There are a few forces on the face of this big blue Earth which cannot be stopped. For instance, gravity. We fight it with construction, rockets, and plastic surgery, but these efforts only slow it down. Eventually, gravity always wins.
I would argue that there is another unstoppable force in this world, and this is the triumph of efficiency, the victory of things that use less energy over things that use more. Eventually, an efficient thing wins over an inefficient thing: foraging for food was surpassed by planting crops, the chariot made ancient by the tank. We can resist it or delay it, but efficiency always wins.
In today’s post, I hope to convince you to attend the LendIt conference in Manhattan on June 20. The subject of interest will be online lending, an avenue that allows people to efficiently lend money to each other without the inefficiency of the banking system. While the future is unknown, this change in lending looks to be the largest shift to happen to the American economy since the advent of the internet, and LendIt is going to be a day where some of the largest voices in online lending talk about what this shift means.
The World in 25 Names
Let’s try and give this some perspective. In 2011 a team called the Swiss Federal Institute of Technology in Zurich created a database of over 43,000 transnational corporations. Using an algorithm, these mathematicians created a model of this database that showed how these companies were interrelated. What they found was that 147 companies controlled 40% of all the business on earth (source).
Notice anything interesting? The majority of these companies are banks. This report confirms something most of us already know: banks run the world. These are the only industries “too big to fail”, the only systems whose CEOs get promoted to cabinet positions within the American presidency.
Yet these financial institutions are becoming increasingly redundant, unnecessary, and inefficient. When you apply for a loan through a bank, the tedious process takes one to four weeks and requires interacting with multiple people, all of whom need a salary themselves.
Lending and borrowing money online, on the other hand, shines with efficiency (watch this video by SocietyOne). It accomplishes the exact same tasks with barely any of the overhead. The internet streamlines the process so it happens in a fraction of the time. There are fewer middlemen to pay, so borrowers get access to more loans at better rates and lenders get higher interest. Everyone wins.
This efficiency has brought companies like Lending Club thundering success. When combined with Prosper, both companies account for over $2 billion in issued loans in just seven years. This begs the question: what exactly happens when the world’s largest economic superpower is made redundant by the internet? What happens when an unstoppable force meets an unmovable object?
The First Cracks in the Dam: LendIt 2013
Organized by LendAcademy’s Peter Renton, June 20th will be a day to celebrate this efficiency and talk about what it will look like going forward. What excites me is that the two major players on the American peer to peer lending scene, Lending Club and Prosper, will be in attendance. Lending Club’s president Renaud Laplanche is giving the morning keynote speech, his company having recently surpassed $1.5 billion in issued loans. Prosper has also gracefully accepted the invitation, and will be well represented by Ron Suber.
As far as I know, this gathering will mark the first time that both Lending Club and Prosper will be publicly talking in the same room together. Joined by other lending voices like Candace Klein of SoMoLend and Matt Symons of SocietyOne, these individuals should curate a fascinating conversation about what this new revolution entails.
I imagine a nation whose money is as deeply connected as their email accounts are today. I imagine a future of financial interdependence that is transparent and free, where people borrow and lend money to each other with ease, less hindered by corporate paperwork and regulatory red tape. The internet has made this possible, and LendIt is going to be a day to herald this arrival.
I have registered for this event, and I hope you choose to as well.
Press release: here