Weekly Briefing No. 110 | The Beast of Bitcoin’s Bubble Burden, Reimagining Life Insurance, AI’s Good Week

December 9th is World Techno Day and Gingerbread Decorating Day. Whether you’re dancing or eating, we invite you to enjoy the sweet sounds on this week’s turntable:

  • Can the Bitcoin bubble just pop already?
  • The time has come to reimagine life insurance
  • A good week for AI, but for humans not so much
  • Debt collectors stink; Is innovation slowing?; A fintech IPO
  • Comings and Goings: New hires at Lyft, Perkins Coie and Balehu
  • Company of Note: Libra

The beast of Bitcoin’s bubble burden.

Bitcoin is on an out-of-control, all-night rampage. The Lyft driver, the chiropractor, and even Grandma want in. It’s gotten to the point where those who really care about Bitcoin should be actively rooting against Saxo Bank’s $60,000 prediction. Indeed, Bitcoin’s parabolic price movements and volatility, possibly caused by the impending start of Bitcoin futures trading, have become a burden to the exchanges, the earth’s environment and the greater financial innovation ecosystem.

But to the skeptics who assert that once the bubble pops Bitcoin will vanish, we say au contraire (even if you aren’t French). To those who say Bitcoin is the second coming of the 17th century tulip bubble, note that Holland now produces two billion bulbs annually. To those who liken Bitcoin to the dot-com craze, consider that as of Q2, there were 129 million dot-com domains. To those who say that Bitcoin is the currency of choice for transactors of illegal drugs, remember that roughly 80 percent of all dollar bills carry traces of cocaine. To those who say Bitcoin isn’t backed by anything and has no intrinsic utility, we’d suggest a trip to the Louvre Abu Dhabi. There, you can view Leonardo da Vinci's “Salvator Mundi,” which was bought this week for $450 million, despite its lack of physical utility, backing or guaranteed convertibility. And finally, to prominent bank CEOs who assert that Bitcoin is “a joke” (See below) because of its association with financial misconduct and price manipulation, we offer a respectful, “Are you kidding me?” The financial services industry was regulated before the financial crisis, and yet rampant malfeasance almost ushered in a return to the Medieval Period. But we get it: old-school thinking doesn’t fade gently, and right now, Bitcoin is on a bender of early-to-mid Rolling Stones proportions. But once the hedonism stops and the hangover clears, there will still be Bitcoin — and maturity (maybe even knighthood) will follow.

The convergence of life insurance and insurtech is coming.

This week, The FR partnered with Accenture on a summit to explore how life insurance can be reimagined for the modern era. After all, as one panelist asserted, the modern US life insurance industry emerged decades ago, when a consumer’s two main financial product choices were stocks and life insurance. Today, of course, life products come in many forms, but most summit participants agreed that the industry needs fresh thinking. Fortunately, panelists from companies including PolicyGenius, Fabric, Everplans, Wellth, Vitality, LifeNome, Domino Data Lab, Risk Economics and Betterment were able to share perspectives, alongside major carriers and investors including Bessemer, Aquiline, New York Life Ventures and RGAx. Here are some of our takeaways: 1) Dusty distribution channels and a lack of carrier engagement have created an enormous opportunity for life insurtechs to score big in the trust game; 2) Many consumers today still fail to realize that a life policy’s face value can represent a family’s biggest asset; 3) Carriers should consider offering simpler, customer-centric products as well as ones that are aligned with innovative health and wellness programs powered by behavioral economics; 4) The explosion of data sets and better ways to process them is starting to permeate all aspects of the insurance process; and 5) Some carriers are now thinking hard on how to revamp industry compensation models and elevate talented people with bold ideas. The final takeway: Much more work needs to be done, but the overall mood in the room was one of cautious excitement for more partnerships among carriers and start-ups in a vertical that deserves a bigger piece of insurance innovation mindshare.

Interested in partnering with The FR?

If so, don’t be shy.

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IN BRIEF

Welcome to My (AI) House.

