In this episode, John and Kevin speak with payments expert Chuck Davidson, head of customer engagement at Card Free, about the future of digital consumer relationships and ‘internet of character’. Chuck Davidson is Mobile payment innovator; designed, developed and launched Starbucks Mobile Payment – the largest mobile payment system in the US from idea to beta to 10,000+ store launch. Leader with 19 + years of successful product innovation experience in Payments, Loyalty and Consumer Products.
John: Welcome everybody to this episode of Creative Futurism. My name’s John Best.
Kevin: And this is Kevin J. Anderson.
John: And today we have-and by the way, you’ve had all these amazing guests, so it’s my turn to bring someone amazing. And I’m excited for you to meet-
Kevin: -It’s about time you did some work.
John: I know. It’s about time I did something for this podcast. You can hear him laughing in the background there. I’d like to welcome-
Kevin: -You brought the joker onto our podcast.
John: I did. Speaking of that I’ve got one of your Superman books here. But just a friend of mine for a long time. He was the dude who was primarily one of the main players in the Starbucks app that you said you use frequently, right?
Kevin: Oh, all the time.
John: And my wife won’t even let me buy anything from Starbucks. If I try to buy it with cash or anything else-
Kevin: -Oh no, you don’t get the points.
John: Well, you don’t get the little stars in the cup, right? So that’s a big deal. But with us is Chuck Davidson. He’s the head of customer engagement right now for Card Free, but in a past life he worked for Starbucks. He’s also one of the most fascinating guys I’ve ever met in the sense of understanding how this goes. And we’re going to talk about the future of payments today. So we’re a little bit in my wheelhouse. A little less about the physics and the last time when everyone laughed at me when I wanted to shoot radioactive waste to the moon.
Kevin: That’s a dumb idea, dumb idea.
John: I realize that is a bad idea. But welcome Chuck, how are you?
Chuck: Dude, that would look so cool by the way. Okay, I’m doing great and I’m really glad to be a part of this and really excited to chat with you guys and our huge audience.
Kevin: Well, and the whole point of Creative Futurism is to be talking about creativity and business and technology and how it’s all changing because I think all of us at our age-and of course we’re very young and virile and muscular and stuff. But at our age it’s almost like hyperventilating every day. Because just everyday stuff is changing at warp speed. And I find that I can’t even update the apps on my phone fast enough because they keep changing. And you being involved with the Starbucks app, which if I remember reading your stuff right the most popular business-
John: -Number one mobile payment app in the world still.
Kevin: Yeah, that-I resisted it first being real grouchy. I just want to use my real gold card. But it’s so easy. And once they started using it I get annoyed when I go to someplace where they don’t have the reader. And I guess what we want to talk about is this podcast is about how we deal with the future and how much it’s changing. And particularly some of the unintended consequences of it. So that’s just my kind of little soapbox, I’ll turn it back to John.
John: Sure. So where I want to start with this is what was the promise of payments like? We’ve talked about this before. Kevin and I talked about in the book Dune, right? I assume you’ve read Dune at some point?
Kevin: Of course, everybody’s read Dune.
Chuck: Everybody’s read Dune.
Kevin: The one person who hasn’t read Dune hasn’t seen Star Wars either. They’re a survivalist out in Idaho.
John: Yeah, they live in Idaho in the back end. But the reality is is that you look at Dune, you look at the payments that were there. We talk about that being spikes. What was the promise of payments, right? What was the plan? Like what was the dream? That one day how would things be paid for? What was your thought? Let’s start with Kevin and then we’ll go to Chuck.
Kevin: Well, I think one of the craziest things that’s going on now that’s happening right under our noses is the entire concept of money is becoming invisible. And it started that way when you had a credit card. You have people that are like, ‘Well I don’t even have to pay this. It’s just a credit card I keep paying for things.’ And then you get your bill at the end. But even that I remember it wasn’t too many years ago when you weren’t allowed to buy groceries with a credit card because they were considered perishable and you would eat it and then not pay your credit card bill or something. Now that seems like a bizarre concept that you can’t use your credit card to buy $100 worth of groceries or gas or whatever. And now you’ve got the scanning cards at the pump where you just waive it in front of the reader. But your Starbucks app, the thing of it is people basically can lock in and get their admittedly expensive cup of coffee. And they just sort of waive the barcode. And the ingenious thing behind it is the loyalty points. Because then you feel like, ‘Well I’ve got to go and use this and use my app so I get my loyalty points.’ And I’m talking too much but one last thing is seeing the new Amazon stores that they’re coming up with that you just sort of have your card with you, and it reads it, and you just pick up whatever you want. It knows what you put in your cart and you walk out. You don’t even have to pay. That’s sort of the next step.
John: Yep. And that was my dream. That was my 2000’s dream, right? That was the 90’s and 2000’s. It was that buying stuff would be more like stealing. And I have had one experience with that in the Apple store where you can go in and if it’s under a certain amount you can fire up your Apple store app and you can buy it and walk out. And it’s a little weird when you walk out for the first time with something that you have in your hands.
Kevin: Well, and I was in Sam’s Club a couple weeks ago and they’ve got a new app where you just you scan the things as you put them in the cart and then you just walk out the door.
John: That’s stealing, I like it.
