Skip to content
By using Twitter’s services you agree to our Cookies Use. We and our partners operate globally and use cookies, including for analytics, personalisation, and ads.

This is the legacy version of twitter.com. We will be shutting it down on June 1, 2020. Please switch to a supported browser, or disable the extension which masks your browser. You can see a list of supported browsers in our Help Center.

  • Home Home Home, current page.
  • About

Saved searches

  • Remove
  • In this conversation
    Verified accountProtected Tweets @
Suggested users
  • Verified accountProtected Tweets @
  • Verified accountProtected Tweets @
  • Language: English
    • Bahasa Indonesia
    • Bahasa Melayu
    • Català
    • Čeština
    • Dansk
    • Deutsch
    • English UK
    • Español
    • Filipino
    • Français
    • Hrvatski
    • Italiano
    • Magyar
    • Nederlands
    • Norsk
    • Polski
    • Português
    • Română
    • Slovenčina
    • Suomi
    • Svenska
    • Tiếng Việt
    • Türkçe
    • Ελληνικά
    • Български език
    • Русский
    • Српски
    • Українська мова
    • עִבְרִית
    • العربية
    • فارسی
    • मराठी
    • हिन्दी
    • বাংলা
    • ગુજરાતી
    • தமிழ்
    • ಕನ್ನಡ
    • ภาษาไทย
    • 한국어
    • 日本語
    • 简体中文
    • 繁體中文
  • Have an account? Log in
    Have an account?
    · Forgot password?

    New to Twitter?
    Sign up
patio11's profile
Patrick McKenzie
Patrick McKenzie
Patrick McKenzie
@patio11

Tweets

Patrick McKenzie

@patio11

I work for the Internet, at @stripe, mostly on accelerating startups. Opinions here are my own.

東京都 Tokyo
kalzumeus.com
Joined February 2009

Tweets

  • © 2020 Twitter
  • About
  • Help Center
  • Terms
  • Privacy policy
  • Imprint
  • Cookies
  • Ads info
Dismiss
Previous
Next

Go to a person's profile

Saved searches

  • Remove
  • In this conversation
    Verified accountProtected Tweets @
Suggested users
  • Verified accountProtected Tweets @
  • Verified accountProtected Tweets @

Promote this Tweet

Block

  • Tweet with a location

    You can add location information to your Tweets, such as your city or precise location, from the web and via third-party applications. You always have the option to delete your Tweet location history. Learn more

    Your lists

    Create a new list


    Under 100 characters, optional

    Privacy

    Copy link to Tweet

    Embed this Tweet

    Embed this Video

    Add this Tweet to your website by copying the code below. Learn more

    Add this video to your website by copying the code below. Learn more

    Hmm, there was a problem reaching the server.

    By embedding Twitter content in your website or app, you are agreeing to the Twitter Developer Agreement and Developer Policy.

    Preview

    Why you're seeing this ad

    Log in to Twitter

    · Forgot password?
    Don't have an account? Sign up »

    Sign up for Twitter

    Not on Twitter? Sign up, tune into the things you care about, and get updates as they happen.

    Sign up
    Have an account? Log in »

    Two-way (sending and receiving) short codes:

    Country Code For customers of
    United States 40404 (any)
    Canada 21212 (any)
    United Kingdom 86444 Vodafone, Orange, 3, O2
    Brazil 40404 Nextel, TIM
    Haiti 40404 Digicel, Voila
    Ireland 51210 Vodafone, O2
    India 53000 Bharti Airtel, Videocon, Reliance
    Indonesia 89887 AXIS, 3, Telkomsel, Indosat, XL Axiata
    Italy 4880804 Wind
    3424486444 Vodafone
    » See SMS short codes for other countries

    Confirmation

     

    Welcome home!

    This timeline is where you’ll spend most of your time, getting instant updates about what matters to you.

    Tweets not working for you?

    Hover over the profile pic and click the Following button to unfollow any account.

    Say a lot with a little

    When you see a Tweet you love, tap the heart — it lets the person who wrote it know you shared the love.

    Spread the word

    The fastest way to share someone else’s Tweet with your followers is with a Retweet. Tap the icon to send it instantly.

