In this analysis, we explore an overarching framework for the M&A activity in the fintech, big tech, and crypto ecosystems. We discuss acquihiring, horizontal and vertical consolidation, as well as the differences between growth and value oriented acquisition rationales. The core insight, however, is about the arbitrage between the fintech and financial services capital markets, as evidenced by the recent transactions for Starling and Figure.
This week, we look at:
How the music industry needed The Pirate Bay and Napster
Why J.P.Morgan is paying $1B in fines for allegedly manipulating the precious metals market
Whether DeFi is flirting with self-dealing and veering towards apathy
Why QAnon and 8chan are a bad example for global governance
And how the European Commission’s proposed crypto-market rules are highly productive for blockchain-based capital markets infrastructure
There is poetry in the symmetry of this situation. Bitfinex is looking to raise $1 billion in capital to support the most popular stablecoin Tether, which it controls. Facebook is reportedly looking to raise $1 billion in capital from First Data, Visa and Mastercard and other payments companies to shore up its own stablecoin asset. Poetry is where the similarities end, and all these devils are in the details.
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.
How do the Americans and the Chinese have such different ethical takes on privacy, self-sovereignty, media, and the role of government? We can trace the root cause to the DNA of the macro-organism in which individuals reside, itself built over centuries and millenia from the collective scar tissue of local human experience. But there is more to observe. The technology now being deployed in each jurisdiction -- like social credit, surveillance artificial intelligence, monitored payment rails, and central bank cryptocurrency -- will drive a software architecture into the core of our societies that reflects the current moment. And it will be nearly impossible to change! This is why *how* we democratize access to financial services matters. We must be careful about the form, because we will be stuck with it like Americans are stuck with the core banking systems from the 1970s. But the worry is not inefficiency, it is programmed social strata.
Facebook is building towards a Metaverse version of the Internet, in both its hardware and software efforts. What are the implications? And further, how does one acquire status, work, and social capital in such a world? We explore the recent NFT avatar projects through the lens of Ivy League universities and CFA exams to understand some timeless cultural trends.
Finance is everywhere, and everywhere is finance. Smart city supply chains, self driving car insurance, video game real estate markets -- no matter which frontier technology you touch, it will have embedded implications on the delivery of financial services. And why wouldn't it? Like the use of language, finance is a human technology that allows societies to coalesce and compete with one another (in the Yuval Harari sense). It lifts people out of poverty and into entrepreneurship through microloans, providing generational sustenance for their families. And of course it also throws them into pits of corruption and greed, as they drink too deeply from the rivers of securitization and political power.
But enough poetry! I want to talk about augmented reality, attention platforms, and the re-formulation of payments and lending propositions in a global context.
The tech companies will become the storefront to absolutely everything.
There is no Internet, there is only Google.
There is no commerce, there is only Amazon.
There is no finance, there is only WeChat / Tencent?
I don't know about you, but I cannot pay for anything in cash in London anymore. COVID has made the city go cashless. For China, QR codes have long replaced the need for paper money. And if there is no cash, what is the point of ATMs, and ATM fees, and bank branches, and bank branch staff? Financial firms no longer need to be the place where you shop for financial product.
Google has done it. In a massive update to Google Pay, the company highlighted exactly the direction of travel for high tech, fintech, and the global banks. It has articulated a vision for competing with Apple Pay and Ant Financial. Let's walk through the features.