Kevin: Well, and you wouldn’t have to worry about that if they weren’t so darn slow at the cash registers.
John: So what was your plan Chuck? What were you thinking?
Chuck: First of all, you guys there’s so much good content here. We could talk forever just on this intro. I mean that’s awesome, so much to unpack. And so Best, question for you. Whenever you first did your transaction at the Apple store, when you fired up your app and checked out your case or whatever it was, low cost item and walked out, did you run around and try to show your receipt to somebody at the front door? Or did you just sail on out?
Kevin: I’m honest, I can do this.
John: I did. I just wanted a little bit of assurance that like the Apple tackler guys weren’t going to get me on the way out the door.
Chuck: Yeah, and then you feel guilty.
Kevin: What’s to stop you? I mean you could just like waive your phone in front of the thing and not turn it on. So that you didn’t really scan it and then you walk out the door. I mean who would catch you?
Chuck: And do they even check? Do they even care? It’s so cool because-
Kevin: -Well trying to get the attention of anyone at the Apple store on purpose is kind of hard.
John: I discovered something. Here’s what I discovered. I tried to buy an Apple TV with the app and it turns out too that Chuck just made an important point that there’s a certain amount that you can buy. And so when I did, instead of doing that it said, ‘Hey John Best needs help.’ And everyone in the Apple store was walking around asking every other person are you John Best? So if you want to have some fun, if you need attention open up the Apple store app and do that. They will find you. I promise you.
Kevin: Yeah, that’s fun in a certain definition of fun.
John: But to Chuck’s point, I did try to get someone to show me the way out. I mean I just wanted to feel a little bit better about wandering out with my stuff.
Chuck: And these are all such good points. So let me back up a little bit. So my whole goal, and I was very fortunate when I worked at Starbucks, is I worked for a business unit. And so I wasn’t really tasked with innovate on payment. I was tasked with, ‘Hey guys, you Chuck work for the store value card, or the Starbucks value card group. And you’re bonused based on getting more people to use that card.’ So my whole mindset was let’s make it easier to use that card in whatever form than cash. Because I’ll get a bonus and it’s cheaper and we don’t pay interchange etcetera and so forth. So it was very business-y right? It was very much thinking about how do I look to behavior the way folks are currently doing behavior and figure out if I can nudge them, change them. Keep it as similar as possible so folks don’t freak out and I don’t get crazy training costs or anything like that. So that was kind of my thought process. Was how do I onboard more people and make Starbucks card or store value card, which is important, right? Because that’s super easy to do verses credit. How do I make that easier for folks? So that’s kind of what I did. Doing a lot of behavior analysis and customer intercepts and customer stories and use cases and all that. Just watching folks, right? That’s kind of what we did. And we realized that a lot of folks had their phone with them. And this was a while ago in 09. So, a lot of folks had their phone with them. And this is back in the day of feature phones too. So we had to use a little bit of smarts and do some modeling and place our bets. It’s going to be a smart phone verses a feature phone. We had no game and no ecosystem if you guys remember back in the day. That was the day when the carriers were going to be involved in all this craziness. And of course we were just a coffee company so that wasn’t going to fly.
So, my whole goal was to be everywhere, right? That’s why you saw things like a mini-card. A foreign factor that was small and fit on your keychain. So if you were jogging with your car keys you had your card with you and you could get your coffee on my product, the Starbucks card. Which of course turned into the mobile card. So just say for example that you went on your coffee break at 10:00AM, you didn’t have to bring your purse with you. You could just walk up with your phone. Meaning nobody really knew where you were going. So there were a lot of different behavioral aspects to that, that turned into moving a store value card form factor into a barcode. Which was super easy, they’ve been around forever, right? We pulled it right off the internet. And get that on a phone and try to keep the process as normal as possible so folks wouldn’t freak out. We didn’t want the operators to have to do additional training. We didn’t want consumers to say, ‘Hey, what’s going on here?’ So you still ordered, you get everything the same. And at the time of payment you just whipped out your phone instead of your plastic. And you even pushed the same button, the Starbucks button, that turned on the image reader. Which read your phone. Or the magstripe reader which of course would read your card. So that’s kind of how we eased folks into doing what is now pretty popular.
I do want to mention one thing. I know that when we first went out the door, we were really surgical, right? We just wanted this to be a utility. That’s it. And we got the elderly doctors who just wanted to pay. But the folks like Kevin who wanted to get the points and all, that was more of the majority. And we knew that once we started adding things like loyalty and stuff of that nature, we’d get a lot more folks. But right out the door we were a super disciplined payment, that’s it. Use your phone for payment, get out of the line. Then let’s start getting some data. How much time is it taking? Is it faster than a swipe? Are we getting many calls to customer care? Does that barista have to do any training? Do customers know how to do it without being incented blah blah blah? Anyway, now I’m the one that’s talking too much. But that’s kind of how we got there.
John: But just a quick question too, the one thing I remember was-and you can correct me if I’m wrong, but didn’t Apple have some sort of deal with Starbucks where when you walked in like the music that was playing in Starbucks would somehow interact with your phone? What was that? Remind me.
