Weekly Briefing No. 130 | AI corporate giants need to hire more artists, poets and philosophers.

Welcome to 130. It was a mother of a week on multiple fronts. Here’s what we have in store:

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  • When it comes to AI, there’s no such thing as a mulligan
  • The CFTC is being held together with duct tape
  • Robinhood, Acorns, Beacon, Trussle, Paytronage
  • Charlie, the Bitcoin fearmunger
  • Novel payments deals; Zillow
  • Ray Dalio’s YouTube video; Spotify’s sentiment data
  • Marxism; Communication debt; Mother’s Day

OPINION

AI’s future “success” lies beyond tech or data.

We strongly recommend that you watch a demo of Google’s Duplex technology, which was unveiled at its I/O developer conference this week. Granted, the actual platform won’t work like the demo, but it was still a profound demonstration of how engineering-centric companies like Google — despite the AI hype — are (giddily) making progress in artificial general intelligence. In financial services, too, we’re seeing firms ramp up their AI efforts. JP Morgan, for example, just plucked renowned AI professor Manuela M. Veloso to run a newly established AI research division that aims to do a lot more than use AI for the back office. And then there’s AI start-up Sensetime, which is fueling China’s social credit system. By 2020, that system will be used to judge a Chinese citizen’s worthiness to borrow money or travel.

If such developments alarm you, you should root for internationally established AI frameworks and blue ribbon commissions. But when you realize that a global consensus on AI is more likely to occur on exoplanet Ross 128 b than on Earth, you should push anyone you know at AI powerhouses to hire Veloso equivalents in literature, philosophy, arts and religion alongside recent grads trained in STREAM over STEM. Because as FR contributor Sultan Meghji pointed out to us, the foundations laid down by the Renaissance were essential to the Industrial Revolution’s successes. Today, tech powerhouses need a similar counterweight provided by brilliant minds who have never written code, but have done some deep learning in the humanities and the nature of our existence. The good news is that firms like Google and JP Morgan can afford to hire lots of “poets.” What they and the rest of the world can’t afford is to screw up the responsible advancement of the AI Revolution. Because unlike Google Glass, there’s no mulligan on this one.

The CFTC’s budgetary blues.

We understand that right now, the mantra in D.C. is to squeeze the belt on everything except the military. Still, the budgetary situation at the CFTC is a head-scratcher given the commission’s oversight of the multi-trillion-dollar derivatives market (which needs a robust watchdog in order to preserve market credibility) and the ongoing development of the cryptocurrency market. How bad is the situation? According to The Wall Street Journal (subscription), CFTC head Christopher Giancarlo recently told the Fed’s Lael Brainard that the CFTC can’t synchronize its market data with Treasury data because it couldn’t afford the technology. Another senior CFTC official was quoted as saying, “We’re holding this place together with duct tape.” Hopefully, some money can be found somewhere to help the CFTC buy some new tech, or at least replace the duct tape with a fresh roll.

FEATURED NEWS

Deals: Hell hath no fury like a bagel scorned.

We’ve received some flak in response to a segment we wrote last week suggesting that AllianceBernstein employees who relocate to Nashville will be able to get over the loss of New York bagels. We’re sorry (sort of) to anyone we offended. Speaking of bagels, Robinhood, which charges a bagel for trades on “most U.S. equities” as well as on options, ETFs and some cryptocurrencies, completed a $363 million Series D. Also, Blackrock has led a $50 million round for micro-investing app Acorns, Pimco just took a minority stake in Beacon Platform and UK digital mortgage broker Trussle closed on £13.6 million led by Goldman and Propel. On a final note, this February, we highlighted income sharing arrangement start-up Paytronage after The FRs Gregg Schoenberg was impressed by the poise and strategy of the company’s co-founders, Zach Pelka and Connor Swofford. This week, Lumni, arguably the world’s leading ISA company, said that it was acquiring Paytronage in a bid to grow the ISA market in the US. This is a space to watch.

A spot market for cerebellums?