Our thoughts are with Southern California’s residents, firefighters and medical professionals who are battling the inferno. Despite the fires, the Neural Information Processing System (NIPS) conference took place in Long Beach this week. The press chose to make hay over the fact that Google, JP Morgan, AirBnb and others were bidding up entry-level AI salaries to $300,000 and that Flo Rida was on hand to sing “My House.” But the real stars of the event were people like UC Berkeley’s Pieter Abbeel, who delivered a keynote on Deep Learning that was incomprehensible to us. More understandable was the fact that this week, Google’s DeepMind shattered the narrative that humans and machines working together are better than machines alone. The blow came on Tuesday in a paper that introduced AlphaZero, a new generic algorithm that was fed the basic rules of shogi, chess and Go. Even with that scant information, the program managed to learn enough within two, four and eight hours, respectively, to emerge invincible. So while we embrace a bionic future for certain functions within finance and the broader economy, it’s important to call a spade a spade. And Google just reminded us that sometimes humans don’t make things better. They just get in the way.

Dodgy debt collectors should be run out of town on a rail.

“Victims have essentially no recourse to do anything but take the abuse.” That’s the troubling state of affairs involving so-called phantom debt which is created when a bad guy obtains personal information such as an old loan application. That data is then sold to a dirty debt collector, who demands repayment for the fictitious bill. In the great article below, Zeke Faux chronicles what happened when one of these dirty collectors picked on the wrong guy. But for the millions of people who don’t have the time or energy to fight hardball methods, whether their debts are real or not, more scalable and ethical solutions are needed. That’s where start-ups including TrueAccord, Collectly and Symend come in, and we’re rooting for them.

Can the US economy grow at a sustained rate of three percent?

On Tuesday, a Gallup poll revealed that the American public opposes the GOP tax reform effort by a wide margin. However, supporters such as the Heritage Foundation have argued that the Senate plan could boost US economic growth by about three percentage points in the long run. In order to do that, though, the added money sloshing around the economy would have to be transformed into productivity growth. So if you can ignore all of the current invective in Washington, the question to ask yourself is whether you believe the core engine of US productivity (i.e., innovation) is capable of bucking the slowing trend. And for perspective on that, we’re highlighting a terrific Freakonomics podcast below.

A credible fintech IPO just happened.

It’s based in San Francisco. It’s completed institutional financing rounds. It started by tackling a big market in need of innovation and expanded. Its founder, Stephen Dash, is a former JP Morgan banker. Now, loan aggregator Credible is a publicly traded company. The catch? It’s listed on Australia’s ASX. However, in recent years, the exchange has burnished its image, infused itself with tech-forward thinking, broadened its industry purview and snagged IPO listings for global fintechs including Xero and Pushpay. Dash, an Australian native, wrote a thoughtful explanation elaborating on his rationale.

COMINGS AND GOINGS

Lyft, Perkins Coie LLP and Balehu Bucks beef-up their ranks.

Lyft has bulked up its corporate development and investor relations game by hiring Kristina Omari, who most recently ran corporate development for Fitbit. Also, Perkins Coie has brought on Michael Didiuk, a former SEC fintech examiner, as a partner in its investment management, fintech and blockchain practice. Finally, Frederick Townes, the founding CTO of Mashable, and Kevin Meilinger, a former director of marketing at ViaWest, have joined small business blockchain start-up Balehu ahead of its ICO.

COMPANY OF NOTE

Libra.

It’s been a good stretch for Libra, a provider of accounting and tax software for the cryptoasset and blockchain sectors that recently relocated to New York in conjunction with its evolved enterprise focus. In addition to closing a $7.8 million Series A, the company launched its Libra Crypto Office solution to automate back- and middle-office processes for digital asset funds, exchanges and market makers. Concurrently, the IRS won a closely watched court case against wallet and exchange leader Coinbase that likely will compel others to upgrade their reporting systems quickly. In commenting to us on the state of enterprise infrastructure supporting the cryptoasset industry, Libra CEO and founder Jake Benson underscored that his company sees a significant greenfield opportunity ahead: “The lack of infrastructure in the space is constraining growth,” he said. “Right now, many institutions are using manual processes and Excel spreadsheets to keep track of their trading activities. This must change in order for the industry to scale.”

QUOTE OF THE WEEK

“It's very brave going from a position of authority to one where you are an apprentice.”

~ Eleanor Catton