Chuck: We had a lot of that. Right out the door at the very beginning it was a pure payment play. But then much like-and you guys will get this, everybody in the corporation wants to play ball. So the folks who were involved in the music, the folks who were involved in the tune of the day, the folks who were involved in the relationship with Apple etcetera and so forth, everybody wanted to be on every channel. And I became a channel, right? Which of course was mobile. So yes, you did see things like tune of the day etcetera and so forth. That’s when the app got bigger and you started getting offers for things. Hopefully that were within your taste profile. And it got more robust as the day went on and as we started pushing down the curve to the early majority, to the majority of folks.
Kevin: Well, I’m one of these people that always brings my own iPod and noise cancelling headphones because I can’t stand the music they usually play in the background of Starbucks. So I wouldn’t want that. But that kind of brings me to a broader question of beyond being just a payment app, I’m thinking for instance of my Safeway card. And my Safeway card collects all kinds of data about what kind of groceries that I buy, what brands that I buy, and then they send me tailored to me coupons. Or to my phone they’ll go, ‘Oh, you always buy half and half so here you go. You get a discounted half and half. Or here, you bought this brand of bratwurst so maybe you want to try this brand for $0.50 off.’
John: Or you should be out of dog food by now, here’s a coupon.
Kevin: Well, I mean that’s kind of creepy in some sense but I feel it’s rather benign. And it’s helpful to me that they help-I mean they spy on my life and tell me what I really need. But it’s not obtrusive because they’re fairly accurate. It really is the stuff that I need. But now the Starbucks app, as far as I can tell, and it may be far more insidious than this, but as far as I can tell I don’t know that it knows that I always get a grande sugar free vanilla latte for my wife and a Pike’s Place brand blend drip coffee for myself. It doesn’t seem to track the things that I buy and then tailor offers to me based on my own taste. You like the sugar free vanilla latte so you might like the sugar free mocha latte next.
Chuck: So first of all Kevin, you need to upgrade to an Americano from that drip.
Kevin: It takes longer. I’m not the guy that holds up the line.
Chuck: It’s tastier, less acidic, your tummy will love you, and it’s got a nice margin. Okay so yes. So first of all, I do believe-and I haven’t worked at Starbucks for a while, but I do believe those guys are looking at the data and trying to present you with a correct offer that would be within your taste profile. I know we did that at Card Free. A great example would be one of our customers has a day part challenge. They want to make sure that the upsell you get is for the right day part. They don’t want to give you a breakfast upsell at dinner time, that type of thing. So we do count on day part. We know when you’re making the transaction. We know what to give you as far as your upsell during the checkout if you’re doing a preorder for example. And then we also-a little bit of it is go human, right? Is trying to make sure that we marry up-like if you’re a vanilla or a chocolate taste profile is a great example, right? Clearly your taste rate is going to be higher.
John: Wait, wait. We have taste profiles? Talk to me about my taste profile.
Chuck: Well you know what, that’s what these guys-good.
John: I didn’t realize I had a taste profile.
Chuck: Yeah, you do. They’re awesome. Oh, heck yeah. Ethiopia-you know if you like an Ethiopian drip, chances are you’re going to like chocolate. If you like a Latin American coffee, chances are you’re going to like citrus etcetera and so forth. And there is a science behind it. They are awesome. Anyway, but you’re right. If your offer is a curated offer and it really does speak to you, it’s a lot more meaningful. And that’s where everybody in the industry is going. And we certainly are doing that at Card Free for our clients.
Kevin: Well, and in fact that traces back to-we were talking a little bit before we started recording, if Safeway gives me an offer for something that I actually use I love it. If they give me an offer for something that I don’t use then it seems like annoying spam. And the Starbucks app was annoying at least for a while when they kept saying, ‘Here download this tune of the day.’ Which I had no interest in this tune. It’s not part of my music profile at all because Starbucks doesn’t know my music profile. So that I found annoying when I kept getting announcements of download this or download this mobile game or something like that. Because it didn’t track with what my interests were. If they are collecting data so that they can give me offers that track with my interests then I don’t find it annoying.
Chuck: That’s important Kevin, you make a great point. Where this really folds in nicely is when folks are developing loyalty programs. Especially these merchants. A lot of times what we used to do back in the day was surprise and delight you with something back in the Starbucks days. Which you know, great. But you would much rather get a loyalty offer based on your taste profile or something you actually may have purchased in the past or you like. Back to Best’s comment, you’re out of dog food, right? That type of thing. That proves to you, that me the merchant, I’m paying attention. And I’m trying to add value and I’m trying to add utility, right? And that’s kind of where you can absolutely see this in the data, right? If you give everybody the same album, just say theoretically you have a whole bunch of albums that didn’t sell back in the album day theoretically, and you give that everybody. Well great, you’re going to piss off a lot of folks, right? Oops, I hope I’m allowed to say that.
Kevin: You are, we’re on HBO.
Chuck: Am I? If indeed you know that Chuck likes a certain type of music and you give him that album, Chuck is going to be more interested and is going to find that loyalty/play a lot more meaningful. I hear you on the spam though, I hate that too. I mean there’s a lunch place that gives away a cookie every time. I’m like you guys c’mon, I don’t need the same thing.
