Patrick McKenzie: prediction

Transcript context

…If I try to use my credit card and it’s a false decline, that is, they won’t take it when they should, what’s the most likely reason for that? Gremlins. It sounds like a joke, but serious people . . . I used to work in the payments industry, Stripe. I’m still an adviser there. Everything I say is in my own opinion. Stripe, as a corporation, does not actually endorse the existence of fiscal gremlins. I’m not sure I don’t. Many people in the payments industry have spent a lot of time looking at the true source of false declines. Eventually, the best you can do is reduce it to some error term where you don’t know specifically what system is at fault. The credit card ecosystem, while it might present to you as a single pane of glass that you interact with just like you interact with a single pane of glass on your iPhone, is actually a stitched-together patchwork collections of systems that have existed for the last several decades. Somewhere in that stitched-together patchwork, someone had a hiccup. Then your credit card gets what we call a spurious decline. The rate of spurious declines is something of a trade secret, but it is much higher than any rational human being would expect is a tolerable rate of spurious false activity within a system. That that has persisted for so many decades is an interesting collective-action problem because it’s a stitched-together patchwork of systems. There’s no unitary authority saying, “You must commit to decreasing your rate of false declines by 50 basis points within the next two quarters, or there will be consequences.” There is limited visibility into what is actually causing the problem. Credit cards are an enormously lucrative business, and for the longest time, all players were like, “Yes gremlins. I don’t know what to tell you.” I know a little bit more to tell you than gremlins, but unfortunately, some of it is trade secrets. A thing that is not exactly a trade secret is that it is not the fact that problems are not solvable in the world. You actually can move the false decline rate by having the right people in the right places actually work on the false decline rate. Stripe has a number of things. You can read it from various PR announcements. The decade problems frequently have the rough form where, if one executive anywhere cared about this and did the bare minimum of effort, you would have somewhat surprising results on them relatively quickly. I had this long-running assumption that we’re doing about as good as we can with rockets. The laws of physics are a thing. We’ve dumped billions of dollars into this problem, and the smartest literal rocket scientists in the world at it. Then Elon Musk came around and said, “Actually, I think we can cheat the costs of getting things up to orbit by, oh, three orders of magnitude. ” If you had told me that in 1990 — I would’ve been very young to opine about it in 1990 — maybe 2005. If you had said that was possible in 2005, I’d bet against. That seems, a priori, extremely unlikely to happen. old me that in 1990 — I would’ve been very young to opine about it in 1990 — maybe 2005. If you had said that was possible in 2005, I’d bet against. That seems, a priori, extremely unlikely to happen. Now we have an existence proof of it happening, and I am reevaluating what I think about the world and how tractable various problems are in it.…

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