Medellin, Columbia, December 12, 2017
“About 50-60% of the people in Medellin do not have a bank account. They take loans out from teenage gang members, who charge 20% per month “tax.”’ And the poor are willing to do this because one: there is no financial education. And two: because they have no other choice.”
That’s what our guide for the Medellin Real City Tours told us. The poor often don’t have a regular job, just sell things on the street. But the system won’t allow them to start an account at a bank for this reason. How are you able to put an “employer” on the application if you sell mangos on street corners? The population of Medellin is around 3 million people, meaning over 1.5 million are what they call the “unbanked”.
Worldwide, 38% of the world’s population does not have a bank account . That works out to 2 billion adults with no account at all. Their bank is literally under their mattress.
A possible solution floated was to allow the poor in Medellin to use the payphone as a bank – enter your account number and put coins into the machine. I thought this was ingenious – but it hasn’t been implemented, nor a date set to start. Better yet: why not use what every single adult already has – a cellphone.
I think we can look towards SubSaharan Africa as an example. “While just 1 percent of adults globally say they use a mobile money account…in SubSaharan Africa, 12 percent of adults (64 million adults) have mobile money accounts…” Imagine now if the banks weren’t huge multi-nationals, but citizens from within their community, keeping the money in the community to benefit all?
My Taiwanese friends were interested in buying Bitcoin, but weren’t able to connect their bank to Coinbase in order to make the purchase. I said, ‘Just give me your money and $5 for fees, and I’ll send you some.’ Which I did.
Then, it dawned on me: I had just become a bank. I received a cash deposit, agreed on a fee, and sent them money/bitcoin.
This is the Dream of Bitcoin: disintermediate and disrupt the Finance Industry. The individual as the bank.
Disintermediation of Banking
“Disintermediation…the removal of intermediaries in economics from a supply chain, or cutting out the middlemen in connection with a transaction or a series of transactions.”
Just look at recent history: what has disintermediated the Taxi industry? Uber.
In every Latin American city I’ve been to I was able to use Uber, arrange my pickup point and where I wanted to go, agree to a set fee, and pay with my phone. I could even set a pickup time in the future. I can even get a limousine-type car with Uber black. Uber wins because it’s cheaper, more convenient and safer than hailing a taxi from the street. And I don’t need to pick up fake paper receipts to inflate the fare for writing off on my company expenses either! I get an email, and it gets recorded in my Uber account.
And now the same disintermediation is happening in the Banking Industry, through Bitcoin, and the other alt coins such as Ether and Ripple. In 2016, the Finance and Insurance Industry accounted for 1.4 Trillion dollars in GDP in the US alone.
Worldwide, the estimated size for the financial industry in 2014 is $13.1 trillion. The Global Market Cap for Cryptocoins currently stands (CoinMarketCap.com, December 12, 2017) at 505,158,081,668, or only around half a billion. Just to give you idea of the scale, the Finance industry is over 1,399 times the size of the Crypto market cap.
When anyone with a smartphone can be a bank – who needs banks?
Well, people don’t have enough money to lend money for a house, right?
Satoshi Nakamoto does.
Satoshi Nakamoto, the sexy and mysterious founder of Bitcoin purportedly owns about a million bitcoins. He could finance a bunch of home loans. And the contract terms could be written in a mathematically precise form, with different term lengths, percentage interest, monthly payment and insurance escrow. And, if the buyer doesn’t pay, then the mathematically constructed contract could determine that ownership reverts to Satoshi – just like a bank. What’s to keep banks in business if the competition is us?
The Teen Gangster Bankers of Medellin
Currently, teen gangsters disintermediate the banks in Medellin. They are the bank of choice for the poor there. But what if a philanthropically inclined individual in turn disintermediates the gangsters, granting short-term loans to friends and family at half the gangster rate of 10%, down from the usurious gangster rate of 20%? He does it through his cellphone, and the gangsters are none the wiser. The poor get to keep more of their money, and the gangsters find something else to exploit.
Now, let’s take this worldwide. There are 15 million millionaires in the world, soon to all have the ability to act as a bank. There are only an estimated 14,600 banks in the entire world.
Remember the Great Recession? Too Big to Fail? Well, now We The People don’t need to bail out an institution anymore. Nor do we need any of such size.
But, what about the World Bank, and bailouts for countries such as Venezuela or Greece? Well, why not have a sorta ICO, but scaled for countries? Negotiate the terms of repayment, mathematically formulate the agreement, and let individuals – not countries, decide. Why should a “Germany” decide that an entire generation of young Greeks shall for a period no less than X years have no economic opportunities? The Greek diaspora worldwide is estimated at 7 Million, 1.3 million in the US alone.
Imagine a sorta bailout ICO, with repayment terms as a percentage of the total “investment” voted on by the bitcoin wallets of the individuals that are willing to participate? No expensive infrastructure to maintain, no impressive office buildings and helipads. Just individuals voting with their wallets.
Nations fall, individuals rise again. Democracy is messy, yet Crypto is ruled by consensus. The lesson of Segwit taught us that.
The Wisdom of Crowds, or Rule by Mob?
That’s the fear, isn’t it? Well, what are nations states anyway? We have a representative government, which has carved up districts in a way to benefit one side or the other. Which has led to things like the creation of National Parks to protect our shared natural resources…and the election of a serial sexual harasser in chief. Wars, both electronic and actual have plagued us as a nation.
But, if there’s anything that travel has taught me is this: while nations create enemies and justify wars, the vast majority of individual people within those countries are good and kind people willing to give the shirt off their back. They live and let live, and if someone needs help they will lend a helping hand.
Medellin was admittedly a basket case of a city back in the bad-old-days of Pablo Escobar. Now, tourists are making their way back, even taking tours of the city that explain the events during the reign of terror of Pablo, and to his eventual death. And how the city has recovered in a way that makes it not just a safer city, but a desirable one.
Their problem wasn’t even of their own making. Worldwide demand for cocaine led to Pablo. The country didn’t benefit, they just got all the shitty parts, like crime, murders, and government corruption.
No one would blame them if they held a grudge against countries that purchase the powder that contributed to such violence. But, every time I am asked where I am from, I tell them with a smile ”Soy Estadounidense.” I am from the United States. And sometimes: “Soy Junkie!” which in Espanol sounds like “I am a Yankee!”
And they go, “Ahh…” and smile back. Because their country has come so far, even tourists from the States want to visit.
And what happens when the Banking system crumbles, and Bitcoin rises and rises again to take its place? When the Insurance Industry is crowdsourced, and National Debt is wiped clean by the proud people from that nation? When individuals assert their power and vote with their BTC and ETH wallets?
My view is that a sort of of democratic capitalist socialism will take hold. It will be messy, and there will be disagreements, but ultimately, I think great good will evolve from it.
Because, to paraphrase a line from one of my favorite science fiction movies: The needs of the many outweigh the needs of the few, or even the one.
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