John: Yeah, give me something I want. Well, so let’s fast forward to today. So Chuck in his current job has been responsible for a lot of other amazing apps that are out there. The Taco Bell’s, the Dunkin Donuts, and the evolution. Like the other day-and I’m going to talk about the future of this a little bit. But the other day-I’m not a Starbucks guy. My wife is, so I go when she does. She pre-ordered a drink. She literally walked in, it was sitting on the counter, she picked it up and she left. It had her name on it. And I thought-
Kevin: -I’ve done that too. But not really legitimately.
John: Yeah, it was somebody else’s drink. But so, he’s a starving writer as you could tell. You’ve seen all of his best-selling books and everything. So the question is is that as you’re out there working on these things, what is the future of this, right? Where is the big bang for the buck? We’re seeing facial recognition get a lot of attention. We’re seeing that one of the big scary things is the big Equifax breach. Which makes a big problem for someone like you who’s trying to-one of the things you talked about was no barrier to entry right? And so now, I have enough information thanks to being on the dark web and buying Kevin J. Anderson’s information because it was part of the Equifax that I am Kevin J. Anderson. So what’s the future of this in the sense of both authentication, identity, as well as like how much better can it get where I can order just walk in, grab a Starbucks, and leave? What’s next? Drones dropping them off through my moon or my sun roof?
Chuck: Yep. Well, I like your two examples because they’re examples that provide utility to the consumer, right? Whether you walk in and skip a line and pick up your coffee like your wife does, or whether you’re driving along and a drone comes up and drops a coffee through the moon roof. I would back both of those. Those are amazing and there’s a lot of operational challenges etcetera and so forth. But what’s interesting about both of those examples is those are examples that you would use. They do provide some sort of benefit to use. And that’s the difference between kind of what sort of the first phase of innovation. Everyone’s going to pay with their phone. If you guys remember way back with the NFC and all that, trusted service manager. We know everyone that’s involved and this ecosystem kind of plays together blah blah blah. No, no, no. No one played, consumers lost. It didn’t work. Nowadays folks are thinking more about the customers, right? I can walk in, get my coffee, and walk out. And what do I get? Well I get to avoid a line. Well that’s valuable to me so that means I’m going to preorder. And if I preorder my order accuracy is going to go up. In fact, preorder chances are I’ll order more. Therefore, my ticket might go up. We’ve seen preorder tickets 20% greater if you go through an app verses if you walk straight up to the actual person.
Kevin: Wow, that’s interesting.
Chuck: So there’s a lot of benefit on both sides for these types of innovations. And those are interesting. And I think that’s the fun part about where we are going. Gone are the days where it was kind of like some of the NBA version of what is innovation. And it looks great on paper but it just doesn’t fly. There’s operational challenges and the consumer doesn’t find enough value in it. Nor does the merchant want to invest the capital, right? There’s no return. So the things folks are focusing on right now have a lot more return. So let’s talk about that. And I can’t really speak to Equifax in the fact that it just freaks me out as a consumer.
Kevin: Why don’t you explain what that was all about. Because I’m not sure everybody is fully aware. Meaning I’m not fully aware.
John: So in the United States there are three credit bureaus, Equifax, Experian, and TransUnion. They’re generally used to make loans for you. That’s where your credit reports go. If it is that you hear the word FICO a lot which is the Fair Isaac Credit Score, it’s basically an algorithm used to determine or quantify what’s Kevin J. Anderson worth credit wise? And so Equifax is one of those where everybody reports their information to. So if I was a financial institution and I had a loan for Kevin J. Anderson, I would report that Kevin J. Anderson had paid his loan on time. And I would report it to Equifax or Transunion or all three bureaus so that other people could then make a decision as to whether Kevin was credit worthy. When I report this I report a lot of information. I have to give them their social because there’s a thousand different other Kevin Anderson’s in the world. So in a way to differentiate the Kevin J. Anderson that I’m talking about, I’ve got to give them a lot of personal information. So Equifax was one of the largest providers of this. And I would say hundreds of thousands of institutions throughout the United States use Equifax to do their decisioning for mortgages and for loans and those sorts of things. Well, that makes them what we call a honey pot. And what a honey pot is is that I’d rather not have to steal honey one hive at a time, I’d rather get a whole pot of it, right? So I don’t go out and steal a bunch of hives. I wait until they get it all in a pot. Then I take the pot. And so the point of that is, I don’t want to go steal identities from Starbucks because I would only get so many people. Why not go to a giant source where they’re all there?
So clearly hackers had been targeting and will continue to target places like Equifax. And because we run in what we call the castle model. And the castle model means that we have a castle. It has a moat, it has alligators, it has all of these things. But the crown jewels are in the drawbridge. The crown jewels are inside but once you get through those barriers of penetration off you go with the crown jewels. That’s what’s happened here. So someone got through their barriers of security. And I don’t know how good they were. I know there’s lots of people looking. But I would tell you that I know Equifax and I’m going to tell you that they’re pretty good. I’m thinking that the castle concept is the problem. And I’m actually writing a blog on that that you’ll be able to check out, johnsbestjunior.com. But at the end of the day, someone got in and they stole all of this personal information so that they would have your name, your social security number, your address, your previous address. They would know what you were paying on your mortgage. They would know past credit history that you have. It’s everything in the world I need to be Kevin J. Anderson today. And they take that big bunch of data and then they go out to the dark web and they sell it off in chunks. Give me people that have a credit score, because here’s why it’s so valuable for them to break in; one of the top ways to do damage in the world is for me to open a credit card that’s you. And then spend as much of that as I can and before they catch me. And you go, ‘Yeah, that’s not me.’ Because I could send it somewhere else. And then Visa’s on the hook, but not really because that just drives your rates up and it drives the common persons insurance up. So someone broke in, they stole I think it was 43 million accounts. Which I don’t even think that’s all of it. I think there will be more that we’ll find out soon in the Equifax data breach.
