However, mastery is not immune to automation. As a profession, portraiture melted away with the invention of the Camera, which in turn became commoditized and eventually digitized. The value-add from painting had to shift to things the camera did *not* do. As a result, many artists shifted from chasing realism to capturing emotion (e.g., Impressionism), or to the fantastical (e.g., Surrealism), or to non-representative abstraction (e.g., Expressionism) of the 20th century. The use of the replacement technology, the camera, also became artistic -- take for example the emotional range of Fashion or Celebrity photography (e.g., Madonna as the Mona Lisa). The skill of manipulating the camera into making art, rather than mere illustration, became a rare craft as well -- see the great work of Annie Leibovitz.
I've been seeing a lot of Fintech headlines recently that make me raise my hands in the air, and go "Come on, are you for real!?". I imagine a lot of people feel similarly frustrated by Lemonade looking to go public at a $2 billion valuation on $50 million of revenue, Initial Exchange Offerings on crypto exchanges raising over $500 million this year, Facebook's tone deaf Silicon Valley club crypto money, or SoftBank talking about selling its overpriced $100 billion Fintech unicorn fund in an IPO. So other than getting crankier with age (Happy Father's day everyone!), I want to dig a little bit into the concept of fairness, asymmetric information, economic rents, and how this can help disentangle feelings from thoughts on these news items.
Robocop vs. Terminator in Fintech; Comparing DeFi originations to Digital Lenders in the early years
I've got a gentle, data-backed story this week inspired by a great distinction made in this Techonomy article by the Chief Digital Officer at Schneider Electric. The thesis tracks three key lessons from attempting to bring large companies into the 21st century: (1) transform the core of your business instead of fumbling around at the edges, (2) digitize your processes and separately figure out a distinct digital model, and (3) catalyze a digital ecosystem from the new model. You can think about the distinction as either taking the existing business and slowly swapping out parts from human to machine (e.g., like RoboCop), or building the robot from scratch utilizing the latest platforms, markets, and artificial intelligence (e.g., like Terminator).
Despite its best efforts to the contrary, Robinhood did end up stealing from the rich and giving to the poor.
Melvin Capital, the $8 billion hedge fund that didn’t find GameStop funny, lost 53% of its portfolio in January ($7 billion) trying to short against the rallying cries of the Reddit Capitalist Union. Gabe Plotkin also faces the embarrassment of having to get bailed out by your old boss.
Speaking of, New York Mets owner and former name-on-the-door of SAC Capital, known most recently for its insider trading fine of $1.8 billion, Steven A. Cohen, put $2.8 billion of capital into Melvin’s fund.
Ken Griffin, owner of the Citadel hedge fund (an investor in Melvin), and Citadel Securities (a massive market maker and buyer-of-order-flow for Robinhood), is seeing capital losses in the former and Washington cries for scrutiny into market structure in regards to the latter.
Robinhood itself — which for goodness sake is *not Wall Street*, but as *Silicon Valley* as it possibly gets — raised $1 billion immediately to protect itself from class action lawsuits, DTCC capital calls, and a now-rapidly-closing IPO window. That means Yuri Milner of DST Global chipping in yet again.
That’s at least 4 people that have had a very bad, no good day.
This week, we look at:
PayPal and Square being larger than Bank of America and Goldman Sachs
The SoftBank $4 billion in tech oligopoly call options, and why people feel uneasy
Uniswap vs. SushiSwap, and Bitcoin vs. Litecoin, and why these forks felt wrong
How understanding signalling can help make better decisions
This week, we look at:
Square acquiring Tidal and its 1-2 million of subscribers for $297 million, and the logic for what a payment processors has in common with the creative industry
How celebrities and creators like Mark Cuban, Gary Vaynerchuk, Grimes, 3LAU and others are generating millions in NFT sales
The impact on the economic model of the music industry, including a look at royalty structures, revenue pools, and financial vehicles when tokenized
The philosophical divide growing between a feudal platformed commons (e.g., YouTube) and a collectivist anarchist capitalism
Today's corporations and governments are in the business of defining the balance of these aspects of our participation in society and the economy. Beliefs about the immutability of different attributes about what makes a person (or an employee) and how economies are built (cutting the pie, vs. growing the pie) determine the policy decisions you make, top down. As the core example this week, let's take Deutsche Bank. Facing pricing pressure and headwinds in several of its businesses, Deutsche is responding with a plan to fire 18,000 employees by 2022 and an announced investment of €13 Billion in technology and innovation by 2022. They even spun up a hipster-colored neobank as a proof point. Wall Street ain't buying it.
Chlöe Swarbrick, a 25-year old climate MP was presenting her climate change case to the New Zealand parliament, and was heckled by an older audience member. Without missing a beat, she acknowledged and dismissed the challenger with a pithy “Ok, Boomer.”
The recording has since gone viral, inspiring everything from merchandise to Vogue articles. While the incident isn’t the source of the phrase “Ok, Boomer”, today it is the most well known manifestation. So what does the phrase mean? If you are inclined to more colorful language, see Urban Dictionary. But the meaning is obvious on its face — Gen Z is dismissing utterly and without consideration the judgment and protestations of society's elders on multi generational issues like economics, climate change, and social norms.
I've seen a whole bunch of headlines this past week about how Facebook is launching its version of the "Supreme Court", as if that were an app feature. The oversight board is meant to police controversial content decisions, and have the power to overrule Zuck's judgment on political matters. Its charter is drafted as if Facebook's 3 billion users were citizens of an Internet nation. Add to this the insanity over WeWork's failing IPO plans, where the CEO has been personally named in the amended filing documents with clear checks on demonstrated abuses of power. We are drifting into a Twilight Zone episode where modern corporations act as if they were feudal states run by divine kings negotiating with their nobility over a Magna Carta. Which is actually sort of where we are.
I hope that you and yours are OK, socially distanced and stocked on essentials. Whether you feel it yet or not in daily life, the world is bracing for coronovirus impact. In this week's analysis, I look at the difficult trade-offs between health and economy, and try to quantify the impact of the likely slow-down. We look at some grim but useful concepts, like (1) the value of a statistical life, (2) what happened to the Soviet economy and life expectancy after perestroika, and (3) how our financial machines (NYSE, Robinhood, Maker DAO) are cracking at the edges. If you can do one thing -- be kind and gracious with each other as some things inevitably break.