We are delighted to present the 100th edition of our newsletter. To celebrate reaching our Benjamin, we are paying homage to the man who adorns the $100 bill and is perhaps the original financial revolutionist. Electricity and diplomacy weren’t how Ben Franklin made his Paris-party money. His Benjamins came from collecting linen rags and turning them into paper. Franklin found many end-markets willing to buy his paper, including the colony of Pennsylvania, which used his reformulated rags to make currency. To further distinguish the quality of his product, Franklin put minerals into his paper, thus foiling attempts by counterfeiters and imitators. With that history in mind, we’d like to thank you for reading our “rag.” It’s been a privilege to provide you with (hopefully distinctive) commentary.
- Is there any hope for a safer cyber future?
- Cannabis economics and state budgets
- Man Group’s AI journey; Schwab channels Amazon
- Platform deals keep coming; Bitcoin and death
- Company of Note: Troops.ai
A kiss won’t protect personal data from hackers.
“I needed a password eight characters long, so I picked Snow White and the Seven Dwarves.” That’s a quote from British rocker/comedian Nick Helm, who told that joke at 2011’s Edinburgh Fringe Festival to much acclaim. Sadly, the problems with the current wave of breaches rocking the global economy and the financial world are not solvable through longer, funnier passwords or apologies from penitent CEOs. And with recent news that Deloitte, Sonic and Whole Foods have suffered breaches, there appears to be no end in sight for the current wave of cyber attacks. So while it’s nice that October is National Cybersecurity Awareness Month, our view is that from now on, every month needs to be. Innovation, of course, should be central to the ‘new normal’ security mindset every business should adopt, which is why The FR is happy to feature a recent opinion piece by Extraordinary Re’s Will Dove, in which he describes the need for a tradeable market for cyber security risk. We’re also happy to include a recent Linkedin interview of Aspada Investments’ Sahil Kini (See below), who makes the interesting suggestion that data should be regulated like natural resources. That’s unlikely to happen, but given the fact that Europe has taken the lead in protecting consumer data via GPDR, it does make us wonder when the US will replace its patchwork of antiquated laws with a new framework. Because when it comes to data protection, America is Snow White, and we’ve downed the poisoned apple to its stem. Do we really think a prince can save us with a kiss?
Too much marijuana green for state budgets in the red.
Currently, 29 US states allow the use of marijuana for medicinal purposes. Of those, eight states permit recreational use today, while several more, including California, will be fully legal next year. Despite this growing acceptance, some have wondered whether the Trump administration will stand in the way of the legalization trend at the federal level. Apart from some saber-rattling, we don’t foresee that happening for one reason: there’s too much tax revenue at stake. Take Connecticut, which the Mercatus Center ranks 37th in the nation in fiscal health. Recently, stark fiscal realities struck when a proposed state budget called for a devastating $300 million worth of cuts to the University of Connecticut. Would cannabis legalization plug that entire gap? No. But according to some estimates, full legalization in the Nutmeg State could bring in over $100 million of revenue per year three years after legalization. Those big numbers will likely prove irresistible to states eager to minimize tax hikes and cuts to popular programs. Moreover, as states fling open the doors to cannabis acceptance, think of the economic multiplier associated with the ecosystem of cannabis related tech start-ups, tourism ventures and service providers that will follow. So while thoughtful people can disagree over the merits of legalization, we think economic realities will prevent the green goddess from being swept back into the black market.
Man Group’s use of organic artificial intelligence.
“When somebody dies in a self-driving car accident, it will be a much bigger deal than the thousands of crashes that happen every day. We live in a world surrounded by algorithms… and yet there’s evidence that people find it hard to trust.” That’s the perspective offered by Man Group’s Nick Granger in a fantastic story on how the Man Group embraced AI despite misgivings inside the 234-year-old fund. Man’s home-grown efforts to develop AI-infused programs were initially quarantined. “You wanted to wash your hands every time you looked at them,” said CEO Luke Ellis. A few years later, though, Man is eating its own AI cooking.
