Book review: Free by Lea Ypi

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Free: Coming of age at the end of history by Lea Ypi

Free is an intriguing memoir about growing up in Albania as it moved from Stalinism to capitalism via shock therapy and civil war. It is a childhood memoir of change and political awakening. But, it also reflects on what it means to be free.

What is lovely about this book is how the author captures the stories we tell to each other, particularly to children. Not entirely lies, but not always the truth. Under totalitarian conditions, the lies and codes we communicate are more extensive. Parents may trust their children, but you could never know what they’d say to their friends, teachers or anyone that asks. So you obfuscate. You talk about universities instead of prison camps. You explain away why your surname is that of a despised former Prime Minister as a mere coincidence.

So, and a bit of spoiler, Lea grew up not knowing that she was related to a former prime minister of Albania. Her gran had been rich. Her grandfather had been a political prisoner. Her parents didn’t love Uncle Enver Hoxha, the leader of Albania from 1944 to 1985, and that she would never get a nice framed photo of him to put above the television.

Then the Cold War ended, the Berlin Wall fell, Ceaucesco shot at a military base outside of Bucharest, and free elections came to Albania in 1992. But crime, communal violence, scams and poverty also came. Teenagers everywhere are angry and confused, tentatively taking steps in a changing world. Life is no longer swings, childish games and toys. Imagine going through all that change as your country swaps Stalinism for capitalism? Lea went through that as her country swung from optimism to anguish. This transition forms the base of the memoir. There is life before liberalism, the transition, and the new normal.

The book is called Free. Uncle Enver told the Albanians they were free but were they? When the west and liberalism came to Albania, Albanians were told they were now free. But free to do what? Is freedom being trafficked to Italy to work as a prostitute, as happened to at least one of the author’s school friends? As Lea concludes, socialism denied her family the right to be what they wanted, to think and say as they wanted. They were not free. But, liberalism broke its promises to them and turned a blind eye to injustice. You were free to lose money in scams, free to lose your job because the international dogma of “shock therapy” demanded it. The new freedom didn’t always feel that free.

She concludes that both worlds fall short of the ideal of freedom. But in different ways. However, she saw a system change once. She knows it can change again and can change for the better. She argues that understanding what went wrong in the past and what is wrong now matters most. To remain free is to do what is right, not be cynical, not be apathetic, and work towards positive change.

Buy it here: https://uk.bookshop.org/books/free-coming-of-age-at-the-end-of-history/9780141995106

Book review: This is how they tell me the world ends: The cyber weapons arms race

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Author: Nicole Perlroth

Written by a New York Times journalist, this book on cyber warfare and the global cyber arms race won the FT business book of the year, and it is easy to see why. It is a real page-turner. It fizzes with intrigue, danger and dubious characters.

The book focuses on so-called zero-day hacks. I am not a technology expert so bear with me. I think a zero-day hack is a bug in the software (or perhaps even hardware) that the developer does not know about. Until the software developer fixes the vulnerability, hackers can use these exploits to extract data, snoop on users and engage in other nefarious activities.

I like how the book captures how we have sleepwalked into a world where we have traded away security and privacy for convenience and frictionless online experiences. We know this for individuals, but we forget that this has also happened in our power supply, water supply, and other critical infrastructure. As a result, we are leaving them open to attack. Open to attack from pranksters and criminals, but also hackers employed by nation-states (or hacking groups loosely aligned to nation-states).

The book is excellent at dissecting the line that our secret services walk on zero-day hacks. They collect them by finding them or buying them for their use. But, they can’t be sure whether less friendly parties have collected the same hacks. So when do they tell the western software firms that they have a bug that needs fixing? And if they do, is it too late? Enemies and allies all use the same systems. Microsoft is everywhere. You can no longer cut a hole in something without poking a hole in security for everyone.

Eventually, hubris gets you. All the recent hacking stories in the US (and, to a lesser extent, in the UK) show that your enemies can be as good at poking holes in systems as you. For every Stuxnet, there is a WannaCry or a NotPetya

The author is clever with the title. Perhaps that is the journalist in the author. “This is how they tell me the world ends.” She is not saying that she thinks the world will end this way. Someone else does. But the title also seems to reference how TS Eliot ends his, arguably, most famous poem, The Hollow Men.

