The usual collection of things which caught my attention in the last week (or so).
Product Delivery
Related (perhaps very tenuously) to getting the right things done.
Deep-Dive: Neon Money Club (NMC), my first deep-dive, in this one I break down a dating app which is really a credit card which is really an investment platform. The investment platform is all about using more inclusive language (“[equity] ownership is the new drip”) to reach people with low financial literacy who are currently excluded from equity investment. In practice though financial inclusion can end up being very predatory - especially in hindsight (#136). When I first started digging into NMC my gut-feel was that they were predatory from the outset. A Black/Hispanic founding team who were targeting the Black/Hispanic community1 with a business model which relied on loss-leading to get customers onto what would be essentially a gambling platform where NMC earned on payment-for-order-flow and/or leverage. I ended up concluding (much more boringly) that their business model simply didn’t work.
Trading 212 - Multicurrency Card, sticking with the theme of investing platforms branching into cards…
Trading212 is a zero-commission trading platform operating in EU, UK and Australia. Payment-for-order-flow is banned in these markets, so they primarily monetise through CFDs (leveraged gambling on stocks/commodities) and foreign exchange mark-up. Which is what makes their new offering so interesting - and so aggressively priced, significantly undercutting Revolut, Wise and Monzo (comparison table).
Currency conversion - for their trading platform T212 rely on Interactive Brokers (IB) who hold customers shares in a pooled account, provide the trade execution and manage currency conversions (source). I strongly suspect that they are leveraging this for the card, which means they are paying IB 0.2 basis points for conversion and then charging 15 basis points to the customer.
Savings rate - T212 are not registered as a bank so this can’t be a conventional interest bearing account, instead this could be a BaaS (like Clearbank) who is actually holding the funds. More likely though it is either a great deal they have negotiated with IB (~0.25% above their standard rate) or they are doing some kind of back-to-back with a money market fund (similar to how Wise is offering interest).
Cashback - this is obviously funded by interchange (#145), however the trick here is that while interchange within the UK is capped at 0.2% for debit and 0.3% for credit these caps don’t apply to UK cards used abroad (as you would expect for a multi-currency card), instead the rates for a UK card within EU are 1.15% and 1.5% - which leaves plenty of room for a 0.5% cashback, especially one which is capped at £20/month (£400 of spending).
Overall I think the combination of wealth management and payments/everyday banking is just common sense. It’s a very interesting though to see businesses which start as trading platforms move towards banking - when for a long time it has been the reverse (and often poorly executed).
Disclosure: I use Trading212 and Interactive Brokers for investing and recommend them both. I also have accounts with Revolut, Wise and Monzo.
New law requires New York businesses to show credit card surcharge in price before checkout, more on interchange… it can be an incredibly opaque area; it varies by card network (Amex charges more) and it varies by card type (higher for credit than debit). But most of all it varies by jurisdiction; in the UK/EU it is capped at 0.2% for debit and 0.3% for credit (unless you’re Amex), whereas in the US it is a free for all and can vary wildly based on whether the merchant/POS company is big enough to drive a good deal from Visa/Mastercard. These new transparency laws in New York will likely start to change this - and exert downward pressure on prices. In the meantime below is from Canada (2022 data):
Spies, Marines, Army and Police, this piece has been bumping around in my brain since I read it. Jim Savage is riffing on an idea from Reid Hoffman’s Blitzscaling that there are personality types of Marines, Army and Police who are needed at different stages of an organisation’s life2. I can see the intuitive appeal - but ultimately I’m pretty uncomfortable with it - for basically the same reason I’m uncomfortable with Myers-Briggs, DISC, HBDI, Enneagram, True Colors or any other ‘type’ based personality framework. They are at best very rough and very reductive stereotypes. Explicitly encouraging people to identify themselves and others as ‘types’ leads to people conforming to type (subconsciously and/or consciously) and making hiring/promotion/retention decisions based on stereotypes. All of which is the exact opposite of what you (should) want to do. In fact it’s only marginally better than adopting a policy of hiring men for sales roles and women for HR because you think (and encourage others to think!) that men are aggressive and women are conscientious. But perhaps I’m just a low-agreeableness Marine.
Default placement on Smart TVs (Nov ‘23, but now in Senate committee), this is an interesting new front in the broader struggle for legacy media to maintain relevance. The short version is that terrestrial TV networks in Australia want the government to force SmartTV manufacturers to give them top/default listing for free. Putting aside the obvious (to me, your mileage may vary) insanity of this it’s a good reason to be bullish about Roku (#125). Clearly the default placement is important advertising real-estate and control of this is an opportunity to generate revenue. See also Google’s ~$18b annual payment to Apple to be the default search engine in Safari.
Provide a graceful Exit Point for your app, in a world where apps optimise for ‘addictiveness’ they risk users deleting them outright. The idea here is to provide users with an offramp so that they can stop using the app for the day/night, which makes them overall happier and more likely to keep using the app over the long term. I do wonder how duration of watching interacts with propensity to purchase - I suspect that it initially increases and then decreases, so giving someone an offramp may not cut sales and would actually show up as better conversion by removing scroll time from the denominator.
Barclays among parties eyeing SocGen's UK private bank, more banking consolidation. I’m not sure that this one actually makes much sense though. In my view a big reason that Barclay’s valuation is perpetually depressed is a discount for the volatility of their investment banking business. Expanding private banking doesn’t address this because by it also tends to be more volatile than retail banking - after all it involves a small number of clients who are disproportionately exposed to equities and commodities. And as NatWest found with their Coutts subsidiary private banking can bring additional headaches around Politically Exposed Persons (in their case Nigel Farage).
