Weekly Briefing No. 119 | Did Nine Cents Thrust the Financial World Into an Alternate Reality?

  From Action Comics #263,   OriginallyPublished April 1960 by DC Comics

From Action Comics #263, OriginallyPublished April 1960 by DC Comics

This week, markets went nuts over a nine-cent surprise. Or perhaps, sanity took hold. Check out our take on that plus:

  • A gig economy calamity; Early-stage fintech VC deals
  • A municipal ICO; Goldman’s Marcus moment
  • Trading via Twitter; Deutsche’s latest open source project; Robo outrage
  • Comings and Goings: Meesh Pierce, Mariano Belinky and Marco Santori

Are we in Bizarro World?

For those unaware, Bizarro World is a parallel planet known as htraE, (Earth spelled backwards) originally conceived by DC Comics in 1960. On cube-shaped htraE, you can find “Batzarro,” a Batman doppelganger billed as the world’s worst detective, and other characters living an inverse reality. Our reason for the question is this: for months, stocks have ignored repeated political and global crises amid signs that the US economy was improving. But last Monday, on the back of news that average hourly earnings rose nine cents in January (despite persistent wage stagnation for decades), markets freaked. Volatility, all but left for dead, roared back, blowing up at least one can’t-lose exchange-traded product. Meanwhile, fallen angel Snap blew away earnings estimates, a Goldman analyst slapped a zero price target on most cryptocurrencies, Larry Fink revealed that he wants to be Warren Buffett and a key member of Team Trump actually hinted that a safe space for marijuana banking could be coming. That’s enough planet-shifting news for a month, even without the added headline that a donkey crashed through the roof of a Brazilian man’s home.

So how can financial services and insurance innovators make sense of a cube-shaped world where things besides donkeys are crashing? That’s the question we’re asking, and while we don’t have all the answers, we are recommending a new report from Bain & Company (See below), which says that demographics, intergenerational conflicts and automation are conspiring to create lots more havoc (and opportunity) in the years to come. We suggest you strap yourself in and give it a read. After you do, perhaps you’ll suspect that what’s happening now is rational and what we experienced through January was the real Bizarro World.

Gig economy victims.

In a heart-wrenching story covered widely in the New York press, Doug Schifter, a black-car livery driver, shot himself in the face in front of New York’s city hall this week. In Schifter’s suicide note, he described his unrelenting 100 to 120 hour-per-week schedule over the past several years as a major factor in his despair: “I hope with the public sacrifice I make now that some attention to the plight of the drivers and the people will be done to save them and it will not have been in vain.” Will Schifter get his last wish? Yes, if Bhairavi Desai has anything to say about it. Desai, the formidable head of the New York Taxi Workers Alliance (NTWA), a union representing approximately 18,000 taxi drivers in New York City, is likely to use Schifter’s death as fuel in her attempts to beat back the forces of NYC’s evolving economy. “Half my heart is crushed,” she said, “and the other is on fire.” While we respect Desai’s passion, we disagree with her hostile view of the gig/sharing economy. Still, we are noting her enhanced profile and that of the NTWA, the AFL-CIO’s first union to be comprised of independent workers. With companies like Lyft and AirBnb (which took a 2018 IPO off the table) continuing to grow at a fast pace, it’s a given that more battles pitting platform companies against incumbent union and corporate interests will follow.

Early-stage fintech deals are still happening.

Last month, CB Insights issued a report suggesting that US fintech funding would decline in 2018 on the back of a shift away from early-stage investments. Time will tell if this prediction proves accurate, but we do share the view that some larger fintechs will raise big rounds to fuel their expansion plans. However, some interesting Series A deals continue to happen. To that point, Cashforce, a Belgium-based start-up focused on cash flow forecasting, announced a €2 million raise. Also, Human Interest, which helps small businesses set up 401(k) plans for their employees, completed an $11 million Series A. Last but not least, San Francisco-based Univfy announced a $6 million round. This unique company offers machine learning-powered predictive models that can provide women with a clearer understanding of their chances of being able to conceive. With that information, the company is able to provide a pre-IVF report that can be used to boost access to IVF refund programs. That’s significant when you consider that a single IVF cycle can exceed $20,000 and that most insurance programs don’t cover the procedure.

