Weekly Briefing No. 137 | Vanguard Goes to Zero, UBS’s New Avatar Economist, Square and Airwallex


Welcome to Saturday. The troika of heat, the mid-week July 4th holiday and the World Cup had an impact on news flow this week. Still, we found some good stuff to put on our grill:

  • Vanguard goes to zero; Daniel Kalt; Square
  • Airwallex; PayPal; Russia’s blockchain nexus
  • The Great Train Wreck of 1918
  • Our hope for fintech disruption of the airlines
  • Theo Lau’s latest; Quantum computing and freedom
  • SWS Partners; Green Visor’s Michael Walsh

Note: If you’d like to connect with us before our July 28th hiatus, please contact Gregg Schoenberg here.


Vanguard announces a nationwide contest to decide its HQ2.

Oops. Sorry, we got Vanguard confused with Amazon again. After all, as our friend Arjan Schutte of Core Innovation Capital pointed out recently, Vanguard is the Amazon of money. A case in point is the decision by the Malvern-only headquartered firm to drop brokerage commissions to a bagel for the nearly 1,800 ETFs of its rivals offered on its platform. However, Schutte added that the company is so obsessed with its customers that it maintained fees on leveraged and inverse ETFs, which Vanguard sees as speculative. As a result of this move, Vanguard is well positioned to attract more assets, further align itself with its customers’ best interests and ruin upcoming Cape Cod vacations for several Fidelity executives (We expect to see a response from Fidelity, which already offers commission-free trading for 95 ETFs). Last but not least, lets not forget that as a mutual company (which Amazon clearly isn’t), Vanguard is in the enviable position of not having to care about the impact of this decision on the upcoming quarter or two. Put it all together and it looks like this move will further solidify the company’s stature as the VangAmazon of the asset management industry.

UBS reincarnates Max Headroom as its chief avatar economist.

In 1984, Max Headroom was foisted upon the world. According to one of its creators, Max was a “very sterile, arrogant, Western personification of the middle-class, male TV host.” However, he was also “gleefully disrespectful,” which appealed to the big-haired, parachute-panted youth of the day. Now, it appears as though UBS is bringing a Max-like figure back to the world. This time, though, the “character” is a digital avatar of its chief economist Daniel Kalt. But rather than delivering snark, the purpose of Kaltroom will be to answer questions from UBS clients in a scalable manner. Watching UBS attempt to train this algo would be interesting.

Is it back to square one for new ILC charters?

Despite expectations that new FDIC chairman Jelena McWilliams would start granting ILC charters again, Square withdrew its ILC charter application to the FDIC this week. However, the company, which kept its ILC application into Utah active, indicated that it would re-file the application soon. As a seasoned, public company with a market cap of about $25 billion and plenty of money to hire great lawyers/compliance professionals, it’s hard to imagine that Square doesn’t make the grade if the FDIC’s intent is to start granting ILC charters. Still, with the Independent Community Bankers of America poised to pounce on any flaws in Square’s bid, it seems wise for Square to withdraw, regroup and aim for perfection.

Airwallex closes on an $80-million Series B.

“We’ve seen more demand in the market. China’s belt road initiative has really taken off, too, and we’re seeing the impact in many, many of our payment corridors.” That’s Airwallex co-founder and CEO Jack Zhang on one reason things are looking up for the Melbourne start-up, despite the commencement of a trade war between the US and China. Likened to a Transferwise for SMEs, Airwallex received its latest funding infusion of $80 million from a group led by Tencent and Sequoia China.

Coziness between PayPal and Synchrony (and Goldman) continues.

This week, PayPal and Synchrony announced the closing of a previously announced sale of PayPal’s credit receivables to Synchrony and an extension of a consumer financing partnership (See below). The PayPal indigo aura also found its way to Goldman Sachs recently. One day, Marcus may become a competitor to PayPal in traditional banking services, but it didn’t stop PayPal’s Dan Schulman and Goldman’s leader-in-waiting, David Solomon, from spinning on everything from diversity, Krav Maga, work-life balance, DJing and Shakespeare.

