Weekly Briefing No. 54 | The United States of Apprentice

  • Welcome to the new and improved version of The Financial Revolutionist. With our revised format, our goal is to provide the same voice but with a sleeker appearance. Please let us know what you think here. This week, we are covering:
  • A Trumpian tailwind for digital currencies
  • Our exclusive interview with Cloud9 Technologies’ CEO, Jerry Starr
  • Lending as a Service, AI’s limits, Goldman’s SecDB strategy and much more

IN DEPTH

The United States of Apprentice.

As the financial world processes Tuesday’s election, one thing is clear: it was a bad day for business as usual. Speculation continues on how Donald Trump will shake up Washington, but let’s work with what we know: Trump can be highly focused in his attacks. But as much as he might enjoy threatening to break up Amazon, picking on just one company doesn’t scale effectively. And since any Commander in Chief, even one whose party controls both houses of Congress, has a limited number of arrows in the quiver, we think Team Trump will go after a few big targets that can both please his supporters and, if he chooses wisely, receive broad support. The latter is important because we assume Trump will continue to be focused on his approval ratings, much as he delighted in his TV ratings as a reality show star.

An intriguing target on Trump’s list is the Federal Reserve. Threatening the Fed’s independence seemingly fulfills his promise to upend a “rigged” system, and any change could have a huge, scalable impact on the world. Putting aside the danger of this action, we believe that even the slightest attempt to reduce the Fed’s independence could provide cover for pro-Wall Street actions that the Trump administration may advocate (e.g., scaling back Dodd Frank, eliminating the DOL fiduciary rule). We also think that any effort to rein in the Fed creates a big tailwind for Bitcoin and other digital assets because, at their core, they are immune to several forms of pressure that could affect the dollar. So even if you have never taken digital currencies seriously before, you may want to open up a digital wallet. Lots of surprises may await the financial system and, fortunately, gold is no longer the only way to hedge the policies of an apprentice in the White House.

A rising Starr talks to The FR.

Telecommunications for traders has occupied an important fintech niche long before the term “fintech” existed. One of the earliest fintech tools, in fact, the venerable trading turret, is not only still around, but it’s also the only piece of hardware that predates the Bloomberg terminal that is still relevant. However, thanks to Jerry Starr, a serial entrepreneur and one time CEO of IPC Systems (one of the world’s largest trading telecommunications companies), the specialized hardware and expensive telephone lines incorporated into trading turrets are set to become passé. Backed by a high-powered group that includes JP Morgan, ICAP, Barclays and Point72 Ventures, Starr’s cloud-driven Cloud9 Technologies is a rising start-up among a small group of disruptors taking on a lucrative corner of the financial telecommunications world. Recently, Starr sat down with The FR’s Gregg Schoenberg to talk about the future of his company, voice-based trading, what he looks for in salespeople and life as the CEO of a consortium-backed fintech.

Want to light a fintech fire?

Are you a thoughtful professional itching to make a case about a topic related to financial innovation? Can you do it in 1,000 words or less? If so, please contact us here.

IN BRIEF

Lending as a Service (LaaS) grows. 

We couldn’t resist jumping on the “As A Service” bandwagon to describe this concise article in FinXTech by Brayden McCarthy of Fundera. His core point: not all online lender-incumbent partnerships are created equal. Outsourcing one or more aspects of a bank’s lending process to a fintech partner (i.e., Lending as a Service) can be a smart thing to do, but there are major pros and cons to each approach. Pick carefully, says McCarthy.

When this man talks about AI, people should listen. 

“If a typical person can do a mental task with less than one second of thought, we can probably automate it using AI either now or in the near future.” That’s the quick and dirty assessment made on the current capabilities of artificial intelligence. It’s tempting to say that this perspective could be a bit simplistic, but given that it’s coming from Andrew Ng, Chief Scientist at Baidu Research and co-founder of Coursera, we take it to heart. Other insights from Ng: Data, rather than software, is a more defensible barrier for many businesses and applying open-source software to data is doomed to failure without major customization.

Why is Goldman giving away its risk management secret sauce? 

“Goldman is marching towards a future where the software it has built or influenced becomes digital oxygen of finance and banking,” says Arik Hesseldahl, who does a great job explaining Goldman’s recent decision to provide free access to its risk management database. “The process of doing that creates new business opportunities that didn’t previously exist.” The SecDB database and its corresponding language, SLANG, are the envy of Wall Street. But since the Volcker Rule went into effect, the idea of keeping that database close to the vest would be penny wise and pound foolish.

Out in Tech: A community of LGBTQ and allied voices in the technology world is hosting its first conference. For the special rate discount code, see here.

Gen Z’ers want McMansions sold to them by agents, claim realtors. 

"I want a big house with a room for each of my kids, a master bedroom, a few guest rooms, a movie room – I want a lot of space." That’s the kind of shelter desired by one of the five Gen Z panelists convened by the National Association of Realtors and Better Homes and Gardens at a recent conference. Other “objective” findings: 97% of Gen Z’ers plan to own a home and 81% delivered “a resounding yes” when asked if they plan to work with a real estate agent. Memo to real estate start-up entrepreneurs: you were right along; real estate incumbents are ripe for disruption.

COMPANY OF NOTE

C2FO.

Few people dream of disrupting how working capital is optimized, but that’s okay. Many of the most compelling fintech companies offer great solutions to big problems that aren’t headline grabbers. But the more we learn about C2FO, the more interested we become in this Kansas City-based firm that has created the world’s first (and biggest) marketplace for working capital. The platform allows suppliers to pull forward cash flows (at a price) while enabling companies with cash to generate a better return on their liquidity.

STRUCTURED DATA

Insurers and health-fintech start-ups should be watching potential legislative and regulatory changes to the Affordable Care Act closely. They should also consider the big discrepancy in attitude towards the current law when evaluating their offerings. Consider these two data points:

  • 58%: The percentage of 18-29 year-olds who support the ACA
  • 38%: The percentage of 50-64 year-olds who support the ACA

Source: Kaiser Health Tracker. Data as of October.

CAREER & INSIGHTS

Comings and goings:

Jason Schenker, a highly ranked market forecaster and commenter, has joined Newchip as its CFO. Newchip, an Austin-based crowdfunding platform that is still in stealth mode, has stated it wants to bring a highly personalized and customized approach to making crowdfunding investments.

Wisdom:

What’s the main reason why large corporations aren’t responsible for more major innovations these days? The answer, says Vinod Khosla, is that big companies are too afraid to fail. See here.

QUOTE OF THE WEEK

“Never forget that no military leader has ever become great without audacity.”

~ Carl von Clausewitz