Weekly Briefing No. 120 | Fintech Confronts College Tuition and Politics; “Lemonading” Healthcare Insurance

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Welcome to our 120th edition. Here’s what caught our eye this week:

Publishing note: Next week, we are taking a mid-winter publishing break.

  • Youth, fintech and the college tuition crisis
  • Vote on financial innovation and tech in 2018 and 2020
  • “Lemonading” healthcare insurance
  • Assault weapons and Wall Street; Online lending’s “good” week
  • The GPU craze; JP Morgan’s crypto 180; blockchain financings
  • Campus of Note: Cornell Tech

Can older people fix the college tuition crisis?

The average age of the accomplished, all-women co-chairs of the WEF’s 2018 Davos meeting is 57 (our math); the average age of an S&P 500 financial services board member is 63.1. What do we think of that? It’s great, and we hope that many of these executives become future Charlie Mungers. Still, we question if there’s enough room for aspiring younger people to go far and fast in mainstream financial services and our broader economy. Moreover, we wonder if olders leaders are best positioned to understand the challenges and tastes of a generation too young to remember first-run Seinfeld episodes. That’s why we’re pointing out this week’s newsflow, which is full of examples of young turks bursting onto the scene in fields beyond Olympic sports. There’s wunderkind gaming CEO George Weiksner and Flynn McGarry, a 19-year-old chef-preneur offering a $155 prix fixe menu at his restaurant. There’s George Haller, a 21-year-old founder of Coinmast, which connects financial advisors to customers for $11 per call. Last but not least, there are recent Wharton grads Zach Pelka and Connor Swofford, who just launched Paytronage. This income-share-agreement startup (advised by pros like Michael Kopelman and Michael Taormina) aims to bring institutional equity capital to help students cover soaring college costs. How great is that? Of course, young entrepreneurs aren’t new. But today, we need more Evan Spiegels to address economic issues dear to the hearts of post-Seinfelders. Because let’s face it: there are plenty of Costanzas out there who aren’t thinking about the next generation.

Financial innovation and tech to be on the ballot.

Recently, The New York Times helped introduce the world to Andrew Yang, a former technology and nonprofit entrepreneur who announced his candidacy for president in 2020. HIs platform includes a $1,000 “Freedom Dividend” (i.e., a rebranded UBI initiative) to address automation-induced unemployment. He also wants to hike the salaries of regulators, but limit their post-service employment. Innovative? Absolutely, but the more we looked, the more realized that there are other politicians looking to secure posts lower down on the food chain who are also advancing innovative ideas to confront a changing economy and society. On the Republican side, there’s Michael Allman, who is running on a “Direct Democracy” platform. There’s also Jenifer Sarver, who is banking on an unheard-of civility-first, bipartisan platform. On the Democratic side, we’re keeping an eye on Brian Forde, an understandable favorite of blockchain enthusiasts, and fintech executive and New Hampshire native Deaglan McEachern, who is advocating for vocational education, a K-12 technology curriculum and an end to the “rental car health industry” to deal with the challenges of the “workforce economy.”

The Lemonade of healthcare insurance?

We’ve spoken to several insurance executives who have criticisms of Lemonade’s approach to disrupting insurance. Given the company’s funding, which looks to have occured on the back of considerable traction, Lemonade has its thoughtful proponents too. But one thing both camps should agree on is that Lemonade has sought to turn its outsider status, or  “ignorance,” as co-founder Daniel Schreiber put it, into an asset in the company’s bid to reimagine P&C insurance. We thought about that brand of ignorant brilliance when we reviewed the allegations facing Aetna. Even if the facts of the case clear the health insurer, we think they shed needed light on the perverse incentives in our current system. As the Los Angeles Times editorial board put it, “Keeping patients healthy is a lousy way for doctors to make money when they're paid by the procedure. Having corridors of unused beds is a symptom of a sick hospital.” Changing those incentives is sure to lie at the heart of the Amazon-Berkshire-JP Morgan healthcare newco. Our question is whether the three titans leading the initiative can dare to be ignorant. In particular, we hope that Warren Buffett can put down his Cherry Coke in favor of some Lemonade.

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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Assault weapon manufacturers and Wall Street.

