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Why is 9% for financial services bad? This should cover fees/interest from everything like loans, transactions, mortgages, advice, investing, etc. It doesn't se

Why is 9% for financial services bad? This should cover fees/interest from everything like loans, transactions, mortgages, advice, investing, etc. It doesn't seem that surprising to me that the systems that are the backbone for all the money operations that power the rest of the economy make up about 10%.

anon7000 1y ago
I get your point, but the flip side is that private companies like visa and Mastercard get to skip 2.5%+ off the entire economy. Visa has more than 50% profit margin, and it’s not like these companies are innovating with all that extra cash either. It’s just money from my pocket to some rich investor somewhere
- rogerrogerr 1y ago
  Visa and Mastercard aren’t skimming 2.5% off the economy; the majority of the interchange fees go to banks (which Visa is not; their actual product is VisaNet which provides payment infrastructure, broadly.) Trivially verifiable by Visa’s revenue being $35B, which is not even close to 1% of just US GDP (about $30T).
  - giantg2 1y ago
    And Visa is international, so some of that $35B is ex-US.
- bluGill 1y ago
  Cash costs more nearly that much when you count all the time spent counting and recounting it - at least 8 times for every transaction. (the buyer finds and counts, then the cashier counts, then count change. Then the manager counts and recounts the till, finally the bank counts and recounts it - several of the above will come up with a miscount and recount additional times to verify). Then we add crime loss on top of that. visa is saving the country a lot of time/money.
- sneak 1y ago
  Not the entire economy, just retail and some b2b. OpenAI isn’t putting two billion in GPUs on their corporate credit card.
- giantg2 1y ago
  "from my pocket to some rich investor somewhere" Or your retirement account. Everyone is mad about investors and companies making money. Sure, there are ultra wealthy people (mostly founders) that benefit disproportionately. However, most people who hope to retire some day rely on a 401k, pension, etc which is dependent on stocks. Retirement accounts have about $36T in the US, mostly in equities and corporate bonds.
  - Newlaptop 1y ago
    "Founders" are a tiny percentage of the rich, they're just the ones in the news. The richest 1% own half the wealth in the world and the gap is getting wider. Since 2020, for every dollar of new global wealth gained by someone in the bottom 90%, one of the world’s billionaires has gained $1.7 million. (Source: https://www.globalcitizen.org/en/content/wealth-inequality-oxfam-billionaires-elon-musk/ https://www.globalcitizen.org/en/content/wealth-inequality-o...) So yes, some of the wealth is going to your retirement account. But for every penny going to a middle-class professional workers retirement, there's about a thousand dollars going to some hedge fund manager or the trust fund of the grandson of some robber baron who got rich a hundred years ago.
    - ethbr1 1y ago
      It’s difficult to ethically defend the idea that someone should make more because of who their parents were than because of how hard they work. Generational inheritance is a cancer, and many American ills are a direct result of allowing it to fester unsolved. Buffett was right — enough to get a good start, but no more.
    - giantg2 1y ago
      I mean, what's the percentage of the ultra rich that doesn't own a company? Musk, Gates, etc... it's the ownership.
dontlaugh 1y ago
9% is very inefficient.
- wavemode 1y ago
  "Inefficient" implies the money is being burned or something. It's flowing into the pockets of people who work in the financial services industry, who then spend it on other things. The economy isn't zero-sum. And the industry itself greases the wheels of other industries. In other words without financial services like lending and payment processing there would be less spending and investment overall, so other industries would shrink along with it.
  - dontlaugh 1y ago
    That’s a lot of money for “greasing”. Nearly 10% on any kind of overhead is generally considered a lot. Central planning is drastically more efficient, for example. It’s why large companies use it internally.
    - hatefulmoron 1y ago
      Is there any evidence that central planning on a much larger scale is drastically more efficient? We're talking about a whole country, after all. I take your point that companies themselves are usually centrally planned internally, but centrally planned economies haven't fared so well.
      - 9rx 1y ago
        > Is there any evidence that central planning on a much larger scale is drastically more efficient? If it were, why do we have more than one company? > I take your point that companies themselves are usually centrally planned internally Well, sort of. It is true that companies exist solely for the reason of exploiting efficiencies in central planning. If central planning was always inefficient, companies wouldn't exist! But, as I alluded to earlier, no company has found central planning to be efficient in all cases. Not even the largest company in the world centrally plans everything. Not even close. As with most things in life, a bit of balance will serve you well.
fspeech 1y ago
Interests you pay is not necessarily all financial services revenue. Only the net interests the industry receives count as revenue. There's a lot of netting going on in finance.

