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5 grandi giochi per l'apprendimento della strategia per il mercato Il potere di apprendimento pratico è indiscutibile. Ma quando si tratta di investire il vostro denaro nel mercato azionario, tuttavia, fare un errore principianti può costare più di un semplice autostima. Fortunatamente, il web rende più facile da praticare con denaro virtuale. Ci sono una moltitudine di giochi online come investimento Investopedia e gnuTrade che giocano con denaro virtuale, ma non tutti sono facili per i principianti. Qui ci sono cinque dei migliori liberi (perché non dovreste spendere soldi veri per giocare con soldi finti) giochi online per ottenere i piedi bagnati. 1. Wall Street Survivor Invest 100.000 in contanti virtuale tramite scelte di menu a discesa. Una versione amichevole cartone animato di magazzino guru Mark Brookshire aiuta a prendere la decisione finale, fornendo alcuni numeri di rating quando si inserisce un magazzino. Tra questi, un voto per sentimento superstite, i fondamentali, tecnica e un Motley Fool Valutazione. Per gli stock di aiuto per scegliere aggiuntivi, il sito ha un impressionante libreria di risorse che si estende per principianti, intermedi e livelli avanzati. Inizia con Investire 101 e prendere in considerazione sfruttando i forum della comunità se avete domande specifiche. Coloro che hanno bisogno di un piccolo aiuto per iniziare può anche scegliere di adattare uno dei portafogli di preset creati dai commercianti provati. Mentre la concorrenza di 100.000 è più popolare, chiunque sul sito può creare un concorso. I premi variano, ma più spesso sono costituiti da orgoglio competitivo. 2. HowTheMarketWorks di proprietà della stessa società come Wall Street Survivor. questo gioco è grande per gli investitori in cerca di acquisire esperienza con un nuovo tipo di portafoglio. Oltre alle azioni e indici, ci sono opzioni per sperimentare con portafogli Forex, penny stock, fondi comuni e le vendite allo scoperto. I principianti possono eseguire operazioni di ordine di mercato in un modo divertente, senza preoccuparsi di cose come orari prestabiliti, il numero massimo di operazioni al giorno, per ogni magazzino e l'ordine di scadenza. Una modalità realistica amplifica la complessità dopo theyve imparato il livello principiante. I giocatori possono gestire fino a tre portafogli azionari e tre portafogli Forex sul sito in una sola volta. Per ogni portafoglio, selezionano un valore iniziale compreso tra 100 e 500.000 e impostare quanta commissione virtuale si pagano per il commercio. L'aspetto della concorrenza è opzionale. concorsi generali mensili dare ad ogni giocatore 25.000 come punto di partenza virtuale. Altri concorsi pubblici includono limitazioni impegnativi come breve vende solo o solo penny stock. Gli utenti possono creare i propri giochi protetti da password, così, che è una caratteristica che gli insegnanti trovano utile per la creazione di concorsi di classe. 3. Young Money Borsa Gioco Young Money Riviste gioco di borsa è facile da imparare, ma anche abbastanza realistica, che è un equilibrio difficile da colpire. aspetti realistici includono un moda virtuale Commissione adottata da ogni commercio, aderendo a ore di mercato e le regole su come si può investire. A differenza di molti giochi di investimento, operazioni sono effettuate ad un prezzo in tempo reale. aspetti di apprendimento sono convenienti le icone di aiuto su termini chiave e un'interfaccia a schede intuitiva. Il sito viene eseguito un concorso mensile con un (vero) premio in denaro di 100 che va a chi ottenuto la percentuale più alta. I giocatori possono anche creare i propri concorsi o unisciti ad altri concorsi user-made. 4. MarketWatch Fantasia Guadagni Trader gioco MarketWatch verrà eseguito questo concorso di borsa finto per un totale di quattro settimane, l'assegnazione del vincitore di ogni settimana con un iPad. La sua su tre settimane in questo momento, ma c'è ancora tempo per entrare in competizione per la quarta settimana. È necessario disporre le selezioni raccolte prima della settimana inizia il Lunedi. Le azioni che selezionati vengono acquistati presso il lunedì aperti e venderanno automaticamente venerdì vicino. Il problema è che tutti i giocatori possono utilizzare solo i 15 a 20 simboli selezionati per ogni settimana. Le aziende vengono selezionate dal proprietario del gioco per le aziende che stanno proiettando i loro guadagni nel corso di ogni settimana. Allineando scelte è facile giocatori semplicemente trascinare il logo companys per la loro carta di trading e designano se vogliono vendere allo scoperto o andare lungo. Anche se ci sono alcuni vantaggi di gioco, questo gioco è particolarmente maneggevole per i principianti a causa delle limitate stock option per ogni settimana. Come Giovani Moneys gioco, UpDown ha utili icone che spiegano i termini chiave per i principianti. risorse più complete nel centro di formazione per fortuna coprono anche il più fondamentale di investire