1% Smarter Newsletter No. 006
What I'm reading, listening to, and learning from the week ending 12/25/21
Do I need Mexican pesos?
In preparing to travel south of the border this week, I spent an inordinate amount of time considering this relatively minor decision. It was partly a consequence of my frugality, as well as of my interest in payments and currency.
One option was to go to my bank, stand in line for a teller, and estimate how many pesos I would need.1 If I bought too many, I’d be stuck with worthless currency once I returned stateside. If I bought too few, I could find myself scrambling for more before my trip finished. Whatever number I landed on, I am sure Chase would reward me, a loyal customer of all these years, with their best exchange rate and no fees (/s).
A similar option, but possibly a Pareto improvement, would be for my bank to FedEx me the money. From the comfort of my couch, I could order pesos for delivery! Who said legacy banks aren’t innovating?
I could also withdraw pesos from local ATMs, pay $10+ for the privilege of accessing my own money, and assume my credentials were not getting sucked up by a skimmer. Or I could bring U.S. dollars into Mexico and exchange them at my destination, relying on my iffy negotiating skills to ensure a good deal with the local moneychanger.
For me, transferring value from one currency to another is a mere inconvenience of international travel, on par with obtaining travel-size toothpaste or suffering a long queue at the immigration counter.
For millions of low-wage migrant workers across the world, however, this issue is of much greater import. As Jack Mallers points out in this week’s featured content, $800 billion in consumer-to-consumer global cross-border payments will take place in 2022. Financial institutions charge between 6%–10%, or even more, on these transactions.
Educated reader, I won’t insult you by doing that math for you, but that is an immense amount of value transferred from some of the world’s hardest working and most vulnerable populations to banks and money transfer operators.
This story can have a happy ending yet. As Mallers points out, crypto protocols, like Bitcoin, allow for instantaneous and (nearly) free cross-border exchange of value. Imagine what millions of migrant workers and their families back at home could do with $80 billion in extra cash a year.
Bitcoin and other cryptocurrencies have many use cases, of which C2C global money exchange is but one. That’s what makes me so excited about crypto: its possibility to bring transformational change to so many corners of finance simultaneously.
So maybe one day when I travel to Mexico, I can plan to pay in BTC (or ETH, SOL, heck, even DOGE) and spend my time picking up travel-size toothpaste instead.
💡 Featured Content
My top pick this week
📺 Bitcoin: Disrupting Cross Border Payments - IMF Fintech Seminar by Jack Mallers
🧪 Science
🎧 Social Connecting and Bonding on Huberman Lab
🐤 Twitter thread on the Omicron variant by Bob Wachter
🖥 Web3
📄 The Web3 Renaissance: A Golden Age for Content by Li Jin and Katie Parrott
📄 The New Get-Rich-Faster Job in Silicon Valley: Crypto Start-Ups by Daisuke Wakabayashi and Mike Isaac
📄 Loot is a viral social network that looks like nothing you’ve ever seen by Casey Newton
📄 Justin Kan’s NFT platform suffers rocky debut as scammer makes off with $150K in user funds by Lucas Matney
📄 Bubble Wealth (PDF) by Bradford Cornell
📄 Tascha’s Destroyed Diamond by Tascha Labs
🏛 Government and Policy
📄 Analysis: In Defense of the SAT — Eliminating College Admissions Exams Only Worsens Entrenched Inequities by Prateek Dutta
💰 Money & Investing
📄 The big ideas that fintech will tackle in 2022 by Angela Strange, et al.
🎨 The Arts
📄 A Chat With The King of Music: An Interview With Daniel Ek by Sotonye
📚 Books
📘 Meditations by Marcus Aurelius
This is an example of the newsvendor problem—one of the few concepts from my Operations Management course in business school that has stuck with me.