Revolut launches eSIM, as the saying goes, there are “only two ways to make money in business: One is to bundle; the other is unbundle.” (HBR). Revolut’s initial success was by unbundling traditional banking - delivering low-fee multi-currency cards. Now they are increasingly focused on bundling, in this case adding an eSIM as a ‘free’ perk on their £45/month (!) Ultra plan.
Mental frameworks for evaluating technology companies (August ‘23), there are lots of good ideas, a few of my favourites:
Low contract-value products must not require customer education (or if they do it must be easy and self-service), quite simply for a low ticket you can’t afford to spend effort on education.
High contract-value products must require customer education, otherwise they will inevitably be undercut by someone who figures out how to do it without the cost of education.
User generated content wins in ad-driven platforms, professional content wins in subscription platforms.
A venture-scale business can’t rely on time to deliver customers (e.g. ageing population) they must create a market.
Getting Paid To Flip Million Dollar Coins, every few months I see something like the below - and the response that obviously you should press the green button.
At the risk of midwiting this, there’s a decent chance that I press the red button - even knowing that the green button has a 25X higher expected value. Because you only get to press the button once. Which is unlike almost any real scenario (professionally, romantically, etc) where actually do get lots of chances and should take risks. Of course if you truly believe the green button is the right choice then you should be willing to pay to press it - but how much? Click through the link to follow the maths.
The Apple Vision Pro’s Missing Apps (Stratechery), Thompson had a good review out a couple of weeks ago (here), but for me the most interesting issue is the lack of apps. Netflix, YouTube and Spotify have all declined to make their apps available on the Vision Pro. Video in particular seems like it cold be a killer-app, a (home) cinema experience at much lower cost, with no footprint, great mobility and privacy. But that pitch doesn’t work as well without any content. It’s impossible to escape the conclusion that a decade of playing hardball on the AppStore has destroyed any desire by developers to cooperate now. A big reason Meta is developing their own AR/VR is specifically to avoid being locked into an Apple platform again. If Thompson is right and Apple counters by deepening their partnership with Disney it would be very interesting to see whether they evolved towards a two-tier model (green v blue chat bubbles but for Disney content).
Disclosure: long Meta.
Off-Topic
Not even tangentially related to product delivery, but still interesting (to me).
Lobbying scandal MP loses suspension appeal, when a political lobbying/bribery scandal comes out I think it’s important to reflect on how incredibly basic and incredibly cheap they are. In this case an MP was (very explicitly - seriously, watch the video) selling his ability to (1) spend 10 minutes (!) walking/talking with the minister, (2) ask the minister some questions and (3) leak government reports 2 days before publication - all for the princely sum of £2-3k a month. And was stupid enough to do it all on camera. It’s hard to escape the conclusion that if you pay (relative) peanuts you get monkeys. Salary for a British MP is £86,584 which sounds like a lot compared to a median salary of £35k, however that’s £86.6k for a pretty shitty job with no power/influence coupled with constant party and constituency work. Masochists who want that (lack of) world-life balance can work in investment banking and earn £100-130k straight out of uni - and the smart ones do. “A lack of money leaves much of politics the preserve of those who are rich, mad, thick or saintly” (Bagehot/Economist).
The public library is actually not that punk (Slow Boring), aside from being a fun trip down memory lane (The Living End!) this makes the case that modern left wing protest and activism actually has much more in common with anarchism (in the original sense) than socialism. Yglesias doesn’t go this far but my feeling is that the common firmament isn’t intellectual (I don’t think the Just Stop Oil protesters are reading Bakunin), it’s emotional.
Retirement Rates Surge (Chartr), the key takeaway here isn’t just that the population is ageing. It’s that there are millions of excess retirees, people who have retired early. Obviously Covid (and/or lockdowns) was a major catalyst with many people simply never returning to work, but the numbers are continuing to surge. Worrying for the rest of us who are footing the bill.
What Does Banning Short-Term Rentals Really Accomplish? (HBR) pretty much exactly what you would expect. It enriches hotels at the expense of everyone else. The tourists who simply can’t visit at peak times anymore, the tourists who pay higher prices, the businesses who receive less tourist traffic and tourists with less money to spend and the property owners/renters who can’t generate income.
Why Is Madrid the Capital of Spain? Fascinating look at the geography of Spain and the almost unique nature of Madrid as a city. My end take on this is that without Spain there would be no Madrid and without Madrid there would be no Spain. Most other capitals in Europe exist at some natural trade hub and they tend to predate the countries they exist in, Madrid only exists to connect Spanish regions. And without that connection it’s unlikely they would have remained a single Kingdom - one can easily imagine an Iberian peninsula consisting of 5+ smaller countries, not unlike Portugal.
Construction of affordable homes in London is grinding to a halt, this is yet another story or rate tightening. Councils can no longer afford to raise debt and build affordable housing. So they are seeking funds from the central government - and most likely waiting for a (likely) Starmer government before actually doing anything. In my view it would be far better to starve them of funds - this would force them to sell land to private developers rather than continuing to entrench the problems of the current approach to affordable housing (poor quality, intergenerational poverty, crime and inflexibility).
Humiliation Bait, worth reading for a couple of crazy stories which should never have been published, quoting the conclusion:
There’s a larger cultural trend here towards ‘great commentary is about my personal journey and travails’. The people writing essays and thinkpieces for sites like The Cut are less and less often writing about abstract ideas and trends and more and more often writing about their own personal journeys, their own lives and travails. Sometimes this is nice. At other times it’s just masturbatory self-indulgence. There’s an assumption by a certain type of writer that the truest writing is where you bare your own soul, to which I can only say No. No, stop it, get some help. Stop humiliating yourself for pageviews.
Resources
Nothing new this week
Something Fun
The T-rex growl in Jurassic Park is actually a Koala (Instagram - click through for video)
Echoes of Bernie Madoff and how he preyed on the Jewish community