concetti. funzionalità della community, come l'opportunità di collaborare con un gruppo e di vedere i titoli più comprati-e-più venduti, sono anche utili per i principianti. Lo strumento di lista di controllo fornisce una vantaggiosa cruscotto per il monitoraggio potenziali scelte. UpDown sponsorizza un concorso mensile che premia i giocatori che hanno battuto il mercato con denaro reale. Ulteriori risorse d'affari di Mashable: praticamente chiunque che è stato coinvolto nei mercati finanziari per un certo periodo di tempo e ha un certo successo sa bene che questi mercati non sono efficienti. E meno male. Bene sorta di. Grazie al cielo, dal punto di vista di un investitore, perché questo crea la capacità di generare rendimenti superiori. Ma la maggior parte degli investitori don8217t, la maggior parte perché francamente 8211 anche se raramente ammetterlo 8211 they8217re nemmeno provare. Ci sono molte ragioni per cui i mercati non sono efficienti, la maggior parte con radici nel fatto che i mercati sono per sistemi adattativi complessi definizione che hanno dinamiche in continua evoluzione e gli equilibri locali. Ma uno dei fattori chiave che contribuiscono alla dinamica di questo sistema è pregiudizi psicologici che sono stati efficacemente incorporati nel DNA del moderno 8220industrial8221 asset allocation paradigma. Il meccanismo di allevamento naturale e istintivo che è costruito in modo gli esseri umani pensano. Per la maggior parte delle persone, non c'è modo di passare questo fuori il meglio si può sperare di fare è di avere alta la consapevolezza di sé e cercare di compensare questa tendenza. È interessante notare che alcune persone sono fisiologicamente mancano questi percorsi mentali. A titolo di esempio, pensare a persone afflitte da sindrome Asperger8217s. I8217m non sono un medico, ma alcuni dei più (coerentemente) commercianti di successo che ho avuto il privilegio di incontrare o di lavorare nel corso degli ultimi due decenni, certamente sembrano avere personalità e del comportamento tratti che si allineano con (almeno lievi) versioni del definizione di Wikipedia di queste condizioni. I8217m abbastanza sicuro che questo non è coincidence.1 Ma in generale, la maggior parte delle persone (e quindi le istituzioni che rappresentano) IMPOSTA (investimenti) decisioni bloccati all'interno di un keynesiano Concorso di bellezza 8211 cercando di indovinare ciò che tutti pensano è abbastanza, non è alla ricerca di grazia intrinseca. E questo è spesso una strategia ragionevole, vale a dire che non si comportano in modo irrazionale. Anche se non potrà mai produrre costantemente forti rendimenti 8211 certamente non su base assoluta, lo farà per lunghi periodi evitano costantemente poveri rendimenti relativi e, anche se i rendimenti assoluti sono poveri (o addirittura catastrofici) non vi è la sicurezza notevole e molto reale a essere caduti (saltato ) al largo della scogliera in un allevamento. Persone come che copre il culo. Sbagliato insieme piuttosto che di successo da solo. avversione alla perdita. It8217s una strategia di sopravvivenza razionale. E questo quadro comportamentale si applica attraverso tutta la catena alimentare asset allocation 8211 LP di fondi a Società 8211 che significa un paio di cose: la grande tendono a diventare più grandi (acquistare IBM) c'è un altissimo barriera di energia ai nuovi entranti (ad ogni livello di la catena alimentare) la capacità actor8217s di raccogliere capitali è il fattore più importante nella loro capacità di ottenere capitali (ricorsiva) e per i gestori loro core business diventa la raccolta (non investire) del capitale (la coda agita il cane) 2 che crea una grande pair3 opportunityrisk (o una serie di coppie di frattali): (per i singoli attori) una opportunità: per quelli che possono staccarsi da questo quadro conoscitivo e di comportamento per rendere rendimenti in eccesso fuori misura se le loro convinzioni sono fondamentalmente sana (per la società) un rischio: che intrinsecamente creazione di valore investimenti (fondi, imprese) sono affamate di capitale, mentre molti investimenti 8220me-too8221 mediocri sono sovracapitalizzata a mio parere non vi è alcuna precisa, fondamentalmente 8220right8221 equilibrio ottimale in questa coppia, o certamente non uno che è costante in tutti gli ambienti, ma ho il sospetto che il nostro stato attuale è abbastanza lontano da una gamma potenzialmente ottimale. It8217s grande per un (molto piccolo) numero di attori che possono avere le capacità e la fortuna di trarre vantaggio. Ma collettivamente poveri per le nostre società ed economie. Sistemica fragili. Da questo punto di vista sociale, penso che sia importante almeno cercare di porre rimedio a questo equilibrio. Ho don8217t avere una soluzione magica per farlo, ma come suggerito sopra, la consapevolezza di sé può essere molto efficace nel contribuire a ridurre (almeno una buona parte) dei nostri pregiudizi sistemici. Si won8217t eliminare il paradigma keynesiano concorso di bellezza, ma