The Liquidity Crisis

There is a problem that is solvable when it comes to startups. It’s liquidity. Over the past couple of years, I have seen Fund of Fund managers like Chris Douvos, Michael Kim, and Lindel Eakman talk about this problem on their blogs. I have also seen funds like Calpers talk about the liquidity problem in articles and documents.

Why is it a problem?

If you put money in, and can’t get out, it’s going to disincentivize investing. That means less money flows to innovation. Less money into innovation and that means society doesn’t propel itself forward. In a capitalistic society, it is critical to have creative destruction.

It also means that ordinary people cannot invest their money in public companies that are innovative. They have to wait and that means they can’t build wealth as easily. This also might explain the ICO craze. Risk capital is being invested in it Continue reading "The Liquidity Crisis"

Phrasing Is Important

“It’s not what you say, but how you say it.”  How many times have you heard that old adage?  I consistently re-learn this.  After being on the trading floor for 25 years, my style of language is a lot different than a lot of people.  It’s not only because cuss words are subjects, predicates, nouns, prepositional phrases, modifiers, verbs, personal pronouns or any other part of traditional English language structure.  It’s because if you took more than a few seconds to make yourself clear, you lost money.  Traders spoke in 140 characters long before there was Twitter.  Emoji’s are like hand signals.

The thought on phrasing occurred to me several times over the past few days.

I first encountered it in the real world back in 2001.  Our house had been destroyed by water.  I was upset.  It was hard not

Continue reading "Phrasing Is Important"

The Bitcoin Debate-Is It Overvalued?

Been watching the bitcoin debate back and forth.  There is a ton of confirmation bias in it.  If you own bitcoin, you think it’s going to the moon.  I have heard bitcoin holders tell me it’s still cheap. If you don’t own it, you think it’s Holland tulip bulbs.  Here is a chart I pulled from Ycharts.
^NYB Chart

^NYB data by YCharts

I added the Bitcoin Investment Trust Index just because.  As you can see, Bitcoin has dropped from the highs.

I don’t know if Bitcoin is cheap or expensive.  It all depends on your time horizon.  If you have a short time horizon, it looks pretty expensive to me.  Markets that run up like Bitcoin did this year aren’t sustainable.  A healthy pullback is good for the long-term health of the market.  It gets weak hands out of the market and Continue reading "The Bitcoin Debate-Is It Overvalued?"

Cross Border Competition

One of the things you learn early if you read Professor Michael Porter’s seminal book Competitive Strategy is looking for new competitors to your market.  I read that book for a class in 1983 and I thought it was the most important book I read in undergraduate business school.  Thank you Professor Anne Hill for making that book part of your curriculum.  I still remember reading it to this day.  If you haven’t read it, you need to read it.  It’s topics and methods are cogent to this day.

If you look at business history, it goes through periods where conglomerates are built, then broken up as nimble focused competitors take market share, then built again.  General Electric is a good example of a conglomerate that is not working right now.  3M isn’t.  3M is a thesis-driven firm in lots of different industries.  Continue reading "Cross Border Competition"

Some Feedback on Digital Innovation in B2C Banking

Was reading the Digital Banking Report‘s latest look on retail banking innovation.  I pay attention to the B2C side even though we only invest in the B2B side.  B2C sometimes informs B2B.  Sometimes businesses startup as B2C, and pivot to B2B or vice versa.
Here are the key takeaways from the B2C side of digital banking in the report.
• The percentage of institutions with a clearly defined innovation strategy
dropped significantly from previous years. This is attributed to the inclusion
of a greater diversity in organization sizes this year.
• Organizations continue to increase investment in innovation strategies in all
functional areas.
• Digitizing products and services, the customer journey and security were
the top three areas where organizations are focusing digital transformation
efforts.
• The top innovation challenge is systems integration and legacy
technology.
• Organizations expect to see a measurable return from their Continue reading "Some Feedback on Digital Innovation in B2C Banking"

Get Rid of The Fed

I know what you are thinking.  I am a crackpot.  I have joined the Ron Paul cadre that wants to end the Fed and go back to gold.  I deliberately put up a click-bait headline because the way we regulate institutions in our financial ecosystem is totally wrong.  I started blogging when Dodd-Frank was being debated.  It was an absolutely horrible bill and has turned out to be an absolutely horrible law for America.  But, Dodd-Frank has been good for gigantic institutions.

However, entrepreneurship and competition will find a way to circumnavigate bad public policy.  I am reminded of the guy in Venezuela who used the free subsidized electricity to mine bitcoin and buy food on Amazon Prime for his family so they don’t starve.

In America, the government policy has killed community and small banks.  The bureaucrats are hungry so they Continue reading "Get Rid of The Fed"

Some Thoughts Gleaned from the Fin Tech Incubator Presentation

Yesterday I was in NYC for the day to meet some people and go to the NYC Fin Tech Innovation Lab presentation.  I thought I would share some of the insights of the panellists because they are informative to anyone that wants to undertake Fin Tech innovation and work with institutional customers.  Those comments were especially interesting to me since West Loop Ventures invests in seed stage companies that are disrupting Big Finance where institutions are the primary target customers.  We are hoping to work with some companies in this future class.

First, understand that although finance is a big hairy ball of wax with lots of people in it, it’s also a small community.  People are gossipy.  That stems from the fact that when you are trading, information flow is key to getting into good trades and out of good trades.  The right Continue reading "Some Thoughts Gleaned from the Fin Tech Incubator Presentation"