David Rosenthal: belief

Transcript context

…It's true. I think there are less affluent people in our generation who have Amexes versus the premium products from banks or merchants. So Visa and MasterCard together, which of the seven powers do they have today? If you want to also do the analysis, which did they have early days? I will start. I think there's an easy no brainer that you have scale economies. Any investment that Visa or MasterCard makes get amortized across 16,000 member banks, across 4 billion cards, across half the humans on the planet, or whatever it is. Good luck competing with any fixed cost investment that Visa is going to make. It'll pay back instantly if it works to the extent that they can roll it out to any tiny fraction of their customer base. It's just so huge that it fits the scale economies thing, where if Netflix goes and buys a piece of content, they can pay more for it because they can show it to more people. Visa is the exact same thing with all of their fixed R&D costs. Tell me if you think otherwise on this. I think there's basically a law of economic nature, that if your gross margins exceed (call it) 75%–80%, and you are of a certain revenue scale threshold like our gross margins exceed 75%–80% but we're a two-person company with a de minimis amount of revenue in the global economy. But say you're in the billions of dollars of revenue scale, you must have scale economy power. It's almost stupid to say this one because it's like, okay, yeah, but that's actually not what gives the business. That's not what's so special about it. The network economies are what's so special about it.…

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