My Comments on @FT re #FixTech @johngapper Cracks are appearing in #FinTech lenders, suggestion of #How2Fix, next E/MBA club 27May on #TruthOfFinTech
There are a lot of major events happening with the Unicorn stars in UK (Powa Technologies) and US (Lending Club), this latest piece on FT by John Gapper talked about even FinTech firms are not able to escape credit cycles. [Great podcast: In Business: European Unicorns with Caroline Bayley http://bbc.in/2646cci ]
My comments centered around whether that is the right question, what question we should be asking and what can be done. I would like to argue we should focus less on the 'idea' or category of #FinTech but focus on sustainable CashFlow/profit margin of firms created. Easy analogy/way would be to move the 'end goal' away from focusing on Exits (like child trafficking) but towards forming a sustainable firm (healthy young adult that does the right thing & add value to society). What I call a new ethos called Good Corporate Parenthood. (@CorpParent )
Indeed, not much was written in Silicon Valley/Tech press, the US investor star Chris Sacca founder and chairman, Lowercase Capital already warned in 2015 of danger of P2P market at 2015's NYTimes DealBook conference (26min in, see it directly here.) or full panel discussion (I would implore you to finish reading rest of my post before you enjoy this fantastic panel produced by our friend Charles Duhigg):
WE must adopt new ways to measure firms by how they bring sustainable benefits, and technology and firms that can bring that about can be called #FixTech. Valuations for purpose of buy & sell is essential but only for the people that trade but not those that aim to derive value from operations.
I look forward to next week's event at RSA talking about Fixing Finance, hope we can get some answers from John Kay & Lord Turner!
Not sure if any of my friends here are FT subscribers, hence I've re-published my comments on FT below.
Would love to hear your thoughts?
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IMHO, it is very difficult and dangerous to 'band' all FinTech firms together as a single category.
Features of the "Elephant in the room" are these:
- ) no agreed definitions of 'FinTech' from P2P to Bitcoin (or latest 'hot cake' of Blockchain disciples)
- ) ALL FinTech firms claims to be doing something better/different, indeed, most try, but ALL still use banks other financial institutions (major to small players) to 'empower' them to 'disrupt' the industry
- ) almost all have been created with an exit in mind (to be bought in 3/5yrs or less, or exit via IPOs and become Unicorn)
- ) most investors/VCs and even Hedge-funds are friendly lambs with habit of shifting into Bison herding behaviour
- ) due to competition & scarcity of good deals, cross investments by star investors/VC firms means most firms, FinTech especially are likely to be me-too variety and none are created to truly fix nor disrupt anything, let alone the key plumbings of Finance.
If the above statements are true, then I can totally understand why Larry Fink created the annual CEO letter tradition as he is crying out for more good firms so he can invest in them (not only for those BlackRock already owns).
In short, we will keep on having these discussions (next will be about blockchain investments in 1-2yrs time), unless and until someone with true firepower dare to truly disrupt and fix finance.
My analogy for my senior C-level friends (from all industry) is this, Roman and Mongol Empire might have had the best 'Tech' of the day (Roman's had armour, spears, chariots, Mongols were great riders on fast horses, bow & arrows,with special blades) but they had become great because they developed the right ecosystem & business model (new roads/infrastructure from Rome to all conquered countries, coins/currency to unify Roman empire economically, or adopt a counter-intuitive "Religiously Tolerant", Multi-faith stance across the Mongol empire despite Genghis Khan allegedly killed 40million people as he created the largest contiguous land empire in history).
Therefore, question is not about whether cracks are forming in FinTech. We should take a step back & #AskTheRightQuestion, namely is the present FinTech a new 'Gold-Rush'? If so, maybe it is by design, that it is suppose to attract everyone, and once the rush takes hold, those that pivoted well and moved from "selling shuffles" to become speculators will all be making money. (a good piece on gold mine here: http://priceonomics.com/how-epic-fortunes-were-created-during-the/ ) No doubt however many will fall on the wayside and lose from money/job to repulations (hopefully not their lives like in the old days).
Given how connected our world is so far, and our many billionaires world, I would like to take a more optimistic view, maybe it is time we all should #AskTheRightQuestion & thus #DoTheRightThing, why not challenge the top guys like Paypal Mafia to work together and develop a viable solution? (see my long blog post in 2014: http://garethcxo.blogspot.co.uk/2014/10/asktherightquestion-my-challenge-to.html )
we can only hope.
BR
PS: Don't listen to me, if you are fellow City/Cass MBA Alumni, you are welcome to join our next non profit E/MBA club 27May free of charge (30th since started in 2005) focusing on "Truth of FinTech" with Samee Zafar of Edgar Dunn & Co. ( http://Q2EMBAClub.CassAlumni.org )
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see my previous post on LinkedIn:
Tomorrowland Today.Must take opportunity to #Activate & #FixTheWorld !
or #DoingtheRightThing in Philanthropy (how to decide what are the right things to do?)
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Gareth Wong is Founder of GamBond®, arguably the only firm worldwide that aims to fix the financial market for good by creating a long term focused financial ecosystem (an alternative for mid-market+ firms to be rated, audited & listed). Ultimately GamBond® is creating nearly "risk-free" alternative & sustainable financial instruments, could be better than even government issued Treasury bonds. Our financial instruments are comparatively insulated by market volatility and true systemic market risks. When successful, GamBond® will break the "Capitalists' Dilemma" status quo, as perfectly described by Prof Clayton Christensen.
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