“This is how the world ends. Not with a bang but a whimper.”

I think it means we fear the bomb, the blaze of glory, but all we’ll get is to fade away—a death by a thousand cuts. The poem’s epigraph references Guy Fawkes and “Mistah Kurtz” from Joseph Conrad’s Heart of Darkness (a character reimagined as Colonel Kurtz in Apocolypse Now). Apocalypse now ends:

He cried in a whisper at some image, at some vision – he cried out twice, a cry that was no more than a breath –

“The horror! The horror!”

Is cyber war the death by a thousand cuts? If we are only nine meals from anarchy, can a cyber war put us over the edge? You can imagine our online lives turned inside out in a cyber war. ATMs frozen, payment terminals down, power down, production lines stopped—massive economic impact. Former US Homeland Security Adviser, Tom Bossert, estimated the costs of the NotPetya cyberattack at $10 billion. But does that mean defeat? Somewhat presciently, the book starts its story in Ukraine in 2019, the target of the NotPetya attack. However, Russia conducted a more conventional invasion of Ukraine in 2022. It seems cyber warfare has its benefits. It softens up and bewilders its victims. It stops short of a declaration of war. But if you want to conquer, you must put troops in the field. As the Ukrainians are showing massive cyber warfare resources alongside massive conventional resources does not guarantee victory.

Buy the book here: https://uk.bookshop.org/books/this-is-how-they-tell-me-the-world-ends-winner-of-the-ft-mckinsey-business-book-of-the-year-award-2021/9781526629852

Book review: The future of money: How the digital revolution is transforming currencies and finance

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The future of money: How the digital revolution is transforming currencies and finance by Eswar S Prasad

The book covers the latest fashion in payments – central bank digital currencies (CBDC). Essentially digital cash that a central bank issues. The author says the “era of cash is drawing to an end, and that of central bank digital currencies has begun.” An exciting conclusion to a book which seeks to make a case for a CBDC but doesn’t quite persuade.

The author takes the reader, possibly a touch slowly, through the basics of money and finance, before looking at the recent “FinTech” developments and the creation of cryptocurrencies. He then sets out the case for CBDCs, before exploring the ramifications of his conclusion that CBDC is nigh!

The first parts of the book are vital, if a bit long. We are at a point where cash use for payments is reducing. More people are reliant on using commercial money for payments than ever. Firms are using new technologies to provide innovative financial services for consumers and businesses that were not possible in the analogue era. Cryptocurrencies and crypto assets are novel but mostly flawed as a means of payment. So what do you do?

The author concludes that central banks minting digital currencies instead of paper currencies is the way forward. Or at least he tries. But I am not persuaded he has done all the thinking to conclude that is the case. I daresay this is a feature of being the first to the printing press with a big book on the big central banking issue of the day. For instance, one of the economic attractions of issuing a CBDC is that it could allow central banks to transmit monetary policy directly to the economy. A nice way of saying any change in interest rates could hit a consumer’s digital wallet straight away, whether up or down. Paving the way for negative interest rates to force people to spend and stimulate a flagging economy. But try doing that in real life. As the author says, negative interest rates “hurt savers, especially pensioners and older savers… negative interest rates are therefore considered politically toxic.” The author does not explain why politicians would give central banks the freedom to go below zero. I expect politicians in the WEIRD (Western, Educated, Industrialised, Rich and Democratic) world to explicitly forbid central banks from paying interest on CBDC balances, making any CBDCs more like paper cash and removing one of the most significant monetary advantages of the whole exercise.

There are several other tricksy issues in a CBDC. A few are privacy, cyber risks, impact on credit creation, and the impact on weaker economies (why hold a weaker currency if you can hold a digital dollar). At the dystopian end of the telescope, a CBDC could lead to the end of the fungibility of money. Theoretically, a central authority could restrict what a particular digital pound could buy. For example, a person on welfare could only spend their welfare payment on food or rent. Those who worry about government waste may salivate at such a prospect, but I urge caution. If you can constrain the use of one digital pound, you can constrain the use of all of them. Who knows what the next government would decide to circumscribe. To give the author credit, he acknowledges many of these problems. But, he still concludes that we can wait no longer and must step boldly into the era of digital money. As Marx could have said: “The central bankers have nothing to lose but their chains. They have a world to win.”