sarà almeno smorzare esso. Affinché non si pensa I8217m esagerare la portata di questo comportamento herding cotta nel sistema di allocazione del capitale world8217s, mi permetta di condividere un po 'della mia esperienza di prima mano di questo. Per quasi un decennio ero un manager consorzio. Per quelli di voi che non hanno familiarità con il gergo di investment banking, il mio compito era quello di gestire il processo di raccolta di capitali (in un industrializzato processo, ripetibile.) Mentre il mio obiettivo è stato fissato a reddito (obbligazioni) (che significa che ogni anno sono stato coinvolto nella gestione di centinaia Offerte di 8211 vale a dire i miei dati impostati darmi un campione decente), la capitale processo di raccolta 8211 se si stanno alzando un giro di seed capital da angeli, fare un IPO o vendita di un prestito obbligazionario 8211 è fondamentalmente la stessa. E se dovessi disegnare un grafico delle prime domande che gli investitori poste durante la commercializzazione di una nuova emissione di titoli, avrebbe guardato qualcosa di simile: (Sì, purtroppo Virginia è così che troppi dei gestori tradizionali di cornice risparmio loro decisions8230) Ma, per gli investitori più intelligenti (definito da coloro che da sempre fornito un rendimento migliore, che 8211 durante il mio mandato come direttore consorzio 8211 erano per lo più un piccolo numero di fondi hedge) questo grafico è stata invertita. It8217s non che didn8217t cura a tutti quanto è grande il libro era o chi altro è stato l'investimento, ma che questi erano strutturalmente secondo ordine, domande tattiche per loro. Prima hanno fatto la loro mente se o non hanno pensato l'investimento era convincente e solo allora si fattore nelle dinamiche affare nelle loro tattiche di offerta. Mi sono ricordato di questo e ispirato a scrivere questo post (nella speranza di contribuire ad aumentare il sistemica consapevolezza di sé accennato sopra) da un paio di post che mi sono imbattuto nel mio andare a letto la lettura di ieri sera che ha evidenziato i pregiudizi (mancanze) del gli investitori nella catena alimentare del capitale di rischio (LP e VC). in 8220How convincere Investors8221. Paul Graham mette in evidenza il comportamento I8217ve sopra descritte: Se si può fare un buon caso, come Microsoft potrebbe avere, vuoi convincere gli investitori non sempre. Un sacco di VC avrebbe respinto Microsoft. Certamente alcuni respinto Google. E ottenere respinto vi metterà in una posizione leggermente scomoda, perché come you8217ll vedere quando si avvia la raccolta di fondi, la domanda più comune you8217ll ottenere da parte degli investitori sarà 8220who il resto è investing8221 Che ne dici se you8217ve stata la raccolta di fondi per un po 'e nessuno ha ancora impegnati Mentre Eghosa Omoigui di EchoVC parla la coppia riskopportunity che nasce dalla 8220Trough di Conviction8221 che LP e VC sono inclini a rimanere bloccati in: la saggezza è sempre stata incredibilmente seducente. In particolare, in quanto richiede poco o nessun sforzo intellettuale. Sto lentamente formando una ipotesi che pattern matching in VC sta mostrando caratteristiche simili, stranamente. VC Today8217s stanno cadendo preda del campo minato dei cosiddetti assiomi mascherati da ovvietà. Quindi, attenersi alle x per y o per le piazzole B è semplice, credibile e quindi finanziabili. Non ho problemi con questo quadro. Esso aiuta gli imprenditori a raccontare una storia e VC amano finanziare narratori. Ma implode di fronte per l'innovazione dirompente, che ho visto ricorrentemente presentarsi come una sconosciuta rispetto al bisogno insoddisfatto. Quindi tutto questo si riduce a la calcificazione apparente di pattern recognition (VC formule), e la partenza dal mercato assunzione di rischi su due lati (imprenditore e venture capitalist), che è sempre stata una parte fondamentale del primo venture stage. Una dipendenza a tempo pieno su pattern-matching se non accompagnati da formazione tesi significa che mancherà i grandi vincitori. Come ha dichiarato il venerabile Tom Perkins, 8216If there8217s nessun rischio, you8217ve già perso la boat.8217 E continua a citare Elon Musk: Penso che sia importante per la ragione da principi primi, piuttosto che da analogyThe modo normale in cui conduciamo la nostra vita è che abbiamo ragione per analogia Stiamo facendo questo perché la sua come qualcos'altro che era done..or è come quello che altre persone sono iterazioni doingslight su un tema principi primi è un modo di fisica di guardare il worldwhat che significa veramente è che si bollire le cose a il truthsand più fondamentale poi ragionare su da therethat prende un sacco qualcuno più energia mentale possibile e la gente lo dico batterie sono molto costoso e questo è solo il modo in cui saranno sempre, perché questo è il modo in cui sono stati in passato Ora, forse, approvando questo visualizzare io stesso sono affetti da bias di conferma. dopo tutto, il DNA di Anthemis Gruppo è interamente tesi-driven (sia nelle