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photo by Oliver H
FinTech — Financial Innovation and the Internet 2020 Fall
Lecture 3 : Internet Technology and Governance (1) Kenji Saito Professor, Graduate School of Business and Finance, Waseda University
Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-09 – p.1/40

This class is recorded
Camera ON is recommended, but not required You do need to speak often (we are going to have a lot of dialogue) We will use breakout rooms a lot, but those won’t be recorded unless you do it yourselves (need to be allowed) Keep your Zoom client updated! We might use latest features The recordings could be used for research on online learning Transcribed for use and anonymized Will let you know when the necessity arises
Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-09 – p.2/40

The lecture slides can be found at : https://speakerdeck.com/ks91
Recording and chat text will be posted at Moodle and Discord Trial automatic transcription of the lecturer’s part will be posted at Discord
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Schedule (provisional)
Lecture.1.9/25.Overview of FinTech (1).•
Lecture.2.10/2.Overview of FinTech (2).•
Lecture.3.10/9.Internet Technology and Governance (1).•
Lecture.4.10/16.Internet Technology and Governance (2).
Lecture.5.10/23.The World of Apps (1).
Lecture.6.10/30.The World of Apps (2).
Lecture.7.11/13.Blockchain (1).
Lecture.8.11/20.Blockchain (2).
Lecture.9.11/27.Other Ledger Technology and Applications (1).
Lecture.10.12/4.Other Ledger Technology and Applications (2).
Lecture.11.12/11.Cyber-Physical Society and Future of Finance (1).
Lecture.12.12/18.Cyber-Physical Society and Future of Finance (2).
Lecture.13.1/8.FinTech Ideathon (1).
Lecture.14.1/15.FinTech Ideathon (2).
Lecture.15.1/22.Presentations and Conclusions.
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Last Week, We Did. . .
Information Revolution and How Society/Civilization Changes Tetrad — A Tool for Analyzing Media (Industrial Tools) Gutenberg Galaxy and Its Reverse Future of Monetary-Financial System? Discussion : Does FinTech Free People? — actually, didn’t ⇒ But we can talk about it a little
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Tetrad of Monetary-Financial System (reprise)
Exchange and consumption Savings and investment Specialization, agricultural/industrial society
Inequality, exploitation and bankruptcy Digital currencies, FinTech and beyond Bullshit jobs and shit jobs — added
ENH REV RET OBS
Moneyless credit system Gift economy Generailzation (of skills), hunter-gatherer society
Control and obedience, hierarchy Maximization of profits
New medium “retrieves” what was previously made “obsolete” Will “gift economy”, “generalization (of skills)” and “hunter-gatherer society” really be retrieved?
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Recently, I read. . .
David Graeber, “Bullshit Jobs: A Theory” (2018) “A bullshit job is a form of paid employment that is so completely pointless, unnecessary, or pernicious that even the employee cannot justify its existence even though, as part of the conditions of employment, the employee feels obliged to pretend that this is not the case” Five types : flunkies, goons, duct tapers, box tickers, and taskmasters Different from jobs that are necessary, but merely bad (shit jobs) Graeber (deceased last month) pointed out that increase of bullshit jobs started when financial sector and corporate executive classes effectively fused (1970s) With the tetrad from the previous page, we know that rise of bullshit jobs is a reverse effect of financial capitalism fueled by its retrieval of control, obedience and hierarchy Since financial system is a cause, and automation may free those people working bullshit or shit jobs (though past automation was another cause of such jobs — why?), the questions raised by this book are not unrelated to this class
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Today’s Topics
Assignment Review Internet Technology
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Assignment Review
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Assignment 1. “Tetrad of the Internet”
Draw a tetrad of the Internet Write a bulleted list of what the Internet “enhances”, makes “obsolete”, “retrieves” and what it “reverses” into Based on the tetrad you drew, briefly describe how the Internet affects finance Please be concise Deadline and how to submit October 6, 2020 at 17:59 JST From Moodle (mandatory) Optionally, you can also post to #assignments channel at Discord So that your classmates can read your report, refer to it, and comment on it
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Trends and Measures
Trends . . . of your reports Measures . . . how to improve the class 15 out of 21 students submitted (better later than never) Just text, please (I’d copy and paste from the report view) Descriptions of the effects on finance may be a little too conventional Although they are good, but. . . Normally, what everyone knows is 20 years behind (Drucker, 1990) If you agree with what general public say, think, “Yabai (Bad)” (as a researcher) RET and REV seemed difficult to think about (you did pretty good on RET, though) What was made “obsolete” by the old media (which supported the ideas before the new media) is “retrieved” by the new media In RET in this case, we see what was made “obsolete” primarily by TV or printing In REV in this case, we see the similar effects as those of TV or printing
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Tetrad (group of four) (reprise)
4 questions about a medium (= any technology or artifact) ENHANCES . . . What does the medium enhance? OBSOLESCES . . . What does the medium make obsolete? RETRIEVES . . . What does the medium retrieve that had been made obsolete earlier? REVERSES . . . What does the medium reverse or flip into when pushed to extremes? – McLuhan, “Laws of Media” Questions that can be asked of any media What are the side effects of the media on people and society? Especially, when a new medium (M1) appears, it would obsolesces some existing medium (M2) that has obsolesced some other medium (M3), so that M3 would be retrieved by M1, as M2 is now becoming obsolete