Recently, Remington Outdoor Company, a maker of AR-15-style semi-automatic weapons, filed for Chapter 11. Why? Because the election of Donald Trump, who has stood with the NRA and assault weapon manufacturers, dampened demand for firearms. We don’t expect that the NRA will do anything substantive to reduce the availability of these weapons, but we’re hoping that the financial industry acts. That’s because major assault weapon shareholders, debtholders and transaction facilitators read like a Who’s Who of Wall Street. Sure, some firms already avoid the gun industry. But as long as the money is flowing to assault weapons makers’ balance sheets, and as long as they can afford to back the amazingly effective NRA and pay for the cleverest lawyers and PR firms, assault weapons makers will likely be able to ride out the outrage of a heartbroken nation. But if the biggest titans on Wall Street pick up the phone and say enough is enough, even if doing so hits their pocketbooks, things could change. Indeed, now is the time for the big money to back up its high-minded talk with action.

Online lending start-ups had a “good” week.

Two things happened on Wednesday that at first blush look promising for non-bank online lenders. First, CNBC reported that in addition to relying on Bank of America to power its lending efforts, Amazon has hit the brakes on loan growth because it has the heebee-jeebees over fielding a major lending operation. Also, the House passed a bill, a so-called “Madden Fix,” which would restore the “valid when made” doctrine that allows marketplace lenders to assign loans to another party regardless of state usury laws. If this bill becomes law, it would indeed benefit non-bank platforms. But our sources indicate that there’s little chance that Washington will soon get its act together on this issue. Amazon Marketplace, meanwhile, boasted 140,000 SMBs who sold more $100,000 via Amazon last year. Translation: Amazon can get big into lending, if and when it feels like it.

The GPU craze.

Lately, we’ve been hearing more talk about the shortage of GPUs thanks to the role graphics processing units play in cryptomining. How much of a shortage are we talking about? So much so that GPU manufacturers have asked retailers to impose a limit on the number of units a customer can purchase so as to protect gamers. In addition to gamers, the SETI Institute, which is working hard to explain the origins of the universe and discover alien life, as well as a South African institute that has one of the fanciest telescopes on Earth, are feeling the GPU pinch.

JP Morgan’s 180 on cryptoassets.

Recently, JP Morgan published a report that pointed to the potential of cyrptoassets as a source of diversification beyond equity and fixed income. The report also claimed that cryptoassets are ten times more volatile than “core assets” and pointed to Bitcoin’s massive spread and inability to weather a liquidity crisis as major liabilities. Still, the bank said that cryptoassets were unlikely to vanish. Although this report dripped of irony, it’s not the first time the bank’s senior leaders have done a 180 after initially scoffing at an abstract idea. Specifically, we’re highlighting the predecessor’s bank’s adoption of its now-ubiquitous logo, which was initially rejected as incomprehensible by Chase Manhattan’s leadership.

Recent blockchain-related financings run the gamut.

This week, Columbus, Ohio-based SafeChain announced a $3-million round in support of its mission to use blockchain tech to remove the pain, suffering and fraud associated with the paper-based real estate purchasing process. Also this week, IdentityMind Global, which is working with companies to address compliance issues surrounding cryptocurrencies and ICOs, closed on $10 million. Finally, last week, it was reported that Polychain Capital and Andreessen Horowitz are leading a $61-million financing for a decentralized virtual computer of nearly unlimited capacity. The not-for-profit developing the protocol is Zug-based DFINITY foundation.


Last Thursday, The FR’s Gregg Schoenberg and Caliber Home Loans’ Marvin Chang were given the chance to teach a class for Cornell MBA’s Drew Pascorella’s fintech intensive at Cornell Tech. Their topic covered how institutional fund managers are are dealing with technology and the explosion of data. Those subjects fit nicely into the broader objective of Cornell Tech, which is giving students the tools they need to compete in a digital economy changing at a blistering pace. Still, our sense is that companies of all sizes in need of talent may be unaware or under-aware of Cornell Tech. If you’re in that camp, we suggest you remedy that deficiency. Because the tech talent being nurtured at Big Red’s Roosevelt Island campus is set to rise strongly over time. Plus, it’s only about a long golf drive away from the banks of midtown NYC.


“If you want to improve, be content to be thought foolish and stupid.”

~ Epictetus