attività che sosteniamo con la capitale e nel modo in cui we8217ve organizzato Anthemis e il nostro approccio.) Anche se è troppo presto per me dire definitivamente la nostra tesi è provata. Detto questo (la consapevolezza di sé), questo quadro è lo stesso che ha informato i miei più grandi precedenti (investimenti) successi 8211 Betfair. Segnalo. WeatherBill. Zoopla 8211 che hanno ampiamente superato quelli che didn8217t lavorano fuori. (È interessante notare che, un esempio di un povero I8217ve investimento fatto era in una società denominata GnuTrade. E anche se GnuTrade didn8217t avere successo, una società costituita quasi allo stesso tempo con la stessa visione chiamato eToro 4 è riuscita spettacolare. Tesi confermata, puntato sul cavallo sbagliato .) Quindi il mio 8220call a action8221 è che chiunque legga questo che ha la responsabilità di prendere decisioni di investimento e di allocazione del capitale combatte più contro i loro pregiudizi di seguire semplicemente il percorso di minor resistenza 8211 la folla 8211 e di sviluppare e abbracciare reale convinzione, derivante da un robusto quadro conoscitivo, e ad agire su questo. Anche se solo ai margini. Let8217s spostare l'ago. Lo dobbiamo ai nostri figli da provare. 1 Sono rimasto un po 'sorpreso che mi couldn8217t trovato alcuna ricerca che era stato pubblicato su questo argomento che potrebbe provedisprove questa correlazione 2 Alcune società venture-backed possono anche cadere in questo trap8230 3 Credo che opportunità e il rischio sono come particelle fondamentali che esistono solo in l'universo a coppie, due facce della stessa medaglia per così dire. 4 Anthemis è orgogliosa di essere un piccolo investitore Quale strada intendete prendere, Nell8217 disse l'agente, in tono molto interessato. 8216Conformity o rebellion8217 Nessuno dei due. Entrambe le vie sono semplice-mente 8211 sono solo per le persone che non possono far fronte con la contraddizione e ambiguità. Neal Stephenson, L'era del diamante A Anthemis Group crediamo che la chiave del successo (business) nell'era dell'informazione risiede nella costruzione di forti, vibranti, reti interconnesse di persone intelligenti e le imprese. Gli strumenti digitali del 21 ° secolo ci permettono di fare questo con una profondità, ampiezza e la velocità difficilmente immaginabile solo un decennio fa. Eppure per quanto potente, questi strumenti non sostituiscono il valore delle connessioni faccia a faccia. Ogni comunità ha bisogno di chiedere per sé, 8220Who sono le persone che stanno per guidare questa comunità in avanti nel prossimo 10 years8221 e capire come sostenere loro. 8211 Charlie O8217Donnell Con questo in mente, la settimana scorsa abbiamo ospitato il nostro 2 ° (annuale) Anthemis HackingFinance ritiro (AHFR13) raccolta di 60 individui sorprendenti 8211 fondatori di avvio e dirigenti, investitori, progettisti, dirigenti dei servizi finanziari dirigenti, leader di pensiero e la squadra Anthemis 8211 in la cornice alpina magica di Meribel. Abbiamo chiesto loro di fare un passo indietro dalla loro vita professionale occupato e collegare. Insieme. Con l'ambiente. Con il futuro. E per almeno un paio d'ore fugaci, pensare a come questa comunità, questo ecosistema potrebbe contribuire alla re-invenzione di servizi finanziari. Pensate a come insieme possiamo costruire migliori modelli di business, creare prodotti e servizi migliori, la forma migliore regolamentazione. Pensate a come si può cancellare un percorso che ci porta dalla obsolescenza manifesto di finanza dell'era industriale ad un nuovo paradigma per la fornitura di servizi finanziari che è nativo allineato alle realtà tecnologiche, economiche e culturali del 21 ° secolo. Gli hacker credono che qualcosa può sempre essere migliore, e che niente è mai completa. Devono solo andare fissarlo 8211 spesso di fronte a persone che dicono it8217s impossibile o si accontentano dello status quo. 8211 Mark Zuckerberg Anthemis è ancora una società molto giovane. Le risorse e lo sforzo 8211 di tempo, denaro, persone 8211 necessari per organizzare e ospitare questo ritiro erano materiale da noi. Come una società di avvio, it8217s difficile costruire un modello finanziario tradizionale per misurare il valore o per cercare di misurare quantitativamente il ROI. Eppure è abbondantemente chiaro che il valore creato da un tale evento è molto reale 8211 non solo per Anthemis o le nostre imprese di portafoglio, ma per l'ecosistema più ampio. Valore che nasce direttamente dalla energia, la passione e l'impegno che ogni partecipante ha portato con sé. Per questo io sono incredibilmente grato. We8217ve cercato di costruire Anthemis come substrato: terreno fertile da cui le imprese possono crescere meravigliosi, testa di serie da parte di persone di talento che condividono una passione comune e il senso l'opportunità manifesto che esiste per creare un futuro migliore finanziario. Nel linguaggio dei fiori, Anthemis (camomilla) significa la pazienza nelle avversità. Era conosciuto come l'erba