    Join the conversation

    Add your thoughts about any Tweet with a Reply. Find a topic you’re passionate about, and jump right in.

    Learn the latest

    Get instant insight into what people are talking about now.

    Get more of what you love

    Follow more accounts to get instant updates about topics you care about.

    Find what's happening

    See the latest conversations about any topic instantly.

    Never miss a Moment

    Catch up instantly on the best stories happening as they unfold.

    1. Patrick McKenzie‏ @patio11 Jan 23
      • Report Tweet
      • Report NetzDG Violation

      Patrick McKenzie Retweeted Matt Levine

      Matt Levine's column interesting as always. I'd like to point to one bit in particular, which is applying optionality to bank decisions to extend credit. (Optionality is one of those great financial lenses which you can apply to *so* many things fruitfully.)https://twitter.com/matt_levine/status/1220402323811422208 …

      Patrick McKenzie added,

      Matt LevineVerified account @matt_levine
      This newsletter is like putting a sandwich in front of me and I haven’t eaten all day. How can I not take a bite out of it? https://www.bloomberg.com/opinion/articles/2020-01-23/index-funds-matter-for-mergers …
      5 replies 9 retweets 138 likes
      Show this thread
      Patrick McKenzie‏ @patio11 Jan 23
      • Report Tweet
      • Report NetzDG Violation

      When you buy an option (or receive one for services rendered, a common case in tech), you're buying the right but not the obligation to be able to engage in a transaction in the future at a locked in price. There is deep, rich literature and experience on pricing these.

      7:33 PM - 23 Jan 2020
      • 1 Retweet
      • 17 Likes
      • Roth Leonardy Kristianto Pavan Yara Henrik Jonsson Eric Fugleberg Kieran Tully Joshua Pearce Oliver Emberton compiledwrong
      2 replies 1 retweet 17 likes
        1. New conversation
        2. Patrick McKenzie‏ @patio11 Jan 23
          • Report Tweet
          • Report NetzDG Violation

          To a first approximation, Matt is probably right with respect to claims that sophisticated financial firms understand option value and exercise it close to optimally. Consumers largely do not.pic.twitter.com/VWVjbBqY8z

          2 replies 1 retweet 20 likes
          Show this thread
        3. Patrick McKenzie‏ @patio11 Jan 23
          • Report Tweet
          • Report NetzDG Violation

          I think it's worth mentioning that a optionality is a great lens for the world but the abstraction is occasionally a leaky one. In particular, true options are *durable.*

          1 reply 1 retweet 17 likes
          Show this thread
        4. Patrick McKenzie‏ @patio11 Jan 23
          • Report Tweet
          • Report NetzDG Violation

          If the option blows up in the face of the party writing it (generally a financially sophisticated party), they are precommiting to *still paying you as promised.* They can e.g. buy them back from you at a mutually agreeable price or otherwise offset exposure, but can't default.

          1 reply 1 retweet 10 likes
          Show this thread
        5. Patrick McKenzie‏ @patio11 Jan 23
          • Report Tweet
          • Report NetzDG Violation

          This is crucially different than offers of credit, which *are often not* true options, and that's useful to understand as consumers of them. A bank (or other lender) which offers revolving lines or credit facilities keeps track of both all draws and all notional exposure.

          1 reply 1 retweet 16 likes
          Show this thread
        6. Patrick McKenzie‏ @patio11 Jan 23
          • Report Tweet
          • Report NetzDG Violation

          In the event economic circumstances for your lender change or their view of your risk profile changes, unless they've contractually committed availability to you, they probably can retroactively change your limits at basically any time allowed by your contract.

          1 reply 2 retweets 15 likes
          Show this thread
        7. Patrick McKenzie‏ @patio11 Jan 23
          • Report Tweet
          • Report NetzDG Violation

          If you do not remember this being a central feature of the discussion your lawyers had with their lawyers, *probably did not* successfully negotiate guaranteed access to the thing credit they have offered to extend you. This is true for consumers and businesses alike.

