This week, we’re taking a vacation from our traditional format. Instead of offering our take on financial innovation news, we’re featuring a selection of things to watch, listen to and read while at the beach or in the office.
- Videos: Ethereum’s godfather and Arizona’s senior senator
- Podcasts: Quantum computing and software accounting executives speak
- Books: WEF’s Klaus Schwab, local banking pro John Waupsh, a sci-fi novel with a dose of fintech and Aimee Groth’s look at an Amazon subsidiary
- Shareholder Letters: Amazon and Alleghany’s letters flow like mighty rivers
Ethereum’s founder keeps it simple in this speech.
“Can we use cryptography in order to reduce the need for centralized authority?” That’s the fundamental question driving Ethereum’s godfather, Vitalik Buterin. In a speech he delivered in June in New Zealand, Buterin delivered an accessible overview of cyrptoeconomics, which he defines as the fusion of cryptography and economic incentives to achieve information security goals. In the video below, Buterin comes off as a brilliant, likable guy, in part because of his ability to distill complex concepts with ease and levity (for example, he refers to zero knowledge proofs as “spooky advanced stuff”). He also doesn’t seem driven by ego or wealth, despite the increasing number of applications that are built on the Ethereum protocol. That protocol has other founders, including Charles Hoskinson, Mihai Alisie and Anthony Di Iorio, but clearly Buterin is the chief patriarch.
Straight talk under pressure.
Millions of people have watched CNN’s "19 seconds of drama" clip showing Senator John McCain casting his vote against the "skinny repeal" of Obamacare. But to us, the more memorable performance by the Arizona senator came a few days before in the well of the Senate. McCain, who had just been diagnosed with a form of malignant brain tumor known as primary glioblastoma, delivered an inspiring speech that was full of guts, clarity of thought, humor and straight talk. It may be true that software is eating the world, but given that health care is projected to account for about 20% of America’s GDP by 2025 (CMS), it’s also true that health care is eating the economy. Perhaps McCain’s rousing words will serve as a small but constructive catalyst for real action in arresting a runaway economic train before it’s too late.
Quantum computing is going to be a big deal one day.
Is quantum computing real, or is it science fiction? According to this technical but interesting podcast from a16z, quantum computing is getting more real thanks to the work of start-ups such as Rigetti Computing. That’s especially relevant to note for financial services, which will likely be one of the first industries to embrace the unfathomable power of this entirely different computing approach. In the podcast, the importance of cloud technologies as a natural transmission mechanism for quantum computing output is emphasized, as quantum computers cannot store data. They also require cryogenic cooling systems and vibration stabilizing mechanisms ─ not exactly easy things for an organization to have on premise.
An interview with Freshbooks’ chief.
When we come across a young start-up that has managed to raise a ton of capital, we half-jokingly express our condolences. That’s because, as old-school types, we believe in the resource curse and that there’s nothing like the jackboot of economic pressure (for a while) to create the conditions for success. Take Freshbooks, for example, which is now a leading provider of accounting software for self-employed professionals. In a Dorm Room Tycoon podcast, company chief Mike McDerment points out that his enviable fintech company resisted institutional capital for a decade (how rare is that?). He also weighs in on the supremacy of marketing over product design and the importance of not playing it safe when scaling.
The Fourth Industrial Revolution
Any book that has the word revolution in it usually gets our attention. And although the writer, Klaus Schwab, sits atop an organization that we feel could use some disrupting (The World Economic Forum), we give him credit for writing a comprehensive primer on what Schwab asserts to be a major new technological era. His book provides a balanced view that, perhaps given his day job, must be measured at times when an arguably more blunt assessment is warranted. Still, reading this book will leave you smarter.
Bankruption: How Community Banking Can Survive Fintech.
We appreciated this deep dive into the challenges and opportunities facing small banking institutions and credit unions across the nation. The author, John Waupsh, speaks from a position of authority, as he leads product management as CIO for Kasasa, an Austin-based community bank that’s received considerable praise for its fintech-forward approach to banking. Candid and data-driven, this book is a great read for anyone eager to reimagine the relevance of community banks in the future.
Ready Player One.
A New York Times bestseller that deserves to be on everyone’s dystopian novel list, Ready Player One is set in an extremely destitute and dirty 2044. The book’s protagonist is Wade Watts, a teenager enthralled with a virtual reality game (OASIS), which was created by a deceased 1980s-obsessed billionaire named James Halliday. Rather than bequeath his fortune, Halliday has created puzzles that send Watts and other gamers (and their avatars) on an online treasure hunt for an Easter egg within OASIS. One of the more interesting aspects of this parallel world is that it features its own (stable) currency, which can be used both within the game and in the real world. We urge you to read the book, but if you don’t have time, you can always see Steven Spielberg’s movie adaptation due out in March 2018.
The Amazon basin (a.k.a. Earth).
In the future, Amazon may be your banker, your baker and your candlestick maker (or at least reseller). It could also become a giant in payments while it furthers its strong position as a leading provider of cloud services, e-readers and tablets, intelligent assistants and high-end groceries (potentially). Of course, it’s also a dominating distributor of consumer staples, beauty products, clothing, industrial and scientific supplies, kitchen items, jewelry and, last but not least, books. Apple may be a much bigger company, but somehow Amazon feels more important/ dangerous/ beneficial to the nation’s financial system. For a deep dive into one of the company’s most interesting subsidiaries, we recommend Aimee Groth’s The Kingdom of Happiness: Inside Tony Hsieh’s Zapponian Utopia. As far as understanding the core of the Amazon juggernaut, we recommend Jeff Bezos’ legendary annual shareholder letter.
Alleghany Corporation isn’t a household name, but it should be.The company was originally formed by two wily young entrepreneurs, Oris and Mantis Van Sweringen (known as “The Vans”), who made a fortune in railroads (perhaps the original social network). After a bankruptcy during the Great Depression and several more highs and lows, the company transformed itself into a P&C and specialty insurer and reinsurer, as well as a holder of real estate and other businesses, akin to a smaller version of Berkshire Hathaway. The company’s shareholder letters are notable for displaying a long-term approach, sound understanding of risk/reward and an openness to addressing the opportunities and challenges created by technology.
Note: We have no commercial incentives tied to any of the works featured in this edition.