But again, I know nothing personally. I’m not related to them in any way. But they had a problem. Now, there is one thing that I’m going to bring up that’s a little weird which is if you go on the site to check your account, put in your social, you’re actually in the disclosure agreeing to never sue them. So don’t forget if you’re going on the site and you’re a listener you may want to consider that issue and to go through it. So how do you protect yourself against this? Well you’re going to have to monitor your credit. That’s the only way to go about it. And unfortunately even though Equifax got hacked, they are a way of knowing how to monitor your credit. So if someone opens up a new account in your name using your social, there are a lot of systems out there that will monitor that. So my point is that if I’m setting up a Starbucks account, I could easily become Kevin. Particularly in let’s not use Starbucks, let’s use Target. Where Target has their own store value debit, so you’re basically applying for a credit card at Target to get the app. And so, I’ll let Chuck take it from there.
Chuck: I think that’s a good point. I also think-I also wanted to add to that everybody who’s listening just rip open the mail that comes to your snail mail. Don’t wait, don’t let it sit on the desk for three weeks because a lot of times when folks open an account fraudulently in your name, that institution will send you some snail mail to your address.
John: Right, that’s what happened with Wells Fargo.
Chuck: Yeah, I know that’s crazy. People keep calling. But that’s a great explanation Best so I appreciate that. I just wanted to make sure everyone does open their snail mail. Because I got in the habit now of opening it every day. I go through it and I shred it and I’m off to the races.
Kevin: Let me check that Chuck because I mean we constantly get this you can apply for this credit card or here’s the junk mail thing. So you’re saying if we suddenly start getting snail mail from Wells Fargo and we don’t have an account at Wells Fargo, we have to look to make sure it’s not junk mail per se.
Chuck: I do, yeah. And my identity got compromised and this is way off on a tangent but it is somewhat related. It did get compromised so that’s when I changed my behavior and I started opening all of my snail mail. And I don’t disregard something from a financial institution that I don’t have a relationship with anymore. I will read the snail mail and then I’ll call them if it’s an issue. Like if there was an account that was opened etcetera and so forth. And immediately ask to talk to their fraud department. It’s a big ol’ pain in the butt but you just fold it in your work flow and you drive on.
John: Let’s talk about the future. So one of the things that Chuck brought to my attention, and Chuck and I speak frequently, is KFC. You’re aware of KFC, right? I don’t know if you knew this but I guess KFC is like the world’s greatest restaurant in China.
Kevin: Oh, I know a friend that lives in China. And KFC saved his life because it was the only food that had any sort of health standards at all. And otherwise he was eating the freaking rats from the street vendors and he kept getting sick. And he found out that the only way that he could keep himself healthy and alive was to just eat at KFC. Because they still had sanitation standards and stuff. Anyway, so in China . .
John: In China there you go. So while also saving people’s lives in Fraud, KFC also has implemented a brand-new way of sort of making sure people are who they are by using facial recognition. And Chuck you brought this to my attention. Would you talk about that a little bit?
Chuck: Sure. Well first of all, let’s take a step back. I think that China’s a big deal. And we should keep talking about that with our users. Excuse me, our listeners in the future. Mainly just because there’s so many folks in China. And their appetite for trying new things in the facial recognition, for example, is aggressive. And plus as a consumer base they don’t necessarily have the same say U.S. push back to a giant database with everybody’s information in it. Anyway, I digress. So what’s interesting about that is a couple things. So KFC is doing this facial recognition trial. What’s interesting about it is you can actually buy something. It’s not necessarily facial recognition that lets you in the amusement park or things like that in the past. But you can actually go ahead and get your chicken with your face if you will.
John: See, I’ve always said that I have a face made for chickens so this is perfect. I’m finally ready.
Kevin: So you’re saying you just look into some camera and it says this is John Best and charge this on John Best’s account?
Chuck: Yeah, you basically look at the terminal and it does a really quick scan into the database offsite. And it gives you the thumbs up, yep it’s John. And then that’s how you pay. I believe you still are prompted for a phone number. So there are two factors there. And then the payment goes through.
John: So face payment.
Chuck: So it’s interesting. So it’s face plus a phone number.
John: Now what if I bring a picture of Chuck in? Is that going to be a problem? He doesn’t want to go out in public. Like hey my face is a little messed up today so I brought this. Obviously they’re not going to let me do that, right?
Chuck: What they say is that because of their process, in which case you look at the camera and you blink, and they’ve got some sort of an algorithm. And they believe that that’s going to address the issue of is this a picture or is this real time John Best? That type of thing. We’ll see, right? What’s interesting and I sent you a quote John, is that the project manager at Ant Financial said, ‘We hope one day in the future people can go without their cellphones or wallets.’ Which kills me. Because years ago I used to say, ‘I hope one day people will go without their wallets.’ Hoping they’d bring their cellphone, hoping they’d pay for their coffee with their phones. Now we’ve gotten to the point where folks say, ‘Hey, just bring yourself.’ And I think that’s kind of cool. At least directionally they’re thinking that way.