          1 reply 1 retweet 18 likes
          Show this thread
        8. Patrick McKenzie‏ @patio11 Jan 23
          • Report Tweet
          • Report NetzDG Violation

          Many businesses have been burnt when the macro environment changes from widespread availability of credit to non-availability quickly, including sophisticated financial firms. (Reluctance of the repo markets to offer capacity as widely Tuesday as Monday contributed to the GFC.)

          1 reply 1 retweet 17 likes
          Show this thread
        9. Patrick McKenzie‏ @patio11 Jan 23
          • Report Tweet
          • Report NetzDG Violation

          You can mitigate this, as a consumer of credit (B2C or B2B) by having multiple independent funding sources and, of course, by keeping a cash buffer around.

          1 reply 0 retweets 12 likes
          Show this thread
        10. Patrick McKenzie‏ @patio11 Jan 23
          • Report Tweet
          • Report NetzDG Violation

          Historically it was operationally difficult for banks to adjust credit lines, but that better adoption of technology (data sources about credit risk, data science applied to your transactions and bank's proprietary data, overall better IT posture) allows this to be *fast*.

          1 reply 0 retweets 10 likes
          Show this thread
        11. Patrick McKenzie‏ @patio11 Jan 23
          • Report Tweet
          • Report NetzDG Violation

          This makes the process more efficient and less risky for lenders, which at the margin should counsel them to offer higher limits to more marginal customers than they'd otherwise be comfortable with. But those limits "mean less" than many people might assume they do.

          1 reply 0 retweets 15 likes
          Show this thread
        12. Patrick McKenzie‏ @patio11 Jan 23
          • Report Tweet
          • Report NetzDG Violation

          Example: there is one particular US bank that I've used in a personal capacity for a very long time. I'm a pretty good credit risk. Back in I think 2012, when I was also a pretty good credit risk, they were uncomfortable giving me any more than $X of total exposure.

          1 reply 0 retweets 7 likes
          Show this thread
        13. Patrick McKenzie‏ @patio11 Jan 23
          • Report Tweet
          • Report NetzDG Violation

          Over the last few years, I've not had bank-legible changes in circumstances, but should still read as "Yep, still a pretty good credit risk." Their messaged appetite for exposure to it is something like 3~4 times more than $X, and $X wasn't a small number either.

          1 reply 0 retweets 8 likes
          Show this thread
        14. Patrick McKenzie‏ @patio11 Jan 23
          • Report Tweet
          • Report NetzDG Violation

          That is likely downstream of "Well, we're not *really* taking on 4X of risk from you. You barely even saturated the $X for most of your years with us. If your financial circumstances change extraordinarily rapidly and you go crazy with charging things, we'd derisk *in seconds.*

          1 reply 0 retweets 12 likes
          Show this thread
        15. Patrick McKenzie‏ @patio11 Jan 23
          • Report Tweet
          • Report NetzDG Violation

          So why do banks offer you "more credit than you need"? I mean, to make money, but the mechanisms are more interesting than that. One is to protect their share of wallet.

          1 reply 1 retweet 15 likes
          Show this thread
        16. Patrick McKenzie‏ @patio11 Jan 23
          • Report Tweet
          • Report NetzDG Violation

          Banks broadly do not believe they have material edges in underwriting consumers: if you are a) a very good credit risk and b) use a lot of credit, banks perceive that it is highly likely all of their competitors will believe the same two things about you, particularly over time.

          1 reply 2 retweets 16 likes
          Show this thread
        17. Patrick McKenzie‏ @patio11 Jan 23
          • Report Tweet
          • Report NetzDG Violation

          (An interesting market opportunity for banks is specializing in people whose circumstances are specialized such that the technology which enables the last tweet, such as credit reports and FICO scoring, does not correctly bucket them as low-risk but where they still borrow lots.)

          2 replies 0 retweets 22 likes
          Show this thread
        18. Patrick McKenzie‏ @patio11 Jan 23
          • Report Tweet
          • Report NetzDG Violation

          So if banks think "Well, if we don't extend credit at the margin our competitors certainly will", whereas previously they might be OK losing the opportunity for your business to protect their risk profile, these days they want you to *know* you have headroom on your card.

