Weekly Briefing No. 135 | The Theory of Everything, Atul Gawande, “The Quant Way,” PayPal, Malls on the Rise

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This week was absolutely sweltering. The temperature was hot, too.

  • Atul Gawande’s rise; “The quant way”; PayPal pays up
  • The mauling of America; one more; one more
  • Financings: Brex & Fabric
  • Opinion: GE;, Blackrock vs. Blackrock Steakhouse
  • Trove: Ripple’s Garlinghouse; Humans & block trades; Venezuela

Note: We will be taking a hiatus after our July 28th issue. If you’d like to contribute an opinion piece or story idea beforehand, please contact Gregg Schoenberg here.

FEATURED NEWS

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No, we didn’t make a drunken mistake with that title. That long string represents a recent hash on the Bitcoin blockchain, which, depending on who you believe, is a huge deal, a gimmick or a coincidence. One thing, though, is for sure: the hash (a.k.a. 21e800) has set the Bitcoin world abuzz this week with talk of time traveling, quantum computing advances and A. Garrett Lisi’s “An Exceptionally Simple Theory of Everything.” Regardless of what you think about Bitcoin, a survey of the debate over this hash provides a primer on a number of fascinating topics.

The Checklist Manifesto comes to healthcare.

If you haven’t read Atul Gawande’s The Checklist Manifesto: How to Get Things Right, we recommend that you do so this summer. In this fantastic book, the Brooklyn-born public health researcher, writer and endocrine surgeon lays out a framework for approaching complicated challenges. While the title gives away some of the book’s main point, it provides terrific insights and real-world examples showing the importance of getting the simple things right (i.e., crafting a well-designed checklist). That premise will be put to the test in a big way given Gawande’s new role as head of the Amazon-JP Morgan-Berkshire Hathaway healthcare initiative. Plus, as Gawande has demonstrated in his other works, including Complications, Being Mortal, and his highly influential New Yorker article, “The Cost Conundrum” (which blew away none other than Charlie Munger, who dashed off a $20,000 check to Gowanda as an expression of gratitude), Gowanda “gets” our healthcare system, mortality, economics and doctors on a deep level. As such, we’d posit that this choice is not only good for the direct beneficiaries, but also for our nation at large.

The “quant way” enters a new phase.

In recent years, we’ve been fascinated by the morsels we’ve heard indicating that several of the world’s leading quant funds have been exploring ways to use their data science, technology and math chops in applications beyond trading. The continuation of this trend was confirmed by an announcement from London-based quant colossus Winton Group, which announced that it is spinning out its data science company, Hivemind.

A four-letter word that begins with F.

Sponsored by Groundfloor

Let’s face it: in elitist circles, there are “good” ways to make a profit and there are ways that are considered unappealing. One such “unsavory” way is to flip homes. In fact, among those who drink their tea with an extended pinkie (and often inherited their housing), flipping a property is just not done. Well, the hardworking, self-made entrepreneurs who comprise the ranks of Groundfloor have a message for elitists: flip off. As one of the nation’s leading real estate platforms focused on the 99%, Groundfloor is dedicated to expanding access to high-quality, direct real estate investments and providing a frictionless, competitive borrowing experience for real estate developers. Interested in learning more? Then check out the company’s website below. Because on Groundfloor’s platform, everybody is welcome.

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Another week, another PayPal acquisition (or two).

Early this week, PayPal announced that it was shelling out $400 million for Hyperwallet, an 18-year-old online payments company that specializes in facilitating transactions for small businesses, marketplaces and gig economy professionals globally. Then, on Thursday, PayPal announced that it was advancing its fight against online fraud by scooping up AI-based Simility. Can PayPal integrate so many acquisitions all at once?

Searching for the American Dream at the mall.

Although the US and Canada are on the verge of a trade war — unlike when the US and British-controlled Canada actually came to blows — it hasn’t stopped a Canadian developer from moving forward with its plans to build an audaciously large mall near Miami. The name of this project is — get this — American Dream Miami. And in case you’re wondering, this mall won’t be full of Merry-Go-Rounds and Chess Kings. Instead, this rendition of the American Dream will feature an indoor ski slope, ice climbing wall and submarine lake. While they’re at it, maybe they could add a lobster ice cream stand to the mix.

OPINION

The Dow of Theseus throws GE overboard.