Kevin: But fundamentally that’s no different from I use my thumb print for PayPal.
Chuck: Same thing. Yeah, good point. I think that a lot of it is whether it’s a retinal scan or a thumb print or facial recognition, I kind of lump those all in the same bucket, sort of bio-metro bucket. And it just depends on which technology is getting there quicker through artificial intelligence or however they’re improving, their accuracy. There seems to have been a lot of buzz around the retinal scan in the 2015 articles that you would read. And in 2016 now it’s all about facial recognition buzz. So we’ll see where it all goes. What’s interesting about the KFC stuff, I think there was a CNN money article in September. And what’s really interesting that they’re actually letting you-there’s a transfer of something. You’re showing your face, you’re getting chicken. So it’s not just a validation. Yes, you can go to Disneyland. It’s okay here’s your chicken, right?
John: It’s identity as currency. So we’ll find that CNN article and post it on the site. But coming back to what Kevin was just saying, so the thumb print-you know why I think the thumb print’s going to fail? Because people don’t want to touch stuff. I think we’re going to get into the voice and the face a little bit more because we’re looking like I don’t want to lick the screen or anything to get in.
Kevin: But also, I mean the thumb print takes a few seconds. You have to actively touch something. If it’s facial recognition-I mean Facebook identifies me just from random pictures I put up. I don’t have to actively do anything else. And in fact, this kind of gets to something I mentioned before we started recording. I’m the science fiction guy. So what we’re sort of moving towards is you the person are like a physical walking bank account. You yourself are an avatar, a manifestation of your self-worth. I mean you, the body, the face, your thumb print or whatever, represents the amount of money you have in the bank account. But as we were talking before is money itself is an imaginary concept. I mean there’s no longer gold coins that you’re passing back and forth. And you have paper dollars which are based on a gold standard which are not really based on a gold standard anymore. They just-we all agree that a dollar is worth this much. And what I was discussing before is that there’s a different kind of a currency that a lot of use. I use it myself. I mentor lots of other writers. I help out with neighbors and friends. We do things where I used to kind of jokingly say that I had a big account of brownie points that was bigger than my account of dollars. And I always like to say that you have to earn brownie points before you spend them. You can’t ask for a favor before you’ve earned something. But what if there’s actually a way to quantify stuff like that? Where not only are we having invisible monetary transactions like I’m going up to KFC in China and it’s recognizing my face and it’s giving me chicken. But what if I read another writers manuscript and she’s really appreciative so she just gives me a hundred brownie points which go into my account? And those brownie points are worth some amount of value that I can then spend to get a favor from somebody else. I mean it’s kind of a conceptual amount of currency. But I really don’t see how it’s different. I think you-your life is going to be some kind of quantifiable value that you can use to buy things and sell things and get services. Which is kind of cool but you worry about the four terrible words if something went wrong. Until somebody hacks the system or your account gets frozen because of something. Anyway, let’s talk about the first part first. I’ll let you respond Chuck with whatever thoughts you have.
Chuck: Well, I think the concept is great. I get it, right? And everybody gets it. I think that what’s interesting is I always go back to-and remember you’re the science fiction writer, I’m the manager. I just go back to the P&L. So for me I’m thinking alright, cool. You’ve got these points, right? It always turns into the chicken or the egg. If you think about it, in order for anything to take off, it has to be in a preponderance of places or everywhere, right? And there has to be enough folks who want to use it, or everyone. Like once you get everyone everywhere it’s a no brainer. But it’s really tough in the beginning to get folks off time dime. So, if I come and shovel your rock and I get three brownie points, what can I trade those in for, right? Unless you’re going to wash my car and it’s a good wash. We’re both there, thumbs up. But that would be interesting to see how that would play out. I like it though. I think a lot of it is if you think about-this reminds me of kind of the whole digital currency block chain discussion. Which is right up Best’s alley. Which you hear a lot of. Everybody understands the concept of distributive ledger. And I think that’s pretty much intuitive. And then everybody kind of understands what the merchant would get out of a sort of mass adoption of digital currency. In lower transaction fees, faster settlement, single global standard blah blah blah. But it always kind of gets wonky for me when I start thinking okay what does a customer get? All of a sudden, you’ve got this hard to convert currency, how do you get the money out? That type of stuff. Like how do I turn it into dollars that I can use for a soda pop down the street? And then of course the fluctuation which just reminds me of FX, right? The consumer has to accept that there could be a potential fluctuation in the value. And are they really willing to? So I think about that when I hear your concept. I start thinking okay, this is cool, these are similar. And it just all sorts itself out in time. It’s just a matter of how these issues or challenges are overcome.
Kevin: I was going to say, I almost think of it like karma points. Like if I do a bunch of good things for people then they’ll do good things for me. It’s not quantified but that’s what happens. I mean if I’m a jerk and I never help anybody then nobody’s going to help me when I need it. So it sort of goes back and forth that way. I was starting to think of all those wonderful people in Houston just going to volunteer and helping to rescue people. And for no monetary payment at all. But boy, they sure earned a lot of Karma points. But it would be nice if there was some way to apply that to something of value. Other than just if I saved somebody from a rooftop by using my railboat, but a year later that person might be happy to come and help me do some landscaping.
