---------- Forwarded Message ----------
Date: Monday, May 14, 2001 9:26 AM -0700
From: Eric Hughes <[EMAIL PROTECTED]>
To: [EMAIL PROTECTED]
Subject: Announce: Eric Hughes giving Stanford EE380 talk this
All:
In discussions at the Bay Area cypherpunks meeting last Saturday, I was
repeatedly asked to forward an announcement. I will be giving the Stanford
EE380 colloquium talk this Wednesday, May 16, 2001. The course URL is thus:
http://www.stanford.edu/class/ee380/
The title of the talk is "Design for Commercial Reliance". The theme is a
particular reason why innovation in commercial transaction systems is
difficult. With the recent sale of the remaining assets of Cybercash to
First Data Merchant Services and VeriSign, the initial wave of digital cash
businesses is now fully over. The score was 0/3 (Cybercash, First Virtual,
DigiCash).
I believe it is instructive to see that the predominant payment system used
over the internet (internet payment order initiation) is the credit card
system for consumer and the ACH (checks) system for businesses. The
internet has been applied to the delivery channel, but the underlying
financial mechanisms remain identical. These internet use of these systems
has been deeply conservative. Even the only even moderately-successful
"alternate" system, Paypal, still uses no new transfer mechanism.
New payment systems are an awful business. They're low margin (they have
to be, to meet the competition), so they have to be high volume to
succeed. Getting to high volume has lousy financial properties. The
"bathtub curve" is long and deeper than you'd like. You have to finance
not only the NRE (non-recoverable engineering) costs, including data center
build-out, but also a few years of operating costs before you hit
volume. Let's just assume you've got the financing in place and also
realistically patient financiers who are not dupes. You have five years to
break-even from launch, say.
Now you have to do everything possible to ensure that your system has rapid
uptake. It has been proven by demonstration at this point (see scoreboard
above) that press coverage and cheerleading are insufficient. It doesn't
matter how much "RAH! RAH! Go Team!" there is. Wishing doesn't make it so.
Certainly you need brand. Without being able to quickly communicate what
the service is about, you won't get rapid uptake, even in the business
market. So let's assume your financiers have stumped up for advertising
and other brand-building activities. You'll also need differentiation,
because otherwise why not just use a check or credit card? Let's assume
that, too. (The first wave of internet companies had adequate brand and
differentiation.)
My claim is that you're still not done. I'll be talking about a basic
design failure that would kill uptake or slow it sufficiently that any new
venture would still fail, even having done most everything else right.
Eric
---------- End Forwarded Message ----------
Robert Guerra <[EMAIL PROTECTED]>
WWW: http://www.geocities.com/rguerra/
