MSD1976

Costco stock dropped 10% when AMZN bought Whole Foods: https://money.com/amazon-whole-foods-costco-wal-mart/

Just a hobby so not really.

I have some half-related product/service ideas but nothing concrete at the moment.

No myth. It was the first CARD and line of credit that could be used at multiple merchants. Prior to that, you had a line of credit with each individual merchant.

Don’t know. Where and how do you draw the line?

George Washington

I'm sorry but why is what Visa does considered "pure rent extraction" versus any other for-profit business?

Merchants may often gripe about the fees they're paying per transaction, but this ignores the tremendous benefits they receive. Yes, a huge retailer like Wal-Mart or Costco has the resources to extend credit, develop POS software, establish relationships with thousands of banks, etc. But do you think the corner bodega does? Or a restaurant that has 1% margins? It may sound simple: "eliminate cc fees and the merchant's margins go from 1% to 3%". But then you're hunting down customers for payment, mailing invoices, extending credit for 30-60 days. There's a real benefit to working capital to getting paid as soon as you swipe that card.

As for why this is the structure...well, it used to non-profit and co-owned by all banks and it worked okay for a bit, but it's harder to balance incentives. And, banks were strapped for cash in 2008 (time of IPO).

- https://money.cnn.com/2008/03/21/news/companies/visabanks/ - https://economix.blogs.nytimes.com/2008/02/25/visa-bailing-o...

I would also disagree with your assessment that it "sucks profits from their economies". These networks truly create far more economic value than they themselves keep. And what they do keep isn't going up into outer space or getting incinerated....

Why should Visa be treated as a utility but not a company like google for example?

Thanks, I appreciate it

Oddly I didn't like the book very much. Personally thought there were better books out there to understand the history.

Sorry what's the error?

Started by BankAmericard by Bank of America in CA only. They then franchised it to other banks in neighboring states, and eventually international banks (I believe under the BankAmericard brand, or under the other bank's brand). And then in the mid 1970s all the participating banks decided to rebrand under "VISA".

You're definitely right. Different countries have varying degrees of credit vs debit penetration. US skews more credit.

Yes Mastercard was in response to the success of the BankAmericard. Banks were much more regional in the 1950s-1960s because of a federal law that prevented them from operating outside of their home state.

Bank of America was the largest bank in the largest state (California), and had the most successful credit card program (the BankAmericard). When they began franchising the program to other banks, it made sense to concentrate their efforts in states near California.

Mastercard (at the time known as Mastercharge) was formed in response by a bunch of East Coast banks.

Re: Amex... they were big in the traveler's cheques business around the time that Diner's Club launched. Diner's Club proved the model, and Amex leveraged their extensive traveler's cheque network and wealthy user base to enter the market.

Also, Visa was originally run as a non-profit until 2007, and was co-owned by all its member banks.

Don't under-appreciate the benefits of having a portable, globally-ubiquitous, safe, instant method of consumer credit that is accepted by millions of merchants.

Imagine it's 1920 and you want to buy a sewing machine, which is 3 months salary. You could save up for years, during which time you're not able to sew any clothes. After you've finally saved enough, you walk over to the merchant with a wad of cash. On the way, you get robbed or lose the cash. Tough luck; no sewing machine, no money. And as for the merchant, they lose out on the sale until the time the customer has enough cash.

But maybe the merchant is willing to let you spread the cost over time. Great, now you can afford the sewing machine earlier and the merchant can book the sale sooner. But now the merchant has to hire staff to process bills and collect payment, they have to asses how likely each customer is to repay, they have to physically mail invoices and then drop payment off at the bank, etc. And every time the customer wants to make a purchase, they have to go through the long approval process with each individual merchant they shop at. No one likes waiting in lines.

Fast forward to Visa/Mastercard...customer walks into practically any store in the world, hands over a piece of plastic (or taps their phone), and walks out with any item. They get an instant, no-questions-asked personal loan.

1. Great for merchants because they reap all the benefits of extending credit (e.g., higher sales) without any of the credit risk/back-office headaches; 2. Great for customers because they can buy anything, anywhere, instantly, regardless of whether they have enough money in their account at that particular moment.

And neither party has to worry much about fraud, losing money/getting mugged, getting ripped off, etc.

This enables literally trillions of dollars of spend and economic growth. I think that's worth the ~$10b profit Visa makes.

Thank you, glad to hear you enjoy it

The former

As far as I know, most of these payment networks don't extend credit to customers in the same way that Visa's network enables. Consumer credit is a very powerful force that is often under-appreciated, and that benefits all parties involved in a transaction (e.g., consumers, merchants, and banks).

That is correct

Glad you like it. No goal really, just a hobby to keep me busy.

Thanks, but I prefer to stay anonymous for now

The site isn't about mine safety disclosures—it's just a name.

A quirky requirement that came out of Dodd-Frank is that ALL publicly traded companies are required to make a disclosure about mine safety, regardless of whether or not they even have mines. So if you look at Visa's 10-K, or Google's, or Chipotle's, they all have a line item for mine safety disclosures.

I wanted to keep it very high-level so that a 10 year old could understand so unfortunately some things had to get left out; like Dee. I did link to his book as part of the further reading/resources at the bottom of the writeup though.

Hey - I wrote this (http://minesafetydisclosures.com/blog/2018/6/18/costco)