“If the ship on which Theseus sailed has been so heavily repaired and nearly every part replaced, is it still the same ship — and, if not, at what point did it stop being the same ship?” That famous thought experiment, posed by Plutarch, came to mind this week as we contemplated the news that GE would be leaving the Dow Jones Industrial Average. Besides GE, when it was established 122 years ago, the Dow fielded 11 other members, including the American Cotton Oil Company and the Distilling & Cattle Feeding Company. When GE is officially replaced on June 26th, the Dow will continue to be America’s old-school, price-weighted grand dame index. Still, this news is sad (to us) because it was nice knowing that one of the original planks had remained in the Dow all these years. On the other hand, as Bloomberg’s Brooke Sutherland points out, perhaps the heave-hoing of GE will be the unshackling CEO John Flannery needs to fully reboot the company. We hope so, as it would be good to see this iconic American company turn its ship around.

Blackrock vs. Blackrock Steakhouse in Lebanon.

As longtime FR subscribers know, we’re no fan of Facebook. Still, there’s no denying that despite its shortcomings as the world’s largest, lightly regulated media company, Facebook remains a powerful platform for organizations seeking to engage with a huge audience. One sector that seems to have missed the opportunity presented by Facebook (and Instagram) is the asset management industry. In a new opinion piece for The FR, George Aliferis, founder of Orama, explains why that creates an opportunity for a smart fund manager.

FINANCINGS

This week, two start-ups that we know and have been following for some time announced significant capital raises:  

Brex:

On Tuesday, Brex announced a Series B to bring its total funding to $57 million. Led by the Y Combinator Continuity fund and backed by PayPal co-founders Peter Thiel and Max Levchin, Ribbit Capital, Yuri Milner, Chase Coleman and Carl Pascarella, Brex provides a credit card product geared to tech start-ups that often lack many of the check-the-box attributes traditional card issuers require. In a recent discussion with The FR’s Gregg Schoenberg, CEO Henrique Dubugras added that he and his partner Pedro Franceschi (the Brazilian duo sold their last company, Pagar.me, in 2016) were ready to do battle with well-funded incumbents. Dubugras added that Brex’s tech stack was built from the ground up in an effort to enhance functionality in ways difficult to achieve via a legacy system. He also pointed out that while Brex has its own (growing) rewards program, the types of companies Brex is targeting aren’t susceptible to quick inducements. “We believe that a few points isn’t worth a way worse process,” he said.

Fabric:

We credit Fabric’s Adam Erlebacher for turning us on to the life insurtech opportunity two years ago. Since then, it’s been great to observe how Erlebacher and co-founder Steven Surgnier have methodically gone about the business of creating a life insurance company that speaks to modern-day parents. We were delighted, therefore, to see that Bessemer Venture Partners, along with several other high-quality firms, closed on a $10-million Series A this week. Just about anyone who has purchased life insurance the old-school way knows that the process is as painful as having root canal performed at the DMV. Fabric seeks to get rid of all the hassle with a digital buying experience that emphasizes speed, simplicity and affordability.

THE TROVE

A ready-for-primetime blockchain exec: At this week’s CB Insights fintech conference, Ripple’s Brad Garlinghouse spoke convincingly on a number of blockchain topics, including the difference between Ripple and XRP, XRP’s volatility, why he’s long Bitcoin and the state of the ICO market. Garlinghouse also reiterated his prediction that at least one bank will use xRapid in its payment flows in 2018.

A catastrophic economic collapse 1,400 miles from Florida: Conventional economic indicators no longer work to describe how dire the economic situation is in Venezuela. So Ricardo Hausmann, a Harvard economics professor, invented a new measure to capture the crisis’ magnitude: how many calories the average worker can buy with a day’s wages. In the US today, it’s over 100,000 calories. Six years ago in Venezuela, it was 57,000 calories. In today’s Venezuela, it’s 900 calories.

Carbon-based life makes a modest comeback at Credit Suisse: AI may be winning the battle vs. humans in treasury services, but DNA-based life forms appear to be enjoying a small renaissance on the trading floor of at least one big bank. Under CS’s Mike Stewart, the Swiss bank is seeking to carve out a niche for itself as the go-to firm for block trades. These transactions are fueled by relationships, feel and an understanding of trading psychology, none of which appear to be Sophia’s forte.

QUOTE OF THE WEEK

“The great thing about the United States and the historically magnetic effect it has had on a lot of people like me is its generosity.’”

~ Christopher Hitchens