Apr. 17th, 2017

fallenpegasus: (Default)
I have a theory, about Apple.

Apple has a quarter of a trillion dollars. In cash.

That is a ludicrous amount of money. That is so much money, that it is too much money. It is too much to deposit as passive cash, because a bank can no longer be a neutral unbiased 3rd party when there is an account that big. Not even a large nation's central bank. When you have that much cash, risks like counterparty risk, fiat currency problems, and government confiscation start becoming a significant amount of the risk profile.

The way that most very large companies waste very large amounts of cash is to buy other large companies. This almost invariably is a terrible idea. The buying company almost always overpays, especially when they start bidding against someone else. And companies on sale for a discount, are for sale for a discount for a reason. So called claimed "synergies" almost never are realized. Costs are always higher than expected. Big mergers and aquisitions almost always are a mechanism where the senior executives burn the investors money in order to make said executives seem or feel more important.

Steve Jobs never felt the need to do M&A to seem or feel more important, so Apple only did aquistitions to obtain specific skilled teams or specific technologies. And in his passing, Apple has generally continued this pattern. (I think the aquisition of Beats was very non-Apple, and was a mistake, and probably is seen as an expensive mistake and expensive lesson by Apple's current leadership.)

But so and still, Apple has Too Much Cash. What to do with it?

When you have a pile of cash that is so large that it in itself starts turning into a local economic distortion, there really is only one profitable thing to do with it: Wrap a banking license around it, and open a bank.

Think about it. Apple could run a bank, a very different kind of bank, with a much lower risks of fraud and loss. They already have secure cryptoprocessors... everywhere! They can use iOS devices as the secure terminals, both for customers and for merchants. They can use ApplePay for retail transactions. They can use what they know about your from user's iOS devices and their AppleID for KYC. They can push secure finantial messages around via the iMessage framework.

With all this in place they could undercut all of the existing payment networks and still make, well, bank.

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fallenpegasus: (Default)
Mark Atwood

May 2017

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