Weekly Briefing No. 167 | Weighing In on the New Apple Card

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Welcome to The FR. Our announcements are always a spectacle.

In this edition:

  • The New Apple Card Looks Pretty Clever

  • Robinhood Gets into the Media Biz

  • Canada’s Pension Fund on Long-Term Investing

  • Big Bank Take Lil’ Bank

  • Intel’s New AI Framework

OPINION

The New Apple Card Looks Pretty Clever

Apple’s Monday event was dominated by Hollywood stars who were drawn to Cupertino by the company’s good taste and aggressive push into an array of new content services, games, subscriptions, and original programming. As such, the Apple Card’s unveiling was a bit lost in the grand Oprahness of it all.

But the company’s new card, which will be backed by Goldman and run on the Mastercard network, could be the real deal, notwithstanding what the skeptics say and antitrust alarm bells that could follow. For consumers, the card will offer decent if not shock-and-awe benefits, daily cash back and a single-use security code each time a purchase is made. The latter attribute, along with the company’s vow not to “collect” customer purchase activity or sneak in lots of fine-print fees, will appeal to those concerned with security, privacy, and transparency.

But the real sizzle is that it’s purpose-built for the iPhone (although a sleek, numberless titanium card will be provided to holders too). "The Apple card is supposed to drive adoption of Apple Pay," noted Kalpesh Kapadia, CEO and co-founder of analytics-based credit fintech Deserve. "This is a crowded space with preferences and loyalty already set for super prime customers, so it seems this was created mostly for Apple fans."

As a result, in the words of payments entrepreneur Brian Roemmele, Apple has in essence created a “new economy” by funneling daily cash rewards directly back to the Wallet app. When that cash is subsequently used on Apple products or with an Apple partner, fees that normally get paid out to intermediaries won’t be present. This will undoubtedly accrue to Apple’s bottom line in time. In turn, Apple will have newfound money that it can use to offer perks and other incentives — all of which will be covered by other people’s (or should we say, other merchants’) money.

Robinhood Gets into the Media Game

In a deal with very interesting synergies, digital investing app Robinhood made its first-ever acquisition this week: for a millennial-targeted media firm called MarketSnacks.

The deal was first reported by Forbes, and Robinhood declined to name the terms of the acquisition. MarketSnacks’ portfolio includes both a podcast and daily newsletter focused on finance, with a humorous bent — as befits a news product geared towards millennials.

Apps in the larger digital investing and advisory field such as Robinhood have long had features such as financial news about the stocks its users own. This move pushes Robinhood further in that direction of offering a wide variety of services beyond just robo-investing. In fact, in the Forbes article, the company says the move is part of its larger plan to become a “one-stop shop” to meet all the needs of younger investors.

“Robinhood approached us and told us that their users were craving easily digestible and accessible business news,” MarketSnacks co-founder Nick Martell is quoted as saying.

We’ll be interested in seeing if Robinhood’s competitors also look to acquire media brands — or start ones of their own.

Pension Fund’s Long-Term Investing Strategies

Looking ahead ten, perhaps even twenty, years into the future, what will be the hot sectors to invest in? Well, if we knew exactly what those would be, we’d be soothsayers, but the manager of one of the world’s largest pension funds has some interesting ideas in that regard.

Mark Machin, president and CEO of the Canada Pension Plan Investment Board, which manages $370 billion, discussed the areas he is looking at for future growth in an interesting interview with CNBC this week.  Among them are what he calls “retail 4.0” self-driving vehicles, and travel companies.

Regarding retail, Machin said, “We’re substantial investors in Alibaba, which we were pre-IPO and post-IPO. We’ve also invested in funds alongside them that are specializing in new retail, as well as Meituan-Dianping,” which is a Chinese food delivery app.

ANALYSIS

Big Bank Take Lil' Bank

That’s the refrain of YG’s 2018 hit song, “Big Bank,” which features 2 Chainz, Big Sean, and Nicki Minaj. Along the way, the song also makes a salient point apropos of today’s college admissions reality: People with big money win out over those with little money.

Of course, we’re referencing the machinations of admissions fixer William “Rick” Singer, who has helped smear heaps of crème brûlée onto the shamed faces of several “prominent” institutions and 750 individuals. But the greater horror is that universities have been shamefully using their venerable status to create legal side-door sludge-hustles that provide less deserving but wealthier applicants with ways to hack their way in.

So while the fountains of cash, jewelry, cars, and Nicki’s bizarre pink horse, make for a vulgar display of wealth in the “Big Bank” video, they pale in contrast to the “tasteful” displays of buildings and athletic centers donated by those with real bank. Today, with U.S. student debt levels soaring above the GDP of Spain, it’s high time to take some attention away from the well intentioned school debt refinancing start-ups that view the cost of education as a financing problem. It’s not. The principle problem is the principal problem. And if this core issue continues to go unaddressed, colleges will keep crowding out other pillars of America’s economy — and in the long run, our nation will graduate fewer individuals who will ever have a shot at obtaining their own big bank.

Intel’s New AI Framework

Last month, the White House issued an executive order laying out how the U.S. would maintain American leadership in AI. Putting aside the fact that the order assumed, perhaps inaccurately, that the U.S. is the world’s AI leader, it was criticized for being long on blather and short on meat (what a surprise). Still, the executive order has served as a catalyst, which has now led Intel to put forth a set of AI recommendations that reflects serious thought over how to develop AI technologies safely and effectively. Of course, Intel isn’t in the basket-weaving business, and its recommendation should be viewed within the context of its own interests. But at least it’s something. And while the tragic and unfolding case surrounding the Boeing 737 Max jet reveals the downside of handing over too much regulatory power to those being regulated, we are heartened to see growing momentum for a serious conversation on AI regulation.

Quote of the Week

“Innovation comes from people meeting up in the hallways or calling each other at 10:30 at night with a new idea, or because they realized something that shoots holes in how we've been thinking about a problem.”

— Steve Jobs