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Tetrad of the Internet by You (collectively)
Imagination Education Information liquidity
Obtaining Information Expressing and Sharing Opinions Connectivity The internet speed
Acquiring knowledge, information, and data Sharing knowledge, information, and data
Redundancy of worthless/useless information (fake news and spam for example)
No personal privacy
Information authenticity Privacy Think independently
Internet Addiction “Fake news” Loss of privacy Loss of private time
AI Virtual World
No need of physical connection
Human online shopping behavior
Virtual Communication Decentralization Access to information Globalization
Communication
Collecting database and Cloud service
Automatic manufacturing Private issue
Decentralization Information symmetry
Overload information Internet addiction
Convenience of life Connection with people Big and transparent information
Live streaming service
Access to information
Secessionism Anti-realism
E-commerce Virtual communication Decentralization
media (from paper-based to electronic media)
Losing real-life social skills
Spaming, Fraud Globalization
delivery industry
Globalization
Lack of physical exercise Less privacy
Communication convenience Globalization
Artificial intelligence Social isolation
Too much information
Immediacy Globalization Higher work efficiency
Nervous disorders
instant and remote communication
Car navigation system (GPS)
speed of information transfer connection of things (IOT) online transaction stream media
Communication Efficiency
New trading system(ex: Ecommerce, internet banking) New working style and job(ex: remote work, YouTuber, internet celebrity) New transportation(ex: Sharing economy)
Social Network Information
Blue. . .Suitable Gray. . .Not suitable (IMHO)
Convenience in searching & saving information
Communication(faster and more convenience) Easier to connect and communicate with people Self-publishing Online shopping
ENH REV
Information hotlines Handwritten document
mail Book CD
Saving cost Security
RET OBS Mobile Phone Video Media
Disperse of trash information, misleading information
Traditional media
Face-to-face communication Retail stores
Traditional media
Let’s discuss whether the classification is right or not later
Freedom to talk Equality
Chaos Conflicts
Traditional communication tools: telegram, telephone
Privacy Creativity
Books & Libraries Printed Newspapers Television/radio
Face-to-face communication Distance restriction dumb phone
Traditional communication Traditional office working
Letter, Telephone Newspaper
Individual activism
Language barrier Retail outlets
The Great Library of Alexandria (As a repository of most of the world knowledge)
cash payment (to a certain degree) traditional cable television
Human relationship Face-to-Face interaction Physical activities
Letters(by using email) Local network Chaos Conflicts Lack of regulation
Easy to access information search
Distance Retails
Books publishing industry F2F interaction Retail Market
Villages Writing and communication importance of the narrator
Centralized management Company-based working
Paper document(ex: magazine, newspaper, and book) Traditional phone and fax Mail and postcard
Important but often overlooked effects
Revived because of the obsolescence
International call Cultural product (museum) Second-hand clothing (vintage) Use of bicycle (sharing economy)
face-to-face communication traditional bank system (force banks to change)
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For reference: Tetrad of the Internet by Saito
End-to-End, best effort
Cyber crimes, fake news
Human network
Firewalls, network divisions
Commons, neutrality and diversity
Echo chambers, no privacy
ENH REV
RET OBS
Hunter-gatherer society (generalization)
Agricultural or industrial society (specialization)
Control and obedience, hierarchy
Versatility of individuals, holacracy
Profits and monetary economy
Credit systems and gift economy
Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-09 – p.14/40

Z’s View of how the Internet Affects Finance
Financial data is more accurate, real-time and high efficiency Financial agencies’ management is easier and flattening Financial tools are more customized and connivence Financial globalization ⇒ Good, but what would be their side effects? Let’s discuss in breakout rooms First, look at the tetrad you made collectively, see if blue and gray classification is right and if there are more effects of the Internet Then discuss side effects of the Internet to finance
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Internet Technology
What’s “digital”? ← Let’s ask What’s “communication”? What’s “network”? What’s “TCP/IP”?
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What’s “Digital”?
Represents information by numbers Ex1 : Assigns a number to a character (encoding) Ａ (65 (0x41)) ａ (97 (0x61)) (‘0x’ stands for hexadecimal) ASCII (American Standard Code for Information Interchange) / UTF-8 If you want to convert uppercase to lowercase, add 32 (0x20) to the letter
Ex2 : Audio CD (sampling and quantization)
← Do you know what CD is? ;)
Stereo 44.1kHz sampling and 16bit quantization (which is far below studio quality today)
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Advantages of “Digital”
Common means of communication → low-cost common base Put everything in a USB flash drive, put everything on the web “Put anything on it” is the whole idea of USB (Universal Serial Bus) to begin with Do you know what bus is? Improvement of transmission quality → No degradation of information Degradation occurs during sampling and quantization, but does not occur after that Concealment or proof of communication → Encryption or digital signature Public key cryptography (we will have a chance to take a deeper look at it in later class) More efficient transmission → Packet communication, compression One single physical communication medium shared by multiple uses at the same time
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How Information is Communicated
Communication between human minds Expressed and conveyed Digitization determines the amount of information and conveys it efficiently But some things are always lost
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What’s Internet?