di umiltà, perché, come una pianta del prato, l'altro è stato calpestato, più velocemente si grewIn biodinamica, la preparazione camomilla promuove una buona ripartizione delle proteine ​​nel compost di elementi nutritivi umici, e impedisce la proteina rompersi ad ammoniaca che andrebbero persi all'atmosfera. Aiuta terreno di trattenere azoto e calcio, mantenendoli nel regno vivente e prevenire la perdita all'atmosfera. preparazione Camomilla rafforza l'impianti di rigenerazione attività di vita e si riunisce questo con il fisico. Questa capacità ha portato camomilla per essere indicato come il medico le piante nel folklore. E 'stato detto che se si dispone di un impianto di fallimento, semplicemente impianto di camomilla accanto ad essa e farà rivivere. (Da Camomilla le piante medico) E hasn8217t sempre stato facile per noi, la costruzione di un business è difficile. La raccolta di capitali è difficile 8211 soprattutto in caso di deviazione dallo status quo in alcun modo. Ma sapevamo che andando in. Io don8217t che ci sono troppe cose nella vita che sono veramente la pena di fare che aren8217t difficile. E di essere circondato da persone incredibili che hanno fiducia e vi sostenga 8211 gli imprenditori we8217ve sostenuti nonostante le nostre modeste risorse, i primi investitori che hanno sostenuto la nostra visione, le persone che ci hanno aiutato in mille modi diversi solo perché hanno pensato che cosa stavamo cercando di costruire valeva la costruzione di 8211 rende tutti i momenti difficili che solo momenti. E chiarisce che 8220the succo vale la squeeze.8221 Nelle prossime settimane, faremo del nostro meglio per distillare le apprendimenti emersi dalle molte conversazioni che echeggiavano attraverso i prati alpini e vette. E se del caso aiuto we8217ll incoraggiare e assistere con attuare molte delle idee e potenziali collaborazioni emerse. E rimanete sintonizzati al nostro canale YouTube per avere un assaggio di ciò che è accaduto (e nel frattempo si può avere un assaggio di ultimo evento year8217s sotto.) Anche se it8217s un anno di distanza, we8217ve già iniziato a sognare prossimo evento year8217s, forse we8217ll ci vediamo lì non si può mai cambiare le cose combattendo la realtà esistente. Per cambiare qualcosa, costruisci un modello nuovo che rende il modello obsolete.8221 esistente 8211 Buckminster Fuller It8217s Non a caso, a noi che alcuni degli incontri più produttivi e creativi sono ospitati in montagna: Allen 038 Co.8217s Sun Valley conferenza, l'Aspen Ideas festival (e numerosi altri), di dialogo, Davos (prima che saltato lo squalo), ecc 8211 non si può fare a meno di ottenere una nuova prospettiva e pensare in grande pensiero di fronte a un paesaggio così maestoso. Anche lo sforzo richiesto per raggiungere questi luoghi aiuta a rafforzare la disconnessione dalle preoccupazioni one8217s giorno per giorno e di routine. Non posso ringraziare abbastanza tutti gli hacker 8211 tanti dei quali viaggiato dai confini più remoti del globo di unirsi a noi. In particolare I8217d ringraziare Kirsten Dunlop e Suncorp che non solo viaggiato tutta la strada da Sydney a unirsi a noi, ma che gentilmente sponsorizzato la nostra cena di apertura. I8217d anche ringraziare tutto il team Anthemis per la loro energia positiva e la volontà di fare tutto ciò che è stato chiesto loro di fare il nostro ritiro un successo, ma in particolare vorrei ringraziare Simrat e Pascale e la mia cara moglie Sandrine senza il quale il ritiro semplicemente sarebbe non hanno avuto successo. Chiunque sia a tutti gli interessati in materia di innovazione e di perturbazione dei servizi bancari e finanziari avrà notato che il mondo sta vedendo un esplosione cambriana di start-up di targeting questo settore. It8217s un momento emozionante per noi a Anthemis Group. come abbiamo lavorato per posizionarci per questa ondata di cambiamento per molti anni. 8220Skating al punto in cui il disco sarà be8221 quanto say8230 La crescita esplosiva dei nuovi entranti nel settore dei servizi finanziari 8211 sia delle singole società e l'universo di tali società 8211 è naturalmente eccitante per noi, ma non pongono alcune sfide, molte delle quali derivano da risorse vincoli, in particolare timebandwidth e dei capitali. Stiamo lavorando duramente per affrontare e superare queste sfide come abbiamo crescere il nostro modello 8220meta-company8221 unico, tuttavia, continua a decifrare me quanto nuovo capitale continua ad essere arato in modelli di business age8221 8220industrial, in particolare nel settore bancario. Due (indipendenti) articoli emersi nel mio flusso di notizie in questo fine settimana mi ha ispirato a porre la domanda ad alta voce. Mentre penso che Metro Bank ha una (molto) migliore approccio alla tradizionale ramo bancario rispetto alla maggior parte degli operatori storici, e posso credere che è plausibile che i rami arcobaleno potrebbero essere meglio gestiti come una entità indipendente 8220clean8221, non riesco a capire come sia di queste strategie porterà a