Sunday , March 3, 2024

Security Notes: Brave New Payments World

Artificial intelligence (AI) is so unsettling that we look the other way as it encroaches on the fundamentals of what it is to be human.

Why do I say this? As AI is envisioned today, each of us humans will have his or her smart self, or “sself.” This sself is an AI unit that will be constantly loaded with our personal data, including information regarding health, finances, profession, tastes, style, goals, concerns, proclivities, weaknesses, strengths—everything.

Now, the various sselves will socialize and use their learning capabilities to search for cohorts, or other sselves that benefit each other by association, which means sharing information or pooling resources. Sselves will form smart families (“sfamilies”), which may or may not correspond to the traditional bond of family. Families will bond into smart tribes (“stribes”), and then into smart communities (“scommunities”).

All this bonding is self-serving. The sself will execute fast computational inference of all the ever-growing information at its disposal to best serve the goals identified by the human (the “dumb self”’). The self-serving sfamilies will identify shared objectives so that their members will benefit the most. And the same for the stribes and scommunities. It will amount to rational optimization of social power to serve the combined interests of the members of society.

This smart society (“ssociety”) will revolutionize everything from politics to health care to ethics to globalization. But here we’re focusing on its impact on payments.

What we buy may be categorized under the headings “life-maintenance” and “life-excitement.” Routine maintenance items like bread, gas, and toilet paper are characterized by predictable consumption. The sselves will bond into negotiation blocks and contract for a price and delivery schedule for each member.

The contract will result in “tethered money” (see my book by that title), which will be transmitted on delivery. When the gas pump fills your car, your sself pays the gas station with pre-negotiated digital tokens. You just fill up and go. To accommodate groceries shipped to your address, tomorrow’s houses will be equipped with a refrigerated outer box to hold items that must be kept cold. Bread, fruits, and vegetables will come directly from distribution centers that we humans will know nothing about.

Under life-excitement, stuff like a new car, an easy chair, or a new jacket will be viewable and touchable in dedicated display centers. We humans will go to these centers to kick the tires, hold the nice lamp, and try on the fashionable pants. Once we have decided on a purchase (estimated prices will be displayed), we will be prompted to indicate whether we wish to have it delivered to our address right away, tomorrow, next week, or “whenever.”

The less demanding we are with delivery, the more negotiation and optimization power we provide to our sself and to the shopping community that this sself belongs to (perhaps an ad hoc scommunity), and hence the cheaper the price. And of course, forget about EMV or other old-school payment devices. It’s all digital money, held, stored, managed and paid by your artificial sself to best serve your human goals and desires.

Give it a few years, and people will wonder how we ever managed to comparison-shop and pay using just this sluggish human brain that randomized Darwinian evolution has endowed us with. So much better to replace our irrational brain with sselves immunized against emotional response.

Everyone using a spreadsheet today pities prior generations that had to use calculators to handle mundane computations that a spreadsheet does so much more efficiently. Similarly, money matters are so conceptually easy: You wish to buy for less and to sell for more. It’s the myriad details that need to be rationalized and optimized, but our brain is ill-suited to this repetitive arithmetic. For our sselves, however, it is easy as pie.

Historically, shopping centers were location-optimized to make it easy for customers to drive there. Department stores were built to allow customers a one-stop shopping place for all their needs. As these two imperatives vanish, so will the solutions. Credit cards were invented to solve the problem of trust between merchants and customers. But public ledgers and other cryptographic trust products offer a much more elegant solution.

Similarly, when clients ask me to help with EMV issues, I say, wait it out. Soon the need will be passé.

—Gideon Samid •

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