anon7000 1y ago

I get your point, but the flip side is that private companies like visa and Mastercard get to skip 2.5%+ off the entire economy. Visa has more than 50% profit margin, and it’s not like these companies are innovating with all that extra cash either. It’s just money from my pocket to some rich investor somewhere

rogerrogerr 1y ago
Visa and Mastercard aren’t skimming 2.5% off the economy; the majority of the interchange fees go to banks (which Visa is not; their actual product is VisaNet which provides payment infrastructure, broadly.) Trivially verifiable by Visa’s revenue being $35B, which is not even close to 1% of just US GDP (about $30T).
- giantg2 1y ago
  And Visa is international, so some of that $35B is ex-US.
bluGill 1y ago
Cash costs more nearly that much when you count all the time spent counting and recounting it - at least 8 times for every transaction. (the buyer finds and counts, then the cashier counts, then count change. Then the manager counts and recounts the till, finally the bank counts and recounts it - several of the above will come up with a miscount and recount additional times to verify). Then we add crime loss on top of that. visa is saving the country a lot of time/money.
sneak 1y ago
Not the entire economy, just retail and some b2b. OpenAI isn’t putting two billion in GPUs on their corporate credit card.
giantg2 1y ago
"from my pocket to some rich investor somewhere" Or your retirement account. Everyone is mad about investors and companies making money. Sure, there are ultra wealthy people (mostly founders) that benefit disproportionately. However, most people who hope to retire some day rely on a 401k, pension, etc which is dependent on stocks. Retirement accounts have about $36T in the US, mostly in equities and corporate bonds.
- Newlaptop 1y ago
  "Founders" are a tiny percentage of the rich, they're just the ones in the news. The richest 1% own half the wealth in the world and the gap is getting wider. Since 2020, for every dollar of new global wealth gained by someone in the bottom 90%, one of the world’s billionaires has gained $1.7 million. (Source: https://www.globalcitizen.org/en/content/wealth-inequality-oxfam-billionaires-elon-musk/ https://www.globalcitizen.org/en/content/wealth-inequality-o...) So yes, some of the wealth is going to your retirement account. But for every penny going to a middle-class professional workers retirement, there's about a thousand dollars going to some hedge fund manager or the trust fund of the grandson of some robber baron who got rich a hundred years ago.
  - ethbr1 1y ago
    It’s difficult to ethically defend the idea that someone should make more because of who their parents were than because of how hard they work. Generational inheritance is a cancer, and many American ills are a direct result of allowing it to fester unsolved. Buffett was right — enough to get a good start, but no more.
  - giantg2 1y ago
    I mean, what's the percentage of the ultra rich that doesn't own a company? Musk, Gates, etc... it's the ownership.

dontlaugh 1y ago

9% is very inefficient.

wavemode 1y ago
"Inefficient" implies the money is being burned or something. It's flowing into the pockets of people who work in the financial services industry, who then spend it on other things. The economy isn't zero-sum. And the industry itself greases the wheels of other industries. In other words without financial services like lending and payment processing there would be less spending and investment overall, so other industries would shrink along with it.
- dontlaugh 1y ago
  That’s a lot of money for “greasing”. Nearly 10% on any kind of overhead is generally considered a lot. Central planning is drastically more efficient, for example. It’s why large companies use it internally.
  - hatefulmoron 1y ago
    Is there any evidence that central planning on a much larger scale is drastically more efficient? We're talking about a whole country, after all. I take your point that companies themselves are usually centrally planned internally, but centrally planned economies haven't fared so well.
    - 9rx 1y ago
      > Is there any evidence that central planning on a much larger scale is drastically more efficient? If it were, why do we have more than one company? > I take your point that companies themselves are usually centrally planned internally Well, sort of. It is true that companies exist solely for the reason of exploiting efficiencies in central planning. If central planning was always inefficient, companies wouldn't exist! But, as I alluded to earlier, no company has found central planning to be efficient in all cases. Not even the largest company in the world centrally plans everything. Not even close. As with most things in life, a bit of balance will serve you well.

fspeech 1y ago

Interests you pay is not necessarily all financial services revenue. Only the net interests the industry receives count as revenue. There's a lot of netting going on in finance.