these bigger issues. So again I really do appreciate you spending some time with us. You know, what are some different ways that people can connect with you and then also how can we get this book?

00:45:39:02 – 00:46:01:16

Daniel Simon: Sure. So you can find me at DanielPSimon.com or on Twitter at Daniel P. Simon. And if you take the Money Hackers into any bookstore, Amazon or Barnes and Noble, this will come up and you can order it and it will be there the next day or in some places, you can still walk into a Barnes and Noble and you should be able to pick up a copy.

00:46:02:13 – 00:46:07:19

Richard Carthon: Awesome. Well I really do appreciate your time today Daniel. And for everyone listening stay Crypto Current.