Unlocking capital, bit by bit
Ask our tech team, and they will tell you (I like to think facetiously) that the greatest challenge Crédito Social has faced so far has come not from changing human habit or combating global poverty, but from getting a computer server set up on AWS.
For those not familiar, AWS (or Amazon Web Services) is a cloud computing platform offered by Amazon. In essence, AWS maintains a universe of computer servers and infrastructure that allows individuals, companies, and even governments to store and process their data remotely.
And while that may seem straightforward, using that technology or in fact even just logging in can leave even seasoned programmers in the fetal position. Nevertheless, if you want to exist on the internet, you will probably need to interact — albeit often indirectly — with AWS.
These challenges that our tech team has faced and the impressive lengths they have gone to learn how to get the most out of AWS, for me, have been good reminders of just how complicated data management can be on a physical level.
Why? Because for as many times as we banged our heads against walls because using AWS was confusing, those frustrations would have paled in comparison to the challenges of the alternative: setting up and maintaining our own physical system of servers.
That AWS or any competitor cloud computing platform exists is no accident. Managing physical servers poses serious challenges and risks. And, given that the alternative for us would have been a storage unit full of desktop computer towers and fans, I’ll take the humbling experience of having to ask someone how I even log in to AWS any time.
Data, or information as it is more scientifically known, has acquired an increasingly abstract connotation prior to the Digital Age, Big Data, etc. But, before computers — or, more aptly, before cloud computing — interacting with information was a much more physical experience for us as humans.
If our computer was running out of memory, we had to get a zip drive or an external hard drive to move files — information — over to make room. Prior, when we wanted to capture a moment, we needed to record it on film and convert that film to photo paper, a DVD, a VHS, etc. depending on the media. And of course, if a book had a lot of information in it, it was going to be pretty heavy.
In other words, information, while an abstract concept, has a very physical component to it. We are just increasingly removed from that as our data moves from printed pages, to zip drives, to the cloud.
The cloud, though, is itself an abstraction. When you access “the cloud,” that just means your phone or computer is accessing a hard drive somewhere far away via the internet. Now, instead of needing to plug in a zip drive to save a file that is taking up space on your computer, that file is saved on a hard drive, or “server,” that AWS (or maybe Google or Microsoft) takes care of for you.
While the internet may feel in the ether, it is very much on the ground. The internet is sitting in gigantic buildings, requiring massive amounts of energy and care to keep your selfies safe — because your selfie is merely the visual manifestation of what is very much physical information. Information cannot exist without a physical record, even if that record is merely the neuronal connections you just grew in your brain to remember that very fact.
Like anything physical, information can be measured, and we measure it in bits and bytes.
Claude Shannon, one of the most influential and perhaps underrated minds of the 20th Century, demonstrated mathematically how information, boiled down to 1’s and 0’s (representing states of TRUE or FALSE, ON or OFF), resolves uncertainty, entropy. Not only is everything displayed on your phone screen a manifestation of 1’s and 0’s, but every stitch of the reality our brains present us is as well. As Shannon’s Information Theory demonstrates, everything occurring in nature is a manifestation of bits. Information is the fabric of reality.**
All right, interesting, but how does this help financial inclusion?
Well, if information, data, is the fabric of reality, then, without information, one cannot know reality, and this makes decision-making more difficult. It is hard to know if I can afford that chocolate bar staring at me in line at the grocery store if I don’t know how much money I have in my wallet, bank account, and/or left on my credit card limit. I need that data to make an informed decision, to know if I’ll be eating that candy shortly or needing to convince everyone in line including myself that the card reader must be broken, and not that my credit card is rejecting a $1 transaction.
In the context of the small businesses we work with at Crédito Social, the same is true. They need to know how much money they have, the status of their inventory, etc. to make appropriate decisions.
Most business owners when they come to us do not know this information, though, so they do not know the reality of their business.
During my time as a researcher in financial education and decision-making, I would observe an unexpected impediment preventing business owners from knowing this information. Very often, they would write down their sales and expenses; however, the most common data capture and storage technology was a paper notebook. Despite 9 out of 10 Brazilian business owners having a smartphone, they recorded their transactions on paper. Needless to say, not much else was getting done with this data. No present balances or sales figures were being calculated.
What I discovered was that there was an economy’s worth of financial and business data quite physically trapped in millions of notebooks, on billions of pages. While all data has a physical component (remember the cloud actually exists in gigantic buildings managed by Amazon, Google, and the like), some physical forms are more convenient than others, depending on how we want to use any given datum. If we want to know how much money we made last year, a paper notebook may not be the most efficient medium to manipulate that data. Writing “=sum(line1:line1000)” does not get us very far on when done so on paper.
What I discovered was that there was an economy’s worth of financial and business data quite physically trapped in millions of notebooks, on billions of pages. While all data has a physical component (remember the cloud actually exists in gigantic buildings managed by Amazon, Google, and the like), some physical forms are more convenient than others, depending on how we want to use any given datum. If we want to know how much money we made last year, a paper notebook may not be the most efficient medium to manipulate that data. Writing “=sum(line1:line1000)” does not get us very far on when done so on paper.
That is what we do at CS. There are trillions of dollars of information in a physical form that is really inefficient. So, we are digitalizing it.
That is what we do at CS. There are trillions of dollars of information in a physical form that is really inefficient. So, we are digitalizing it.
This task is why getting AWS is so important: because at the very least “=sum()” produces a meaningful result for the small businesses we support. But, more importantly, that unlocked data can provide the information emerging economies more generally thirst for: cash flows, creditworthiness, risk. All of these critical economic data are currently in paper file-formats. Imagine what Brazil’s $2 trillion economy could do with that data available, instead, at the click of a button or tap of a screen.
At Crédito Social, we believe it can help hundreds millions of people.
** To observe a particularly physical manifestation of the transfer of information, watch this video of how a slinky (of all things) falls. As physicist Mike Wheatland explains, the information that the slinky has dropped is essentially bound by spacetime.