A blockchain Anapa-bama on the Black Sea.

The Russian Ministry of Defense is launching a research lab to analyze how blockchain technology can be used to mitigate cybersecurity attacks. But this new lab won’t be in one of the nation’s known tech centers such as St. Petersburg, Akademgorodok or Moscow. Instead, the Black Sea town of Anapa, a Florabama of the Caucasus, was chosen. Why Anapa was designated prima ballerina is hard to figure, but we’re noting that a) infamous James Bondesque hacker Evgeniy M. Bogachev purportedly lives in Anapa, and b) Anapa will soon be home to a new “technopolis” dedicated to advanced weapon systems.

Flipping is good for you (and the country).

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Is Dutchman’s Curve Now in Menlo Park?

Next Monday will mark the 100th anniversary of the Great Train Wreck of 1918, a tragedy involving two trains that collided in Belle Meade, Tennessee. The wreck, which claimed over 100 lives and caused many injuries, took place at a point known as “Dutchman’s Curve.” We don’t expect you’ll see much coverage of this accident in the national media because a) it happened 100 years ago, and b) trains aren’t at the forefront of most people’s minds today. But in the 19th and early 20th century, the railroad industry was America’s tech-fueled social networking sector, connecting people and businesses like never before (until that pesky disruptor Ford scaled its Model-T). Following the accident, fingers were wagged, rules were changed and regulations were enforced. Perhaps most importantly, though, railroad companies started phasing out wooden train cars in lieu of steel ones. Most likely, the railroad juggernauts weren’t stricken with a conscience. Rather, it seems like they realized that in the wake of Dutchman’s Curve and other wrecks, spending large sums of money — not symbolic amounts — to protect their customers from harm was a wise decision. In other words, being distrusted is bad for business, regardless of whether the source is naivety, negligence or faulty machinery.

We need fintech disruption to fly the sneaky skies.

A recent article by Business Insider’s Benjamin Zhang got us steamed for highlighting how airlines use non-transparent, carrier-imposed fees to juice profits. Airlines can and should have wide discretion in making their own pricing decisions. But our sense is that intermingling these fees among government-imposed security ones (e.g., the September 11th Security Fee) and taxes leads consumers into thinking that these charges are required by law. Delta, for example, nestles its carrier-imposed surcharges of up to $650 each way in a mind-numbing list just above “Singapore Aviation Levy.” Really, Delta? Hopefully, some start-up(s) or Amazon-like entity will come along to shed an obnoxious light on this practice. Because packaging sneaky fees in a patina of governmental legitimacy deserves a turbulent ride.


She was young — until she wasn't: Theodora Lau kicked off the week with her latest thoughtful meditation on the headwinds facing an aging population that is expected to save for retirement on one hand and confront rising health care costs and the challenges of being a caregiver on the other. “Creative thinking and collaboration between public and private sectors will be required,” she says. We agree with Lau and raise our coffee mug to her for highlighting key questions on how people can afford the longer lives they hope to lead.

Could quantum computing be the end of free will?: That’s the Satresque question raised by The Atlantic’s Rachel Gutman, picking up on recent comments made by the Weizmann Institute of Science’s Daniel Zajfman at the Aspen Ideas Festival. Free will is likely safe from quantum computing, says Zaifman; however, given the enormous computing power that future quantum machines may possess, he urges caution: “Don’t believe anyone who tells you something is impossible.”

Running an RIA leaner and meaner with tech: “Join the revolution or die.” It isn’t subtle, but that blunt motto guided our friend, Phil Kessler, as he and his partners built a fast-growing independent RIA in the wake of the roboadvisor trend. Unsurprisingly, the answer for Kessler and other tech-savvy advisers has been to harness software to demonstrate the true value they bring to their clients.

A comprehensive interview with Green Visor’s Michael Walsh: Below is a terrific interview featuring Walsh on Software Engineering Daily. Topics covered include AWS’s impact on fintech, marketplace lending, opportunities in payments, China’s fintech scene and the future of Bitcoin and the broader crypto market.


“True strength is delicate.”

~ Louise Berliawsky Nevelson