lungo termine, il successo sostenibile e forti rendimenti degli investimenti per i loro sostenitori. Nessuno dei due è nativamente adattata per la transizione ai modelli di business che emergeranno come leader dell'informazione. I loro economia sono fondamentalmente errata di essere più efficientbetter gestita darà loro un vantaggio rispetto agli operatori storici, forse sufficiente per qualche breve periodo (2-5 anni) vince. Ma a lungo termine, sono altrettanto esposti a nuovi modelli di disturbo come today8217s operatori storici (forse dà fastidio solo data la loro mancanza di TBTF inerzia.) (D'altra parte, se sono in grado di approfittare del loro status sfidante, l'accesso al capitale e una gestione più agile di collaborare con o acquisire alcuni dei nuovi leader Banking 3.0, forse può emergere come vincitori nella term8230 più) l'economia del veramente nuovi entranti come Fidor Bank. Semplice. Moven e decine di altri non sono solo leggermente migliori, ma in alcuni casi un ordine di grandezza (o più) migliore. Chiaramente, come i nuovi operatori si trovano ad affrontare molti (spesso diversi) i rischi di ottenere l'adozione e il ridimensionamento. E mentre il successo di qualsiasi singola società, tra questi nuovi operatori 8220digitally native8221 non è garantita, vorrei suggerire che i grandi vincitori delle banche del 21 ° secolo sarà quasi certamente essere trovati fra questi tipi di imprese (e non dalle fila dei tradizionali, ramo - modelli centric.) in quanto tale trovo ironico che molto più capitale di investimento (apparentemente un ordine di grandezza o più) è a caccia di questi vecchi modelli. Avendo lavorato nei mercati dei capitali e il mondo degli investimenti per un paio di decenni, in realtà ho capisco la dinamica sul posto di lavoro 8211 persone (soprattutto quelli che lavorano per le grandi istituzioni) di solito si sentono più a suo agio investire nella 8220more del same8221: migliore, più veloce, le versioni più intelligenti , sicuro but8230 Naturalmente è più facile fare proiezioni lineari del passato verso il futuro. Investire in nuovi modelli richiede alle persone di riconoscere discontinuità ed esponenziali, che è certamente difficile. Il fatto è che, se si è nel bel mezzo di un cambiamento epocale nei quadri economici e sociali (che credo sia il caso), questa è l'unica scelta razionale. Per chiunque pensi di investire nel futuro del settore bancario, I8217d invitarli a confrontare le metriche (clienti, attività, volumi, economia unità, ecc) di questi nuovi arrivati ​​digitali con aziende come Metro o arcobaleno per dollaro o libbra di capitale investito. Ora, pensare a quello che nessuna di queste società potrebbe fare con 100 mln, per non parlare di un 1bn8230 Il disco può essere in un angolo, per ora, ma piuttosto I8217d essere davanti alla rete. Articoli correlati Molti anni fa, il software aziendale è stato scritto per funzionare su computer mainframe. Questo era il migliore (solo) una soluzione in quel momento che aveva la memoria e potenza di elaborazione necessaria per eseguire queste applicazioni e così 8211 nonostante il loro costo, inflessibilità e operativi complessità 8211 mainframe rappresentato il modello di elaborazione ottimale per le applicazioni aziendali. Fino a quando un nuovo modello di calcolo è emerso. Sulla base di potenti, abbondanti e poco costosi server blade e una serie di nuovi componenti software standard, questo 8220technology stack8221 è diventato il nuovo modello di elaborazione ottimale per l'esecuzione di più di impresa. LAMP è stato il nuovo 7.007.000. Non solo era questo nuovo modello meno costoso, più robusto e più resistente, è stato molto più adattabile. Inoltre, gli standard aperti incoraggiato un enorme quantità di innovazione e sperimentazione che a sua volta ha favorito lo sviluppo di una vasta gamma di specialisti, ma varianti compatibili. Ciò ha permesso soluzioni su misura per le diverse applicazioni e ambienti per essere facilmente sviluppate senza la necessità di costruire una nuova piattaforma di volta in volta. E come ogni componente nella pila ha avuto un ruolo o uno scopo ben preciso, il suo design potrebbe essere ottimizzato senza compromessi. Il modello di business bancario tradizionale rispecchia il mainframe: un all-in-one integrata verticalmente con tutte le risorse e gli strumenti necessari per fornire prodotti e servizi bancari in un unico grande contenitore (nero). Nel contesto del panorama competitivo e tecnologico del 20 ° secolo questo ha funzionato bene. Era la soluzione ottimale. Ma come il mainframe del mondo informatico, l'approccio all-in-one 8220big iron8221 al settore bancario non è più il modello di business ottimale con cui servire in modo efficiente e redditizio i clienti bancari di oggi. Un nuovo approccio, predicata sull'assemblaggio fornitori specializzati degli elementi componenti necessari per fornire prodotti e servizi finali si rivelerà il nuovo modello di business ottimale per il settore bancario. Benvenuti alla pila (bancaria). Prendiamo ad esempio il processo di creazione di un prestito. Questo in realtà si scompone in un stack8221 8220process che ad alto livello simile a questa: Ogni strato di questo stack richiede diverse competenze e risorse. I driver di valore per ogni attività sono diverse. Ogni richiede un diverso mix di tecnologia, design e il talento e l'applicazione di fondamentalmente diversi modelli di business e risorse di capitale. Come tale, cercando di alloggiare tutti nella stessa organizzazione significa che alcuni o anche ciascuna di queste attività sono gestiti in modo ottimale. Infatti, la forte cultura, meglio gestita la banca è (nel contesto di modelli tradizionali, gerarchici), il più acuto è il problema. Detto questo, fino a quando i margini sono rimasti elevati e la concorrenza in sordina, con i concorrenti che operano più o meno efficiente e abilmente eseguito versioni dello stesso modello di business, attaccare con il modello 8220mainframe8221 era quasi insostenibile. Tuttavia questo non è il caso. I nuovi entranti 8211 alleggerito dalle tecnologie legacy e mentalità 8211 stanno emergendo in tutto lo stack con modelli di business che sono nativamente adattato non solo per sfruttare le tecnologie di oggi, ma che anche affrontare le aspettative mutevoli dei clienti in termini di prezzo, il design e l'esperienza utente. In molte parti della pila, le istituzioni in carica troveranno difficoltà a competere come il migliore di questi nuovi operatori guadagnare trazione. Il meglio gestite di today8217s principali istituzioni si adatterà a questo paesaggio che cambia. Come Lasciando andare i loro modelli di business tradizionali, aprendo la loro catena del valore e fare una valutazione onesta di dove nello stack hanno un vantaggio competitivo sostenibile e dove in effetti non lo fanno. Questo non è un cambiamento banale per la maggior parte delle banche tradizionali e, a parte le modifiche nella tecnologia e modello di business che comporterà, forse l'aspetto più difficile in questa fase di transizione sarà quello di cambiare la cultura e la mentalità di queste istituzioni, per i quali architetture e collaborazione aperta è spesso anatema. Ma per quelle istituzioni che sono in grado di apportare queste modifiche, la ricompensa sarà significativo. Concentrando le proprie risorse e talenti sulle aree dello stack dove hanno un vero e proprio vantaggio competitivo, uscendo altre aree dove sono strutturalmente non competitive e collaborando con (e investire in) società con dirompenti nuovi e potenti proposte di valore in queste aree, lo faranno navigare con successo la transizione per diventare una banca dati di età. Prendendo l'esempio precedente, già sta diventando chiaro che i modelli tradizionali che consente di effettuare, sottoscrizione e di elaborazione prestiti non sono più competitivi. Nuovi modelli da aziende come FundingOptions. Zopa. OnDeck Capitale. Kabbage e molti altri stanno dimostrando di essere molto più efficace ed economico. La banca tradizionale devono essere in fila per collaborare con aziende come queste e, in particolare, diventare istituti di credito e fornire servizi di transazione bancaria di base, aree in cui essi hanno un vero e proprio vantaggio competitivo. Essi dovrebbero anche essere sfruttando i loro canali di distribuzione forte per guidare i clienti a queste piattaforme, in cambio di tasse di lead generation. Naturalmente per i dirigenti e dipendenti responsabili di queste funzioni all'interno banche tradizionali, la transizione sarà dolorosa, in ultima analisi, il posto di lavoro spariranno. Tuttavia, in ogni caso, questo risultato è inevitabile come loro proposta di valore e posizione competitiva diventa sempre più compromessa. Abbracciando il cambiamento e di lavoro all'interno del chicco di questo nuovo paradigma, le banche già presenti sul mercato possono fare molto per garantire il loro successo futuro e la sopravvivenza e lo troveranno molto più facile ricostruire la fiducia 8211 con i clienti, i regolatori e le loro comunità 8211 attenuanti il ​​dolore a breve termine e l'impostazione se stessi su un percorso di redditività sostenibile. L'alternativa è quella di continuare a fare la stessa cosa e lentamente ma inesorabilmente ruggine via. Le migliori dirigenti bancari di domani dovranno essere familiarità con le API e SDK come sono con APRs e RAROC. Articoli correlati 12 settembre segnerà il 50 ° anniversario del famoso discorso di John F. Kennedy8217s alla Rice University di lanciare il progetto che avrebbe messo Neil Armstrong sulla Luna meno di 8 anni più tardi. Ascoltando il suo discorso anche oggi, ci si può ispirare solo dalla visione e l'ambizione 8211 di fronte ad una sfida enorme 8211 che ha catturato l'immaginazione della nazione e del mondo. E solo uno può chiedersi perché questa stessa ambizione, questa stessa energia, lo stesso senso di scopo sembra troppo spesso per essere completamente assente oggi. Perché i nostri leader 8211 in politica come nel mondo degli affari 8211 sembrano