John: Maybe he’s a carpenter or something, yeah. I think the good news is this, and Chuck mentioned my alley so for once we’re in my alley. I’ve got a nice dark alley I can hang out in. So talking about a bit going in cryptocurrencies, so really this idea is really great. The challenge has always been that there always has to be some sort of centralized player, right? So in the model that you’re thinking of there’s somebody that’s collecting this and they become sort of the mediator between you and the carpenter who you saved from his rooftop. That’s where things go south usually in all these models. But because we only have the ability to have these centralized networks, which means that there’s nobody in the middle. But it gives the ability for me to communicate with you, and you to directly communicate with me, we can exchange value. But still have trust which is an amazing concept. So what you’re talking about is something that-and he’s going to be one of our guests. His name’s Drummond Reed. And he’s going to be also with Doc Searls, an author we’re going to have on talking about the intention economy. Chuck, I believe I introduced you to them if I remember right.
Chuck: Excellent, excellent.
John: And the idea is that there’s going to be an internet of character. And the value proposition of that is we can use it to gain credit. Which is the real-world money, which solves the problem that Chuck was just mentioning on his P&L’s. But it solves your problem too. So maybe you don’t get direct help from that carpenter which would be great. But maybe that character that you just showed also be able to be a way that we could go back and say, ‘People like Kevin who go help people more often than not pay their bills. Or more often than not pay their credit.’ Because people are far more than-we talk about Equifax, their list of credit. We tend to want to quantify people down to a number. But the reality is is that people are-your identity is a lot more than those things. And so, the idea that a soup kitchen could give you credit for being there and we could say, ‘We’ve lost the context of service in this country to some extent.’ And so, if you could get sort of a-and I liked your idea earlier of calling it karma. There’s something right now called a FairCoin, right? And if you look in the world of what we call BitCoin, right now there’s a couple different ways to go. There’s proof of work. That means that I worked, I was a miner in this thing so I get some value from that. There’s proof of stake which means I put money in and so now I’ve got this much stake because I bought gold or whatever it is, right? And there’s a new one coming out called proof of cooperation. And I think we’ll see more. I think we’ll see proof of service. Because service has value ultimately to humanity. And so as a result, there should be in my mind, we’re going to have a way to use A.I. or some way to quantify what that value is for Chuck’s side of the P&L. It could be that the Starbucks people go, ‘You know what? It’s really worth it to give free drinks to guys over time who do this because they bring in other people and more value.’ Or something along those lines.
Kevin: Well think about the people in Houston that they drove from Oklahoma, they drove from Colorado, they drove from all over. They left their jobs for a week or two to just help out people. And now, they can’t pay their bills because they went a couple weeks without being paid, they left their job. But they were serving and helping people. But it would be nice if a Starbucks recognized that they just put in 50 hours in the rain and in a boat pulling people off of rooftops that that’s worth maybe a couple of grande Pike’s Place or Americanos.
John: And Americanos right. And that’s where the Red Cross could be the guys who put that information in. Because you ultimately have a trusted source. Now if I just said I did it, we’d have people that game it. I mean it didn’t take but three hours before people were looting homes in Sarasota in Irma this week. So we have to be careful about that but this distributive network really brings that opportunity. So I want to close out with Chuck on this. So Chuck, if it were that you were inventing-if you could wave a magic wand and I want to connect the science fiction to this. And you were in one of these science fiction novels that Kevin writes in this world, what would it look like to you-the payment structure? How does it play out? Go ahead.
Chuck: I think I always look at it from a consumer’s standpoint. So whatever the payment is, whether it’s your face, your thumb, your tongue, your eyeball whatever, did this add utility? And this is a big deal. Because a lot of folks were building better mouse traps back in the day but nobody was using them. You have to really look at how do I want to change behavior? Because it’s a behavior play right? So did this add utility? That’s easy, right? Being on the plane first. You can get a free point. Here’s a free brownie. It’s super easy to model behavior if you want to pay someone to do something or reward someone to do something. But it has to be part of the equation. And the operational complexities of a big deal is intense. It just use to kill me when I would see people trying to pay with their phone at another coffee shop back in the day. When they were using another mobile payment play the barista had no idea how to do it. And I asked the barista, ‘How often does this happen?’ Once a month. Well no kidding, right? Because no volume solves all problems. But you’ve got to keep it super simple. Is there any training needed? That goes on the customers side too. Do they understand what to do? Or are they going to feel stupid? No, it’s got to be no training needed. And security issues are a big deal issue also. Because we talked about facial recognition and what’s interesting about it I mean you guys said, ‘Hey, what if I bring a picture?’ And that’s true, there’s different artificial intelligence and different ways to go about making blank, that type of thing. But there’s also really smart kids. Like the guys at CMU I guess I read an article recently where they created a way to fool the university using full facial recognition into thinking they were someone else. With these glasses they made, really wonky looking glasses. But they cost like $0.22 a pair. And that certainly makes you think well okay wait a minute, granted if folks are walking my amusement park with these crazy glasses I’m not going to let them in. But you have to ask that question. Is there a way around that? What is the initial application? I’m sorry go ahead.
