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 Amazon.com. 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
cryptologists.
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."