Had a really interesting conversation with @matt_levine about the intersection of technology and finance, coming to an Internets near you in the not too distant future.
I definitely learned something; hope everyone will enjoy it.
Specific interesting thing from about the first minute: I asked Matt what a convertible bond was for the audience and he gave the true technical answer (a bond which can be surrendered for stock at some agreed upon terms) and why it was interesting to companies.
That reason: you should only convert the bond above some share price, which effectively means you have a call option on buying the stock. Call options are more valuable if volatility is high. This is well understood.
Therefore, a borrower running a business with high variance (like a tech company with unproven model or a biotech firm) can get a loan which they’d probably not qualify for under traditional underwriting standards (“Where’s your cash flow?!”) by bundling implicit option premium.
That’s kind of beautiful: the very fact that your business is risky de-risks the offering enough such that you can access the money necessary to take your risky shot.
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I don’t have anything novel to contribute on the substance of but have to again comment, pace Situational Awareness that I think kicked this trend off, that single-essay microdomains with a bit of design, a bit of JS, and perhaps a downloadable PDF are…ai-2027.com
… a really interesting form factor for policy arguments (or other ideas) designed to spread.
Back in the day, “I paid $15 to FedEx to put this letter in your hands” was one powerful way to sort oneself above the noise at a decisionmaker’s physical inbox, and “I paid $8.95 for a domain name” has a similar function to elevate things which are morally similar to blog posts.
This week on Complex Systems, a continued discussion of credit card rewards, interchange, and what I believe is a persistent misconception about how society should want justice done via payments systems.
It ends with the following, which the team took the liberty of putting into a short clip. (Sound on if you like hearing my voice, but video is subtitled.)
Last week the Atlantic published an opinion piece which argues that the poor are subsidizing the rich's receipt of credit card rewards. This view has wide currency among certain advocates and among opinion writers.
It is not true.
Credit card rewards are actually funded by interchange, a cost which is ultimately paid by card-accepting businesses for a combination of services they get from the payments industry.
Rewards have a few equilibria globally; the U.S. is in a high rewards, high interchange one.
An argument I have had with some credit card enthusiasts for a very long time, paraphrased.
Enthusiasts: I’m robbing the bank blind!
Me: Doubtful? They are probably pretty happy to have a portfolio of you.
E: Oh by carefully layering promotions and making a spreadsheet and…
Me: So checking my understanding: you spend a lot of money on credit cards.
E: Yes, that’s the whole point.
Me: And in a nation which makes it illegal to underwrite using an IQ test, you have self-constructed an IQ test.
E: Yes and I pass it obviously.
Me: Right. Tracking.
Me: You sound like a very desirable bank customer.
E: Oh no I’m not! I take them so hard.
Me: Your income and net worth are likely to be quite higher in ten years right. You predict that too?
E: Oh yeah.
Me: Yeah you’re going to continue consuming lots of financial services.
There is a general feeling in some quarters that the payments industry functions as a tax on everyone, and that the incidence of this tax must be highest on the poor, because they're least likely to have a rewards card.
Last up at #microconf, Marcos Rivera from Pricing I/O on pricing.
"How to avoid stupid mistakes in SaaS pricing"
(I am likely to have some thoughts.)
As always, quotes are Marcos (lightly paraphrased; real time is hard), anything attributed to Marcos is a heavy paraphrase, anything unattributed is me.
Marcos was previously Head of Pricing for Vista Equity Partners (hoohah; noted PE firm in software space).
This is a useful enough specific observation that I'm promoting the general observation to text:
Organizations don't make decisions. People at organizations make decisions. Very often, there is one lynchpin person who must hypercommit to an org doing something for that to be.
From this follows any number of corollaries, including:
1) If you desire change in an org, it is really useful to understand who, specifically, is the lynchpin for the change you want to see.
2) You might be offered the choice to be that person at some point in your career.
This will rarely follow someone whose job title is Quest Giver coming to you with a choice of two pills, one of which is failure and one of which is success, with clearly listed of side effects.