Want to cause a splash within the greater financial innovation universe? If so, contact us about marketing opportunities with The FR.

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IN BRIEF

A municipal ICO?

Recently, we cheekily predicted that political campaigns would one day finance themselves through Citizen Voice Tokens. We’ve got ten years on that one, but we are taking note that ICOs are moving closer to politics and government. Specifically, Ben Bartlett, a Berkeley city councilman, is pushing the idea of Berkeley doing an ICO as a way to hedge against its status as a “sanctuary city,” which may jeopardize the city’s access to federal funding for housing initiatives. Radical? Of course. But given that the city has joined forces with UC Berkeley’s Blockchain Lab and public finance fintech Neighborly to move the project forward, perhaps Berkeley will once again start a new trend that is ultimately followed elsewhere.

Goldman’s Marcus looks poised to bulk up.

At an October, 2016 conference, this is what some experts had to say about Goldman Sachs’ newly hatched Marcus service: “I wonder if Goldman will actually be able to keep up, because this is not a mature industry; everything changes sometimes within months." (Translation: Goldman is too big and oafy to compete against online lending start-ups.) Here’s another: “There are hungrier, more aggressive, and more technologically sophisticated guys in this room who I think would do better." (Translation: See above.) Fast forward to today, and Goldman’s Marcus is proving the doubters wrong, having originated $2.3 billion of loans and growing online deposits by $5 billion in 2017. On the back of that momentum, two unconfirmed deals have been swirling this week that could further boost Marcus: 1) Goldman’s potential purchase of Clarity Money, which would be folded into Marcus; and 2) A possible partnership with Apple that would enable Marcus to provide point-of-sale financing of new iPhones. Not bad for a big oafy firm.

Trading over Twitter: what could possibly go wrong?

“We are not the arbiters of truth.” That’s what Nick Pickles, Twitter's head of public policy for the United Kingdom, said during testimony in Washington this week. He added, “We are not going to remove content based on the fact this is untrue.” Well, Sir, if that’s the way your company wants to play it, that’s your right. Still, when you overlay that policy on TD Ameritrade’s snazzy new chatbot that lets people trade over Twitter, it makes us wonder about the upside/downside of this trade. Yes, TD Ameritrade wants to be close to its customers, but is an integration with Twitter the soundest way to do that? Aren’t both firms setting themselves up for future pickles?

Deutsche keeps up the open source momentum.

Once again, the global bank has shown open source leadership within financial services by announcing that it’s made public a second major batch of code. This time, the solution, classily named Waltz, enables users to gather IT information from a variety of sources (i.e., application, data, infrastructure, etc.) in a user-friendly interface. As a result, the software, now public via Github, can enhance transparency for decision-makers presiding over complex IT environments. Nicely done, DB.

The selective outrage of robo-detractors.

The narrative contending that roboadvisors don’t have the heft needed to deal with a major market correction isn’t new. And this week, those who subscribe to it were given useful fodder by the outages Betterment and Wealthfront suffered in the wake of the market’s volatility. But here’s the problem with it: the web sites of mainstays including T. Rowe Price, TD Ameritrade, Vanguard, Schwab, Fidelity, RBC and Merrill Edge were also reported to have experienced outages. But when you read articles like the one below, which suggest that Millennials haven’t earned their big-people trading pants yet, it’s apparent that generational stereotyping remains a convenient narrative for some seeking to defend the status quo.

COMINGS & GOINGS:

 Meesh Pierce, Mariano Belinky and Marco Santori

AutoGravity, an Irvine-based start-up that provides consumers with the ability to secure auto financing options over their smartphones, announced that it has appointed Meesh Pierce as its new vice president of product management. She joins from Fandango. Also, Banco Santander’s Mariano Belinky has taken over as head of Santander Asset Management. Previously, he led the bank’s $200-million Santander InnoVentures fintech fund. Finally, Marco Santori, one of the nation’s most prominent blockchain lawyers, has left law firm Cooley and joined his client Blockchain as president and chief legal officer.

QUOTE OF THE WEEK

“Anyone can hold the helm when the sea is calm.”

~ Publilius Syrus