          1 reply 0 retweets 14 likes
          Show this thread
        19. Patrick McKenzie‏ @patio11 Jan 23
          • Report Tweet
          • Report NetzDG Violation

          "I don't want to lose a single business trip worth of expenses to Amex just because they were worried about going over and MOST PARTICULARLY I do not want Amex to get their transactions *next month, too* because of an opportunity to change habits or stored cards."

          2 replies 1 retweet 17 likes
          Show this thread
        20. Patrick McKenzie‏ @patio11 Jan 23
          • Report Tweet
          • Report NetzDG Violation

          That is also downstream of the increasing computerization of user spending behavior: previously, the jargon was literally "We want to be 'top of wallet'; the card our customer habitually reaches for first." The expectation is all other cards are a short distance away in wallet.

          1 reply 0 retweets 13 likes
          Show this thread
        21. Patrick McKenzie‏ @patio11 Jan 23
          • Report Tweet
          • Report NetzDG Violation

          When your business runs transactions monthly on AWS or you personally have a card installed on Apple Pay, though, the difference between "top of wallet" and the next card is *gigantic*. Your "next card" isn't on the system charging you money and probably isn't on *you* either!

          1 reply 2 retweets 22 likes
          Show this thread
        22. Patrick McKenzie‏ @patio11 Jan 23
          • Report Tweet
          • Report NetzDG Violation

          You'll note that "Ahah, they are trying to trick you into spending more than you can afford" is a very different narrative from "Ahah, they are hoping you concentrate more of your transactions on them this month, pay back quickly, and come back for more next month."

          1 reply 7 retweets 24 likes
          Show this thread
        23. Patrick McKenzie‏ @patio11 Jan 23
          • Report Tweet
          • Report NetzDG Violation

          There exists a heterogeneity of strategies and a wide distribution in customer behavior. Some banks (and some products at a particular bank) might be caricatured as being more of the first, and some more of the second. And some are both, for different people.

          1 reply 1 retweet 8 likes
          Show this thread
        24. Patrick McKenzie‏ @patio11 Jan 23
          • Report Tweet
          • Report NetzDG Violation

          Financially unsophisticated people, including very smart financially unsophisticated people, often believe "Banks can't make any money from you if you are a responsible user of credit. They want you to get in over your head." This is false as stated.

          2 replies 2 retweets 34 likes
          Show this thread
        25. Patrick McKenzie‏ @patio11 Jan 23
          • Report Tweet
          • Report NetzDG Violation

          Banks sell financial services. Sometimes the pricing is a little opaque to the end user, because it is subsidized by someone else. If you consume a lot of financial services, and banks are eagerly courting your business, it is *probably not* because they're bad at math.

          2 replies 6 retweets 37 likes
          Show this thread
        26. Patrick McKenzie‏ @patio11 Jan 23
          • Report Tweet
          • Report NetzDG Violation

          A concrete example: which of the following two customers is more lucrative? A: Spends $10k. This strains them; they can pay back the minimums, but it will take them years to pay off, at a 15% APR the whole while. B: Spends $10k monthly. Never pays a cent in interest.

          2 replies 6 retweets 35 likes
          Show this thread
        27. Patrick McKenzie‏ @patio11 Jan 23
          • Report Tweet
          • Report NetzDG Violation

          Answer: depends *almost entirely* on what it cost the bank to acquire and keep B's business, because B is *printing money* via interchange. A contributes about ~$1.3k of revenue per year (plus $200~$300 in month 1). B contributes about $2.5~$3k annually.

          7 replies 7 retweets 50 likes
          Show this thread
        28. Patrick McKenzie‏ @patio11 Jan 23
          • Report Tweet
          • Report NetzDG Violation

          (Should insert a *plausibly* before "contributes" because there are actually a lot of different interchange rates the issuer could be receiving depending on product, jurisdiction, card brand, regulation, etc, and I should clarify "I'm being very handwavy on math here.")

          8 replies 0 retweets 20 likes
          Show this thread
        29. End of conversation

      Loading seems to be taking a while.

      Twitter may be over capacity or experiencing a momentary hiccup. Try again or visit Twitter Status for more information.

        Promoted Tweet

        false

        • © 2020 Twitter
        • About
        • Help Center
        • Terms
        • Privacy policy
        • Imprint
        • Cookies
        • Ads info