Book review: Platform revolution

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Platform Revolution: How networked markets are transforming the economy and how to make them work for you.

By Geoffrey G Parker, Marshall W Van Alstyne and Sanger Paul Choudary

A readable book that in parts overplays its hand and in others glosses over matters contrary to their thesis. I guess it is enlightening in its case studies and intriguing in its ideas, but also superficial. 

I think it overplays its hand because as starts from the position that the platform is a new and unique phenomenon. The authors define a platform as: 

A business based on enabling value-creating interactions between external producers and consumers. The platform provides an open, participative infrastructure and sets governance conditions for them. The platform’s overarching purpose: to consummate matches amount users and facilitate the exchange of goods, services or social currency, thereby enabling value creation for all participants.

OK. Sounds good. But, delete “social currency” and you could be describing Chelford livestock market. And that is the problem with this book. It has doubled down on defining this “new” business model that it does not appear to think critically. 

It also, fairly unthinkingly, reproduces the Tom Goodwin line that:

Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate.

Undoubtedly this is an exciting and attention-grabbing idea, and I have seen this arresting quote all over the place. Yet all are, to a lesser or greater extent, false comparisons. Minicab companies don’t usually own the cars used by their drivers. Facebook isn’t a media company or publisher, at least that is what it insists to regulators around the world. Like Alibaba, Bury market never held any inventory. And St Ives holiday cottages doesn’t own any of the cottages you can rent through them. 

Ultimately all are brokers. However, the advance of technology allows these business to be at a scale hitherto unimagined, and to be smarter and faster at matching supply with demand. I am not belittling the technology or suggesting that somehow these businesses are not different. The technology is important, and these new companies are different. But, it is wrong to suggest that these new business models were unknown to science. 

Overall I think more sceptical writers would have done the topic greater justice. For instance, the issue of data and governance are spoken about but not explored with a more jaundiced eye. As we have seen with Airbnb’s recent move to inspect all the properties listed on its website; basing your reputation on review systems that are gamed works until it doesn’t. Similarly, the concept of social currency could have been looked at in more depth. Is social currency simply selling attention, so marketing and advertising, or is it genuine new phenomena? Famously you can’t eat money, but at least you can buy food with it. Can you say the same about social currency?

In my opinion, Shoshana Zuboff wrote a better book on the changing economy and the novel aspects (and concerns it brings). Albeit her book, The Age of Surveillance Capitalism, is a touch overwritten in the opposite direction. It is overly negative. This short blast through the Facebooks and Airbnbs of this world is more optimistic and has more applicable ideas for business folk. For me the sweet spot is somewhere between the two books. To be pithy the book platform revolution is the ideal primer for those who want to sound like the zeitgeist without too much effort. Whereas, Shoshana’s book is the smartest person you know drunk on conspiracy. So why not read both?

Was 2019 the year central bankers got interested in retail payments?

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Through 2019 the spectre of Facebook’s stablecoin initiative, Libra, has stalked the world’s central bankers. With a potential reach in the billions and the fact that it would bypass existing national currencies, the proposal put the frighteners on England’s old lady and central bankers around the world. But perhaps there is unity in fear, and during 2019 we have seen cooperation between central banks. The central bankers have been clear on Libra: “there is an open mind, but not an open door.” In addition, they have been thinking carefully about the reasons Libra attracted such positive coverage. 

The Bank of England’s future of finance review concluded that despite the ongoing revolution in online commerce, payments are often more expensive than they need be and take too long to clear. This is amplified for cross-border payments which can cost up to 10 times their domestic equivalent. Central bankers in the UK, Eurozone and US are all taking action to address this. The US Federal Reserve has proposed building a real-time payment system, FedNow; and, the ECB has thrown its support into an initiative to enable SEPA Instant payments at point of sale, PEPSI (Pan-European Payment System Initiative). In the UK, the Bank of England has pioneered efforts to enable non-Bank PSPs to access central bank money, and will consult further in 2020. 

