Weekly Briefing No. 96 | Best of 2017 Special

We’ll be back with a fresh edition of The FR next week. In the meantime, here are some of our most popular segments from 2017. Happy Labor Day.

  • Treasury’s Mnuchin is no flat-Earther
  • Soup and warm blankets for the fintech revolutionists?
  • Care to tango with an algo?
  • Enterprise Ethereum Alliance is hatched; Nicki Minaj and student loans
  • Gracias is joining Addepar’s board; Connecticut needs to self-disrupt
  • Will voice beat fingers in biometrics?


Treasury’s Mnuchin is no flat-Earther. (4/1/17)

“I think people should do their own research, man.” That’s NBA star Kyrie Irving doubling down on his February assertion that the Earth is flat. Fortunately, another NBA figure, Shaquille O’Neal, stated that he was joking all along when he said that he agreed with Irving. By coming clean, Shaq reaffirmed that he is a smart guy who knows how to work the world of sports media like a maestro. And speaking of smart guys, newly-minted Treasury secretary, Steven Mnuchin, has taken a drubbing for stating that AI won’t have a “big effect” on the economy and jobs for another “50 or 100 more years.” In fact, the tech and innovation media complex, some economists and even presidential aspirant Mark Cuban ridiculed him mercilessly.

Then it hit us: Like Shaq, Mnuchin didn’t mean it. But unlike Shaq, he maintained appearances for a serious reason: Treasury secretaries must be coy. For instance, they have to be officially in support of a strong dollar because it signals confidence in the US economy. To say otherwise would be blasphemous. Does Mnuchin realize that AI will have a greater long-term impact on our economy than a trade war or a surging greenback? Yes he does, but because he doesn’t have any answers to the challenges posed by an increasingly automated economy, he couldn’t play it straight. That’s not what Treasury secretaries do. Their job is to look everyone in the eye and say that the world is flat. That’s precisely what he did, and everyone believed that he meant it. Well done, Mr. Secretary. You made AI jobs destruction denial the new strong dollar. Even Shaq would be impressed.

Soup and warm blankets for the fintech revolutionists? (6/3/17)

No one joins a revolution merely to optimise costs.” That’s one of several points made in an excellent new report by the British arm of Accenture (which explains the spelling of “optimize”). The report’s title raises another good one: Did someone cancel the fintech revolution? Although confined to the UK, the report’s conclusions are applicable to the US, as many of the same forces are at play. And although it doesn’t answer the question, it notes that fintech hasn’t yet lived up to its promise to “contribute meaningfully to productivity.” True, regulatory burdens are high, customer acquisition is costly and building profitable business lines is brutally hard, even without Google, Amazon and Facebook lurking. But another explanation for fintech’s “disappointment” thus far ─ which the report doesn’t emphasize ─ is co-option. As anyone who follows fintech knows, incumbents have done a 180 in their engagement with fintechs, smartly switching from frigidity to friendliness and more within a few years. That “more” has effectively given many formerly combative outsiders a warm meal and the cozy blanket of security that comes from collaborating with giant institutions. But that paternalistic support may well prove smothering to many would-be disruptors. Should we, therefore, change our name to  “The Financial Evolutionist” (which has a nice ring to it) to reflect the current state of affairs? No. A hudna isn’t meant to last forever, but for now, Accenture is right to question the revolution. Because coziness and coup d’etats just don’t mix.

Care to tango with an algo? (2/4/17)

This week was one of intrigue for fintech watchers. On Monday, AI took a bold step forward when Carnegie Mellon student Noam Brown and his professor, Tuomas Sandholm, confirmed their victory over four renowned Texas Hold’em players. The fact that the victory required two CMU brainiacs and three distinct AI techniques requiring nightly calibration was beside the point: AI defeated human masters in a game of imperfect information, psychology and intuition (Doc Holliday is rolling over in his grave). But fear not for humans. The following day, Betterment announced an expansion of its services to include human advice options. Then, on Thursday, Wealthfront announced it is doubling down on full automation with a new retirement feature entitled “Path.” In a supporting blog post, co-founder Dan Carroll said, “We believe if done right, software can be a far more powerful motivator than the human conversation.” Perhaps for some people, but we respectfully disagree that the right software is always primed to win. Our evidence: just watch two people dance the tango. Observe the unspoken cues, power exchanges and the importance of coordination. With heavy tweaking, human-powered bots might be able to out-bluff poker players, but when it comes to the weightiest of issues (i.e., love, death and financial security), we think that empathetic humans remain positioned to be the lead with a decent portion of the population. Besides, would you want to watch two bots dance?