A win-win opportunity in today’s Millennial housing conundrum.
Sponsored by Fundrise
When it comes to Millennials and home purchasing, the numbers are scary. America’s largest generation is earning 20% less than Baby Boomers at the same age, and carries $1.1 trillion of the nation’s $3.6 trillion of personal debt. The result: homeownership is little more than a pipedream for many individuals. But rather than just accept this reality, Fundrise is taking action by creating an innovative investment model, the eFund, to develop homes in attractive urban areas like Los Angeles and Washington DC, at a reduced cost. With this structure, participants have the chance to benefit from the investment model both as investors – potentially earning attractive returns – and as potential homebuyers – securing priority access to purchasing a home in the fund. Put it together, and you’ve got a win-win.
Schwab channels Amazon in fight against robos.
At an event hosted by The Economist this week, Schwab CEO Walt Bettinger seemed to embrace the prospect of driving down his firm’s revenues earned from client assets if doing so will fend-off emerging rivals like Betterment and Wealthfront. What’s interesting to us, though, is that even though Betterment and Wealthfront are often paired together when referenced by incumbents, they are likely going to look increasingly different from each other over time. As such, and assuming they both continue to grow, Bettinger & Co. may find that contending with them in the future will require a diverse set of strategies that goes beyond simply lowering fees.
Platforms are on the rise while couples fighting may decline.
We’ve taken note of recent notable financings that underscore the use of innovative platforms to solve longstanding challenges. A case in point is Boost Insurance, which just received $3 million to help take some of the pain out of the go-to-market process for insurtech start-ups. And speaking of pain, finmedia start-up Patreon last week announced a whopping $60 million round to further develop its platform to help creators, including musicians (e.g., Kina Grannis) and podcasters (e.g., Chapo Trap House), bypass big publishing platforms and get paid directly from fans. Finally, we’re applauding IKEA’s purchase of odd-job platform TaskRabbit. It should be the hope of romantic partners everywhere that the new owner pours more resources into increasing the number of Taskers available to help navigate the tension-laden challenge of assembling items such as the KOKOSNOT.
What happens to your Bitcoin when you die?
Mario Draghi may not have any power to regulate Bitcoin, but that doesn’t mean you can’t bequeath your crypto when you enter your crypt. The challenge in doing so comes down to whether your heirs have access to the private key that will unlock your wallet and whether Bitcoin holdings have been listed in a will. In response, Everplans’ co-founder and co-CEO Abby Schneiderman affirmed this growing issue and commented to us that “cryptocurrencies should be treated as seriously as you would your savings, house or business from an estate planning perspective.”
COMPANY OF NOTE
It’s an opinion lots of people hold but few publicly acknowledge: using CRM systems can be a royal pain in the posterior. According to Troops.ai, that’s because many enterprise software companies have been trying to get people and work habits to adapt to their systems, rather than the other way around. Troops.ai aims to remedy that issue by sitting on top of collaboration platforms (e.g., Slack, Teams, Symphony) to serve as an intelligent liaison with enterprise CRM solutions such as Salesforce and Hubspot. Through its use of artificial intelligence, the 14-person New York-based startup has created tools that enable organizations to automate key actions and ensure that their CRM data stays current. In a recent conversation with The FR’s Gregg Schoenberg, co-founder and CEO Dan Reich explained why his company’s solutions can be especially helpful to both buy- and sell-side financial services firms looking to modernize their sales processes. “Manually inputting information into a CRM can be especially burdensome given the complexity and long sales cycles often associated with marketing financial products and services,” said Reich. “With our technology, we can free up salespeople to spend less time in front of their computers and more time closing business.”
QUOTE OF THE WEEK
“Today's shocks are tomorrow's conventions.”
~ Carolyn Gold Heilbrun