Historically central banks don’t tend to worry about the low-value payments made by the person in the street. They care about the high-value wholesale payments. This has changed in 2019, and I do not expect a reversal. As the central banks central banker, the Bank of International Settlements (BIS), concluded recently the development of cryptocurrency, the entry of big tech firms into financial services and the Libra proposal has “propelled money and the payment system to the top of the policy agenda.” And BIS has asserted the central role of central banks in payment systems. To paraphrase Agustin Carstens, BIS’ General Manager, it doesn’t matter how a payment system is organised central banks must provide the foundations of that system. These foundations include the unit of account, settlement finality, liquidity provision and regulatory oversight. 

Read more:

Learning from India’s payment revolution

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The search engine Google, in its recent submission to the Federal Reserve’s consultation on the proposal to create a real-time payment system, FedNow, urged the US central bank to learn from India’s payment system. In India, the National Payments Corporation of India, a non-profit partnership between the central bank and commercial lenders, has built the Unified Payments Interface (UPI).

The UPI launched in 2016 and is a real-time interbank payment system that also harnesses the philosophy of open banking. Technology companies can build applications that can transfer funds in and out of payment accounts held at banks. The rate for growth in the use of the UPI has been dramatic. The monthly volume of UPI digital retail transactions has risen seven-fold since the beginning of 2018. In November 2019, there were more than a billion transactions, totalling around $27 billion in value. The UPI has facilitated the large-scale adoption of digital retail payments in India, increasing from 65% in 2013/14 to 95% in 2018/19. 

India has shown that open payments infrastructure can address policy problems like financial inclusion. For instance, India has gone from only 27% of adults holding a Bank account in 2008 to 80% in 2017. It also can enable significant innovation and competition. However, payments infrastructure alone will not solve all these problems. It must go hand-in-hand with trusted digital identity services, appropriate data protection arrangements and robust fraud protections. This together with wider Government initiatives like demonetisation appear to have moved the needle on financial inclusion.

But, before we get too carried away on the growth trajectory of payments in India it is worth bearing in mind that India is starting from a low base. Despite the staggering growth in the use of cashless payments, the average Indian made under 20 cashless payments during 2018.

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Two sources

JimMeyrick

[This will not be the usual fare]

Yesterday evening (9 December) according to “senior Tories” (Robert Peston, ITV Political Editor) and “two sources” (Laura Kuenssberg, BBC Political Editor) a Labour activist punched a Conservative party advisor. The incident apparently occurred when the Health Secretary (Rt Hon Matt Hancock) visited Leeds General Hospital.

This didn’t happen. But for several hours apparently it had. The perpetrator had been arrested. The protesters got to the hospital in taxis paid for by the Labour Party. None of it true.

One assumes this is part of the rough and tumble of election campaigns. However, what struck me was the “two sources” line from Laura Kuensberg. Racking my brain, I remembered a piece by Peter Oborne in October for Open Democracy. Entitled “British journalists have become part of Johnson’s fake news machines” The article is worth revisiting.

Mr Oborne’s article starts with an autopsy of a Mail on Sunday front-page splash during one of the fevered Brexit period that eventually led to the passing of the Benn Act that would prevent a “no deal” Brexit. The Mail on Sunday’s original story asserted that “the Government is working on extensive investigations into Dominic Grieve, Oliver Letwin and Hilary Benn and their involvement with foreign powers and the funding of their activities.” Strong stuff, but was there an investigation? According to Oborne’s account, the Number 10 press office and Cabinet Office spokesmen denied the existence of such an investigation.

The Mail on Sunday stated when questioned by Open Democracy:

We stand firmly by our story. Two separate sources in Downing Street told us that officials in Number 10 were gathering evidence about allegations of foreign collusion by MPs opposed to a No Deal Brexit. When the prime minister was asked about our story on the BBC ‘Today’ programme on 1 October he responded that there were ‘legitimate questions to be asked about the generation of this legislation’.

Two separate sources again.