Interested in marketing with The FR?

Interested in marketing with The FR? If yes, let’s talk. Please contact us

alt text


Does the world really need another blockchain coalition? (3/4/17)

It’s easy to roll one’s eyes at the announcement of yet another blockchain alliance that supports nice-sounding but vague goals such as “work together” and “promote common standards.” Still, we are taking note of the newly minted Enterprise Ethereum Alliance because its announcement turbocharged the price of Ether, and its shock and awe member group includes Accenture, CME Group, ING, JP Morgan, Microsoft and Wipro. Oliver Bussmann, UBS’s former CIO, is one such expert who is taking the new coalition seriously: “We will have to wait and see what comes out of an enterprise Ethereum project, if anything. But I think it’s something to keep a close eye on. If it can be made to work, enterprise Ethereum has a real shot to become an open, global blockchain standard.”

Nicki Minajonomics. (5/20/17)

SoFi, Commonbond, Earnest other start-ups have helped tens of thousands of individuals refinance their student loans and gain better control over their finances. But the bigger issue remains how the US copes with the skyrocketing cost of higher education, which continues to crowd out other priorities, including business formation, home purchases and iPhone 7 upgrades. Now, with the nation’s total student loan debt reaching $1.34 trillion, the time could be right for more dramatic ideas, which is where Nicky Minaj comes into the picture. Scoff at her if you want, but the “Super Bass” songstress is no dummy. She understands that education costs are a growing threat to our economy, and damage control will require tackling principal, not just interest costs.

Gracias for the $140 million. (6/10/17)

Fintech financing levels may be muted right now, but large deals are still happening. A case in point is AvidXchange, an automated payment processing software company that raised a whopping $300 million from Mastercard, Temasek and Peter Thiel, amongst others. Then there’s Addepar, which took in $140 million to further develop a platform that, in the words of our colleague Graig Norden of Freewheel Marketing, offers a “remarkably lucid” approach to synchronizing data aggregation, investment analysis and reporting capabilities for the world’s ultra-wealthy. But on top of having more money to go against formidable competitors, the news that Valor Equity Partners’ Antonio Gracias is joining Addepar’s board could signify plans for a bigger push into another area: the pension and endowments sector. That sector constitutes a sizable component of the world’s wealth and has been an innovation laggard to date. Perhaps a little more Addepar glamour could bring it into the modern era.

Connecticut needs to self-disrupt. (7/15/17)

“Driving to work, sailing on Long Island Sound, puttering around a two-acre yard and golfing at local country clubs.” That’s the 1974 pitch the Nutmeg State used to lure GE to Fairfield. But in recent years, that pitch hasn’t made many birdies. For example, GE announced last year that it would relocate to Boston. And last month, Aetna followed suit and announced it was moving its HQ to New York City. Are companies fleeing Connecticut because of the high cost of doing business there? In some cases, perhaps, but New York and Boston don’t fit that explanation. Connecticut’s bigger problem is that entrepreneurial companies aren’t attracted to its old value proposition. So while we think the attempt by Upward Hartford (See below) to inject new energy into the state’s insurance hub is a good thing, it’s a drop in the bucket compared to what’s needed to revitalize the state’s financial services and insurance communities. For that, it needs 10x initiatives like Upward Hartford, and it needs them soon in order to attract/retain the talent needed to compete with regional rivals that have sharper pitches for big and small companies alike. Still, it remains the wealthiest state in the nation, and it’s loaded with great universities. So what’s the holdup, Connecticut?

Will voice beat fingers in biometrics? (4/8/17)

There’s plenty of buzz around the rising use of biometrics to guard against fraud. In fact, last week alone, several financial services firms made announcements indicating that they would expand the use of fingerprint identification to provide customers with safer and easier ways to transact. But if you believe a recent study by Japan’s National Institute of Informatics (See attached), a fraudster with a good camera can steal fingerprint data from social media sites. That’s why we’re taking note of Australia's ANZ bank, which is putting its weight behind voice biometrics as a safer “next step” in strengthening security.

Are you yearning to ruffle a few financial industry feathers?

If you’ve got something to say about financial innovation and are willing to put your name on the line, then we’d like to talk to you about writing a guest opinion piece in The Financial Revolutionist.

alt text