Apple iMoney

Image via WikipediaMobile banking is just a channel, where we can inquiry our balance and send money to other accounts with a mobile phone at this moment. But I believe sooner or later, mobile banking will be more than just a channel but a bank itself and furthermore to be “Money“ itself.

Hypothetically, let us assume Apple inc. is planning to be “money” creator, with iPhone6. What Apple inc. needs to prepare is a bookkeeping system, which tracks down who owns how much money, say, Apple iMoney. As long as transactions happen within Apple iMoney (a buyer transfers money to a seller and both are using iPhone6), what Apple inc. needs to do is just to update the bookkeeping system, to change the ownership of the currency iMoney. In other words, in case users want to transfer out his/her iMoney out of the iMoney ecosystem governed by the apple bookkeeping system, the total amount of iMoney has to diminish. For example, withdrawing iMoney to Cash with ATM, exchanging iMoney for another currency. The key to understand this iMoney scheme is, “Money is just information serving medium of exchange”.

For this iMoney scheme to be “real” as the global currency, Apple needs a big data center in Northern California and mobile phones, smart enough to connect to Internet and send encrypted data, “exchange” rates of various currencies, and the most importantly, “credibility” for users to feel comfortable relying upon the company, more than relying upon nation states.

We can buy a same music in various countries with iPhone now. The same music, from the same store, by the same infrastructure, with the same payment process. Why not the same common denominator called “iMoney”?

The technology is ready, how about your mindset?

My money, Your money

Image via Wikipedia

There are only two types of money in this world. One is “my money” and the other is “your money”. In corporate finance, the former is called “equity” and the latter is called “debt”.

How efficient is my money utilized? Namely how much return per one unit of “my money”? The formula is given as return divided by “my money” (equity), so called Return of Equity (ROE).

There are only two ways to improve ROE, to increase the return or to decrease the equity. The latter can be achieved by utilizing “your money” i.e. borrowing your money, so that the share of my money per return will decrease. Then I can claim, “I am using my money efficiently”.

Quick question. I lend you 100 dollars and you lend me back 100 dollars. Is it my money or your money?

Technically, it’s your money. The 100 dollars are on my hands now but obliged to pay you back in future, as it belongs to you. I am just “borrowing”.

So… now I know it is your money… (My personality suddenly changes). Who cares about your money! I am the risk taker! Let us put your money into a risk asset such as sub-prime. (10 sec….). Oops, no money left to return “your money”, but can you pay me back “my money”?

In MBA, the place we can learn about the current “Capitalism”, being taught the virtue of borrowing money, and draw the clear line between your money (debt) and my money (equity), lacking a holistic view.

Yes, money must be used efficiently, and CAREFULLY regardless of my money, your money.

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