Mr Peston even wrote a long reply to the piece. I won’t summarise it. However, he proudly writes that:

[the role of a] conscientious political reporter then and now has been to distinguish palpable nonsense spouted by aides from information that genuinely represents the policy of the Government.

So was the non-existence of a punch a policy that brave Mr Peston was relaying with “maximum transparency permitted under conventions that govern political reporting in the UK”? Or simply that the policy is distraction, and some journalists are just hapless pawns in the game?

I hope that this is life lesson for Mr Peston and Mrs Kuenssberg and other British journalists prone to such errors. Maybe they won’t in future simply transmit what comes out of the mouths – or whatsapp accounts – of their “two sources.” But, I will not hold my breath.

So what chance do us unwashed folks have? How can we hope to know what has actually happened in our politics when the political editors of our two largest television networks apparently do not fact check what was a clear incident that either happened or did not. It seems at the minute they simply get the story from one (senior) bloke with a vested interested and check it with his mate.

I donate to fullfact.org. I suggest others should too.

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Gotta have it – Wearable payments increase 800% in EU (28 November)

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In just one year, the number of wearable transactions made in Europe has risen eightfold. Mastercard figures show that European consumers were able to use payment-enabled wearables in 26 EU countries using over 30 different devices. The Dutch were the most prolific users of wearables to make payments, and the Netherlands accounted for a third of all wearable transactions. The UK accounted for 18% of the total. Globally the most wearable payments were made in Australia.

The Mastercard figures are based on payments made using active and passive wearables. A passive wearable is something like a ring or a key fob, and you use it like a contactless card. You can approve the transaction by entering your PIN on a payment terminal. With active wearables, like a smartwatch, you can enter your PIN on the wearable itself and complete the payment with a single tap.

However, the distinction between active and passive wearables is increasingly blurred. Natwest has announced that it is issuing a payment fob linked to a customer’s fingerprint that will allow contactless payment of up to £100. Is this active or passive? The use of biometrics blurs this distinction, and the use of biometrics in payments is increasing. For instance, earlier this month, Barclays released an improved version of its VeinID reader for corporate customers. The new version is smaller, more portable and wireless-enabled. These changes are driven by improvements in technology, a desire for greater security and regulations – biometric authentication in its broader form, inherance, can be one of the two factors required for authentication under PSD2.

Read more:

– Mastercard, wearable payments are taking off across Europe: eightfold increase in transactions in just a year: https://newsroom.mastercard.com/eu/press-releases/wearable-payments-are-taking-off-across-europe-eightfold-increase-in-transactions-in-just-a-year/

– Finextra. NatWest tests biometric payment fob: https://www.finextra.com/newsarticle/34888/natwest-tests-biometric-payment-fob

The choice of a new generation (26 November)

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The European Central Bank (ECB) has relaunched its retail payments strategy. It has put dislodging the card schemes at the heart of the policy. It plans to “actively foster pan-European market initiatives for retail payments at the location of the purchase or interaction.” ECB Governing Council member, Benoit Cœuré, wants European banks to use the SEPA instant payment scheme to facilitate instant, secure and inexpensive payments online and in bricks and mortar stores.

Mr Cœuré lamented the absence of a European solution for point-of-sale and online payments. The fact that ten European countries have national card schemes that do not accept cards from other EU countries is not acceptable to him. However, twenty European Banks are plotting to fill the gap. The so-called Pan-European Payment System Initiative – or PEPSI – is trying to create an alternative to Visa and Mastercard.

For the initiative to get the ECB’s seal of approval Mr Cœuré wants PEPSI to offer the following: Pan-European reach; be convenient and cost-efficient; safe and secure – it should have the highest levels of fraud protection and provide consumer protection with robust complaint and refund procedures common brand and logos; and, finally, global acceptance. Mr Cœuré wants to see a clear roadmap on the future of PEPSI. If Visa and Mastercard are the real thing, will PEPSI be the choice of a new generation of Europeans?

Read more: Benoit Coeure (ECB), Towards the retail payments of tomorrow: a European strategy: https://www.ecb.europa.eu/press/key/date/2019/html/ecb.sp191126~5230672c11.en.html