Kevin: On the same hand though, if I’m standing in front of the cash register at KFC, and I’m supposed to be paying, and I hold up an 8X10 picture of John Best, I would hope that the person on the other side of the cash register would say, ‘Excuse me, that’s not allowed.’
Chuck: Well, let’s talk about that. That’s a big deal because I think whenever you daydream or whenever you strategize about what you want your future vision to be, and then you map to that, you’re saying the exact right thing. Which is I don’t have to solve the problem that says the person behind the register needs to ask John Best why he’s holding a picture, obviously that persons going to hold up a picture, right? I think you’re right. I think there’s certain human behavior that you just have to rely on. I used to hear this all the time. What if my friend goes to the bathroom and I go through her purse and take her Starbucks card and take a picture of her Starbucks card and send it to myself in my email? And then I go out and I get an account-excuse me, get a copy. And I’m thinking, ‘Okay, well what if you just grab four dollars out and go up and get a coffee?’ It’s the same thing right? It’s you’re stealing from your friend. That’s not what you’re trying to solve for. You’re trying to solve for a different set of variables. So I love the fact that you brought that up. Because I don’t think that you need to worry about that. I think that the person behind the register will say, ‘Well, wait a minute. Why are you holding up a picture of John Best?’ That type of thing. So that’s exactly the right answer. I think there’s also some technology attitudes, right? I mean in the U.S. we’re crazy uptight, not so much as we used to be. But we’re crazy uptight about big brother. We don’t want all of our information to go somewhere and be used-misused against us, that type of thing. And that’s not necessarily the case in China. They have a surveillance database with everybody’s information in them. They use it actively for crime prevention etcetera and so forth. But accepted by the citizens. So those citizens won’t have a problem if their facial recognition calls on this database and returns a positive negative so they can get it at an amusement park. Our citizens in the U.S. may have a problem if Delta airlines is calling the TSA database to see if I can get on the plane first using their facial recognition. I don’t know. That’s a good question to solve and to think through.
John: Well the TSA is already checking you on the way through the thing with facial recognition. So if you made it all the way to the gate you’re fine. You’re going to be okay. That’s what I’ve learned. But you make a valid point. By the way there is a Karma point, I didn’t know. There’s something out here that says do good things, be kind towards others, express thanks, and donate to the Chuckdavidson.com. I think my assistant might have just set this up. No, it doesn’t say that but it’s out there.
Kevin: But just think, if you had something where you could actually earn karma points or brownie points or whatever, think of how that would affect our volunteerism in this country. I mean granted there are lots of people who do it because it’s the right thing to do and they want to help their fellow human being and stuff. But there’s a lot of people who are living on the financial edge and they want to go help the people in Houston or now Florida. But I can’t take off two weeks of work to drive down there. A lot of people who were trying to evacuate couldn’t afford to evacuate. But if you could go and volunteer for a week and it was proved that you volunteered and actually worked for a week, then just think about it like you’re doing jury duty. Your boss cannot fire you for having to do jury duty. This is karma duty and you’re helping out people. And if you’re actually helping out people in a natural disaster like Harvey or Irma, then maybe there’s some kind of a brownie point fund that helps at least pay your bills. I mean this is kind of way going far off field. But think about it how the volunteerism that I would love to see.
John: No, I’d love to see it too.
Chuck: No, I hear you guys. I think the big picture, yes. I always go back-I’m like a bottom up guy. So I’m like it’s got to make something, where do we monetize? Like blah blah blah. I always get into the nuts and bolts. But I agree, I absolutely agree that there’s something to be said for that definitely. Taking a step back I did want to mention one thing. We had talked about going into a store, scanning, and leaving verses Best’s example where he picks up the item and goes into the app and then walks out. To answer your question John, what do I think the future will look like? I don’t think you can move the work to the consumer. Like if I have to scan all my items in my basket, I don’t think that’s going to fly. I do think-it’s like eh., you’re just making me the clerk.
John: I have a limit of what I will take through self-checkout. I have a mental limit. Like I’m not taking 50 things through the checkout. It’s like the same thing where like I get to cook my own steak. I don’t know why.
Kevin: People like it. It’s like the mini-bar in some hotels that when you lift the can out it registers that you bought it and it charges your thing. The problem is I put it right back.
Chuck: Exactly. I totally agree with you guys, totally agree.
John: Right. Chuck, if someone’s interested in getting in touch with you how would they do it?
Chuck: Best way is at Card Free. So, ChuckDavidson@CardFree.com. And I think we should do a book report. We should talk about this steampunk book. I think that’s a great idea.
John: I just finished it, it was fantastic.
Kevin: There’s your assignment. You all need to read it and then we can talk about it. And actually for our listeners if you want to post some comments on the webpage, we have a place for them to do feedback, right John?
John: Yes, we do.
Kevin: This is wrapping up another episode of Creative Futurism. We think it was futuristic and creative today, lots of really cool ideas. So read a good book. Either one of John’s or one of mine or use the Starbucks app even though Chuck no longer works over there.
Chuck: I always use it.
John: Alright, well thanks everyone. And then thanks Chuck we’ll talk to you soon.
Chuck: Alright guys, cheers.
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