At last week’s Berkshire Hathaway annual meeting, Warren Buffet likened Bitcoin to “rat poison squared.” The world’s greatest investor also articulated his sense of optimism in America by saying, “I would love to be a baby being born in the United States today.” Perhaps that quote lodged itself in the mind of his soft-spoken partner, Charlie Munger. Subsequent to the annual meeting, Munger said in an otherwise fantastic interview that Bitcoin is “almost as bad” as trading freshly harvested baby brains. Imagine what Munger would say about Litecoin or Monero. On a related note, Goldman Sachs recently confirmed the rumors that it’s setting up a desk to trade baby brains. Other mainstream organizations looking to get in on the action include the NYSE, the duo of Mike Novogratz and Bloomberg, and Facebook, which may be planning to launch its own cryptocurrency.

New and novel payments partnerships keep coming.

“We have asked ourselves: why can't we behave like a tech company?" said a cheery Shahrokh Moinian, global head of cash products at Deutsche Bank. With that gemütlichkeit in mind, the German bank announced this week it would partner with global airlines association IATA to launch a new real-time electronic payment system for plane tickets. For Euro airlines, the hope is that they can take advantage of  PSD2’s open banking rules to dramatically cut down to a few cents the amount they have to pay for ticket payment processing. In the US, meanwhile, Apple and Goldman let it be known that the two firms would be launching a new credit card that would carry the Apple Pay brand and boost Goldman’s consumer finance effort.

Zillow in the news.

Lately, we’ve been keeping tabs on real estate tech bellwether Zillow, which always seems to be releasing interesting data or making news. Take this week: during Zillow’s Q1 earnings call, CEO Spencer Rascoff doubled down on its controversial “Instant Offers” initiative. Also, the company issued its latest study confirming the ongoing trend of Millennials living with their parents (amazingly, in Riverside, CA,  51.5 percent of young grads live at home). And finally, Zillow’s Zestimate tool, which has been the subject of several lawsuits over its alleged misleading impact on home prices, was given the all-clear signal by a Chicago-area judge.

THE TROVE

The man with the blue hat is you: In an entertaining animated series that channels the ghosts of Curious George creators H. A. Rey and Margret Rey, Ray Dalio has distilled his bestselling Principles into a 30-minute ultra mini series adventure. It’s well done, in our view.

Should Spotify open an economic statistics division?: Perhaps, if you believe the Bank of England’s Andy Haldane, who recently expressed interest in “non-traditional” means of determining economic sentiment. Specifically, Haldane cited a recent Claremont Graduate University study that showed Spotify downloads, when paired with semantic search technologies, seemed to work as well as the University of Michigan Consumer Sentiment Index.

Springtime for Marxism?: We certainly hope this is not the case. But last Saturday marked Karl Marx’s 200th birthday, and with it a cavalcade of “Marx was right” sentiments were expressed in honor of his philosophy. To be clear, we think our market-based economy and political system could use a swift kick in the rear end. But in our opinion, anyone who believes any form of Marxism would be preferable needs a history lesson, pronto.  

Communication debt is real: It’s fashionable to use the term technical debt to describe the challenges developers at financial incumbents face in overcoming legacy technology systems within their organizations. But what about communications debt? As our friend Henry Poydar of Status Hero pointed out in a recent piece, thanks to email, Slack and other chat apps, developers (or anyone else in a company) can easily be overwhelmed by the constant flow of communications absent a framework to address the onslaught.

Mother’s Day done right: We wish all of our mom readers a very happy Mother’s Day tomorrow. For those fortunate enough to have a mom they can visit (sadly, some of us don’t), we’d suggest you read this history on the founder of the holiday. In short, Anna Jarvis decried the commercialization of a holiday that was intended to be about showing gratitude for moms, not putting lame gifts in front of them. Indeed, the best gift you can give your mom is to leave your phone at home, ditch the flowers and haul yourself over for a visit. But if must buy something, consider one of the options below.

QUOTE OF THE WEEK

“I think it's rarely about what you actually learn in class... it's mostly about things that you stay motivated to go and continue to do on your own."

~ Maryam Mirzakhani