Jos dreams about micropayments

Renée Gentry

Lunch time with Jos at WebTV. I always looked forward to it.

We'd walk over to the WebTV cafeteria, pay our $2 (WebTV subsidized our lunches), and stand in line to get our food. We'd always take it to the tables outside, away from the crowd, away in our own little place. We'd talk and laugh while we ate, usually for about a half hour. Then the second half of lunch would start.

"Time for a walk?" someone would ask. Usually it was Joel. Then on cue, we'd all get up and walk across the street to "do a lap." Like little ducklings following the mother of visions, ideas, and all possibilities, four or five of us would walk around the swamp of reeds that was behind one of the WebTV buildings. Over the course of 20 to 25 minutes, we'd talk excitedly about business ideas. Some of them were foolhardy, of course, though entertaining. Others were more serious. Some were born and dismissed in a 10 minute time span. Others were recurring topics--ideas that needed nursing through the most perplexing of problems.

Micropayments was one of those recurring topics. Jos thought it was the idea that was going to make everyone rich. This was faintly ironic--with micropayments we'd all get rich, one penny at a time! But of course, more important to Jos than making us rich was the fact that micropayments would spark the world of electronic commerce, starting a fire of epic proportions. Commerce would never be the same if Jos could just get micropayments to work.

Now, plenty of e-commerce happens on the Web today. It's easy to spend $20 or $30 on a single order at But what if you just wanted to buy the opportunity to read a single magazine article once? You certainly wouldn't want to pay even a dollar for it when you could buy the entire magazine (which could be read as many times as you wanted) for $3 or $4. Maybe you'd pay five cents. Yeah, OK, five cents. But how?

That is the problem Jos thought about. Not on a credit card. Wouldn't be practical. How else? There must be a way. Would you have to be a bank? Would you have to issue credit? Could you just collect money up front? How could you get people to trust you with their money? These were real problems that Jos and plenty of other people in Silicon Valley were thinking about.

Yes, plenty of other people. As we heard of each new micropayments idea, we'd share them and discuss them. What worked about the idea? What didn't? And so it was that one day, Joel emailed an article about micropayments to Jos and I. "Hmmmm, I'll have to think about this one," I thought.

But not Jos. No, Jos didn't stop at thinking. Jos was a man of talk, no doubt, but he was also a man of action. To Jos, the company mentioned in the article wasn't just a random fragment in the micropayments vision. Rather, they presented an opportunity. Perhaps they could be partners.

From: Jos Claerbout (Brava Services)
Sent: Thursday, July 29, 1999 3:26 PM
To: Joel Black; Renée Gentry
Subject: RE: Micropayments

Love it. I'll send a business proposal to them next weekend.

     -----Original Message-----
     From: Joel Black
     Sent: Thursday, July 29, 1999 3:23 PM
     To: Renée Gentry; Jos Claerbout
     Subject: Micropayments
     PayPal Puts Dough in Your Palm 
	     by Karlin Lillington 
     The bill for lunch arrives, but you've left your wallet
     in the car.  Your lunchmate doesn't want to pick up the tab. 

     So she pulls out her Palm III, beams you a little program
     called PayPal, and suggests you beam back your share of the bill.
     Later that day, the cash comes out of your account and drops
     into hers. 

     That scenario should be a reality by September, when Confinity,
     a Palo Alto, California software start-up, launches PayPal,
     an application that will allow individuals to "beam" sums
     of money between handheld devices such as mobile phones,
     Palm Pilots, and pagers. 

     "All these devices will become one day just like your wallet,"
     said Confinity CEO Peter Thiel. "Every one of your friends
     will become like a virtual, miniature ATM." 

     In Thiel's case, though, it's a pretty fat wallet. 

     Last week at PayPal's launch party, venture capital firm
     Nokia Ventures used the software to beam US$3 million
     to Confinity through Thiel's Palm Pilot. The whole process
     took about five seconds. 

     Thiel said consumers will register a credit card number
     at the PayPal Web site, download the small application,
     and choose a PIN number.   

     Sending a payment involves entering in the amount into
     the Palm and transferring it to another with the "beam"
     function. The device figures out who the recipient and sender
     are, and the next time the sender logs on to PayPal's site
     the payment is processed. 

     The company's business model relies on this "infrared
     distribution" to spread the application itself across
     Silicon Valley and beyond. 

     And if the recipient lacks the PayPal application, the sender
     can beam that over, too. That, says Thiel, is actually part
     of the business plan for spreading the application widely. 

     Americans have so far been reluctant to use online electronic
     wallet programs or microchip-embedded smartcards, although
     the latter are popular in Europe. 

     Thiel says he is confident PayPal will succeed because the
     program allows individuals to make payments to each other,
     not just to retailers or financial institutions. 

     "Most transactions take place between people in the real world,
     away from the desktop," he said. 

     The money involved in the transactions will be handled
     by Merrill Lynch in an escrow account; the interest earned
     by the account will go to Confinity. 

     "Part of our business model is to capture the float," says Thiel.
     Once Confinity establishes a trustworthy reputation, he says,
     he expects many people will also choose to pay Confinity directly
     by check or transfer to preload their PayPal account,
     rather than adding the extra step of going through a credit card. 

     Concerns about security have also hampered the growth of digital
     transactions, but PayPal relies on the work of two renowned

     Stanford University professors Dan Boneh and Martin Hellman helped
     develop the application. Hellman, who along with Whit Diffie
     invented public key cryptography, is also an investor. 

     Thiel says PayPal uses elliptical curve cryptography, a type
     specially developed for small devices. 

     Because PayPal uses strong encryption, Confinity is obliged
     to apply for an export license from the US government to offer
     the program outside the United States. The company hopes to market
     PayPal in Europe. 

I don't know whether he started writing that proposal. But I do know that Jos embraced the idea of micropayments, and looked forward to the day when they became real.

Yes, I looked forward to lunches with Jos. In fact, on the day he died--it was Friday--I distinctly remember putting $2 in my pocket that morning, already looking forward to lunch and that lap around the reeds. But there were to be no talks about micropayments that day.

There would be no talks about micropayments the next Monday either. Instead of putting $2 in my pocket that morning, I put a quarter in my pocket. Twenty five cents. A great sum in terms of micropayments, but losing Jos was a great loss. I watched as the Rabbi talked at the grave site. I cried as the Rabbi talked at the grave site. And when the time was right, I walked over to that site, took the quarter from my pocket and kissed it. Tossing it to Jos, I sadly said, "Shalom."