Foundation for communication in which digital information is exchanged Social / requirement aspect Network of networks Technological / functional aspect What’s communication? What’s network?
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Can Humans and Dogs Communicate?
Those who think they can Those who think they cannot Why?
photo by nikoretro
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Definition?
Communication The exchange of thoughts, messages, or information, as by speech, signals, writing, or behavior Interpersonal rapport — “The American Heritage Dictionary” It’s undeniable that you feel that humans and dogs feel close to each other. . .
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Human-Dog Communication
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Mechanism of Communication
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Enviroments and Communication
Can humans communicate with each other in any environment? We use signals under water The meaning is conveyed What can you change? What has to remain unchanged?
Photo by SLU Madrid Campus
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Protocols and Layers
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Definition?
Protocol the official procedure or system of rules governing affairs of state or diplomatic occasions the original draft of a diplomatic document, especially of the terms of a treaty agreed to in conference and signed by the parties a formal or official record of scientific experimental observations Computing a set of rules governing the exchange or transmission of data between devices — “Oxford Dictionary of English”
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Network and OSI Reference Model
OSI : Open Systems Interconnection
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Networks and a Relay
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Definition?
Network 2. a group or system of interconnected people or things a complex system of railways, roads, or other routes: the railway network a group of people who exchange information and contacts for professional or social purposes: a support network
.
. a number of interconnected computers, machines, or operations: a computer network
.
.
— “Oxford Dictionary of English”
Lecture 3 : Internet Technology and Governance (1) — FinTech — Financial Innovation and the Internet 2020 Fall — 2020-10-09 – p.30/40

Railway Model of Computer Networks
In the railway model, “×× line” is a network
(hopefully someday this map will look familiar for everyone)
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Railway Model and a Relay
-A network is directly connected by a train (LAN)
-A relay station connects the
Waseda Univ.
(Waseda) Exit 2 Waseda St. Tozai Line Rails
networks
Keio Univ.
(Mita) Ａ3 Mita St. Mita Line Rails
Otemachi St. Mita Line|Tozai Line
Rails
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TCP/IP
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Railway Model and TCP/IP
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IP Does Not Guarantee
Does not guarantee packet delivery No performance or reliability requirements for lower layer networks No lower limit, and no upper limit ↑ Easy to enter, and does not hinder new development for improvements Does not guarantee packet delivery order Can cope with congestions and faults by changing the route TCP recovers from errors Resend packets and/or rearrange the order
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Railway Model and TCP/IP (Story of students sending scrolls)
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Story of Students Sending Scrolls (1/3)
Background — Waseda and Keio Univ. Two among the best private universities in Japan These two universities are known for their rivalry and matches in baseball and other sports known as “早慶戦” (first characters of Waseda, Keio and match), although Keio students would often call it “慶早戦” ;) For undergraduates, classes may have to be cancelled for students to go cheer on the baseball team Story The head of the Keio cheerleading squad sends a letter of challenge in the form of a traditional scroll to the head of Waseda’s cheerleading squad It is a very long scroll that has to be untied from Keio’s Mita campus, slipped into Mita Station on the Mita Line, and then slipped out from Waseda Station on the Tozai Line to reach the Waseda campus so that the head of Waseda’s cheerleading squad can read it This is a metaphor of stream communication over the Internet as we do it via Zoom at the class Two ways TCP (Transmission Control Protocol) . . . Don’t miss reading every word of it (e.g. browsing a web page) UDP (User Datagram Protocol) . . . Well, it’s a long scroll, and it’s okay if it’s missing parts (e.g. Zoom)
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Story of Students Sending Scrolls (2/3)
Story – continued Either way, inside the entrance of Mita Station, there is a photocopier, which copies just part of the scroll at a time, and students pass through the ticket gate with one fragment each in their hand Each fragment is sequentially numbered from the top of the scroll Students are not familiar with the railway network, and when they ask the station staff how to get to Waseda, they are told to go to Otemachi, so they do Students ask again at Otemachi Station (router), and are told to change to the Tozai Line When they arrive at Waseda Station, a student operates a scanner/printer before the exit, scanning the fragments in numerical order and outputting a long scroll on the printer, and students pull it to the Waseda campus Now, some students may get lost on the way What would you do?
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Story of Students Sending Scrolls (3/3)
Story – still continued TCP Students pick up their receipts (with fragment #) at Waseda Station and take them back to Mita Station At Mita Station, if a receipt is not returned, it is assumed that the fragment was not delivered, and another student is sent out with the fragment UDP Why do we care if some students are lost? (They are grown up, and we are certain that they will make it to their home)
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See You Next Week!
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