Hi, welcome to Target. How can I help you today?
- I want to return this $29 DVD player.
Oh, it's you again.
- Yeah, and I want credit for this $29 paper shredder, too. I know that identity theft is my problem -- you certainly can't blame the credit card industry -- but I tried to feed it a week's worth of offers from Capital One and sparks flew out of it and set my home office on fire.
Well, at least the fire destroyed the junk mail.
- Uh-huh. And my tax records, and all my books.
You need a bigger shredder.
- I need Capital One to stop writing me every day. I'd like to meet Mr. Capital One and push him down some stairs.
You and everyone else. Did you know credit card companies mailed six billion offers in 2005? That's 50 for each household in America.
- Well, nine of them must not get any, because I get theirs. What's wrong with Capital One? If I wrote a stranger five times a week they'd get a restraining order.
Really?
- Geena Davis. Back in college. It was a misunderstanding.
Don't take it personally. Capital One doesn't have a creepy crush on you. It's just flux quantization.
- It wasn't a crush. I admired her work. (Changing the subject) So what's flux quantization?
Flux quantization is a quantum phenomenon in which a magnetic field is quantized into flux quanta.
- Oh, of course.
Critical point phenomena. Happens with superconductors. Discovered at Stanford back in the sixties, by this physicist named William Fairbank.
- So?
Brilliant man. Pioneer in condensed matter physics and phase transition related critical point phenomena
- Wha-huh?
The study of the point between when something is one thing and when it's something else. The space between. The transition. The changing point. The flux. Get it?
- Maybe I'll just go to Best Buy.
No. Listen. Back before Capital One, there were just two kinds of consumers: People who could afford credit cards and people who couldn't afford credit cards. The problem was that the people who could afford credit cards already had them, and the people who needed them were deadbeats.
- What does that have to do with flux?
The guy who started Capital One imagined a third kind of person -- someone who could almost afford a credit card. A virtual credit card holder. Something between a good risk and a social parasite. Someone who couldn't pay off the principal on a card -- only the interest.
- So?
That person -- that fluxoid -- is actually a better customer than someone who can really afford a card. Because interest and penalties are where the money is.
- You smoke a lot of dope, back in the break room?
If you have enough data -- if you can find the exact right people -- you can make higher profits lending money to someone who can't pay you back than someone who can. As long as they can virtually pay you. In 2001 -- not the movie, the year -- more than one-quarter of the lowest income families spent over 40% of their income on debt repayment.
- But why is my mail always from one company- - Capital One?
Because the machine feeds on information. Capital One knows that data is power. Even when you don't respond, you're still telling them something. You're telling them what doesn't work. They invented the teaser rate, and honed it through trial and error. They did another test, dealing with customers who threatened to switch cards, and offering them computer-generated random new rates -- or nothing at all. They conducted 14,000 different tests in 1997. In 2000, they conducted 45,000.
- You're pulling this out of your butt.
And my Stanford alumni magazine. Capital One isn't just making huge profits, annoying you, and killing trees for paper. It's probing. It's learning.
- Wow. You can learn a lot, talking to a paranoid loon. Thanks for telling me about fluxons, too. Now I'm going to edge off slowly...
You're welcome. By the way, you know that guy I told you about, William Fairbank? The father of quantum flux? Back in the '70s, NASA hired him to prove the general theory of relativity? Headed the Gravity Probe B Project and designed the Lambda Point Experiment for the space shuttle? The one who was fascinated with changes in the property of matter at a phase transition critical point?
- Sorry... can't hear you... busy backing away...
His son is Richard D. Fairbank. The founder and CEO of Capital One.
--
And... scene.
Well, we've had a lot of fun today. But, you know, consumer debt is no joke. The median household income in America is $46,000. The average credit card debt is $9000. Someone should probably do something about predatory lending -- and things like universal default, and the traps and small print in credit card statements.
But it probably won't happen any time soon, even if the good guys win the next election. According to the Christian Science Monitor, financial and credit companies made $7 million dollars in campaign contributions in 2006. Commercial banks made another $25 million in contributions to candidates and both parties.
The #1 recipient? Hillary Clinton.
--
Something my children figured out after I broke the shredder:
I probably don't have to shred the applications.