troppo spesso per impostare la barra così notevolmente basso, razionalizzare questa mancanza di ambizione come pragmatismo. Basta essere 8220realistic8221. Sì, c'è un posto in questo mondo per pragmatismo, realismo. Ma questo non giustifica l'apatia 8211 o peggio cinismo 8211 dei nostri society8217s più fortunati e potenti di fronte alla grande opportunità e dei rischi (per questi due sono solo facce diverse della stessa medaglia.) Conserva il mio lavoro. Il mio potere. Il mio capitale. Nulla di veramente utile in qualsiasi dominio di realizzazione umana è stata mai compiuta da persone o società che sono stati governati da questa mentalità. Eppure è pervasiva. Come i nostri transizioni della società e l'economia globale dalla industriale per l'era dell'informazione. la dimensione e la portata delle sfide che abbiamo di fronte sono ancora più grandi di quelli coinvolti nel mettere un uomo sulla luna. Ogni aspetto delle nostre istituzioni (governo, imprese, istruzione, cultura) dovrà essere ri-configurato nel corso dei prossimi decenni, se vogliamo sopravvivere e, in definitiva prosperare in questo nuovo mondo. Abbiamo bisogno di ambiziosi, appassionati, persone energiche di alzarsi e abbracciare questa opportunità per re-invenzione. Capi. Doers. A Anthemis. Sono enormemente la fortuna di essere in grado di lavorare con decine di queste persone che portano i loro talenti e le energie per portare ogni giorno a lavorare verso il nostro grande, importante obiettivo di re-inventare la finanza. Lo fanno non perché è facile, ma perché è difficile. Non perché il successo è assicurato, ma perché è importante per loro di avere successo. Certo, it8217s più facile essere cinici. Per dirla can8217t essere fatto. Abbiamo scelto di andare sulla Luna. Abbiamo scelto di andare sulla luna in questo decennio e fare le altre cose, non perché sono facili, ma perché sono difficili, perché questo obiettivo serviranno a organizzare e misurare il meglio delle nostre energie e competenze, perché questa sfida è uno che siamo disposti ad accettare, uno non siamo disposti a rinviare, e uno che intendiamo vincere, e gli altri, anche. 8211 John F. Kennedy Abbiamo scelte. Il futuro è nostro inventare. Unisciti a noi. Articoli correlati La settimana scorsa ero via con la mia famiglia per un paio di giorni. In una posizione dove non c'era connessione ad Internet e un segnale 3G molto impreciso. In qualità di fondatore di start-up con un senza fine per fare la lista, questo era abbastanza sconcertante (soprattutto perché era inaspettato.) Quindi, a parte andando fuori di testa per un paio di giorni, non avevo altra scelta, ma per recuperare il ritardo su entrambi sonno (I hadn8217t abbastanza rese conto di quanto è grande la mia mancanza di sonno era diventato) e la lettura. Che ha finito per ricordandomi che disconnessione di tanto in tanto può pagare i dividendi. Sulla strada fuori dalla porta, dalla mia pila di dozzine di libri 8220to read8221, avevo successo di afferrare due libri da portare con me: Tim Harford 8216s L'economista mascherato e una copia pre-release di Dave grigio 8216s The Connected Società. The Economist Undercover è un conto formidabile di come l'economia spinge i comportamenti e la sua visione di come un cambiamento nei nostri motori economici sottostanti è fondamentalmente minando i nostri (tradizionali) strutture organizzative e istituzionali esistenti particolare risonanza con me: 8230economists credono there8217s una differenza importante tra l'essere in favore di mercati e di essere a favore di imprese, in particolare particolari imprese. Un politico che è a favore di mercati crede nell'importanza della concorrenza e vuole evitare che le imprese di ottenere troppo potere scarsità. Un politico who8217s troppo influenzato dai lobbisti aziendali farà esattamente il contrario. Alla fine del libro, che include l'introduzione di un libro successivo Adapt: ​​Perché successo inizia sempre con il fallimento. Racconta la storia di un giovane ingegnere russo Peter Palcinski che ha sfidato il top-down, pensiero gerarchico del primo Russia zarista e poi comunista, più di un centinaio di anni fa: cosa Palcinski rese conto era che la maggior parte dei problemi del mondo reale sono più complesse di quanto si think8230His metodo for dealing with this could be summarized as three 8220Palchinsky Principles8221: first, seek out new ideas and try new things second, when trying something new, do it on a scale where failure is survivable third, seek out feedback and learn from your mistakes as you go along 8230Most organizations and most forms of politics have the same difficulty in carrying out the simple process of variation and selection8230if we are to accept variation, we must also accept that some of these new approaches will not work well. That is not a tempting proposition for a politician or chief executive to try to sell8230 8230There is a limit to how much honest feedback most leaders really want to hear and because we know this, most of us sugar-coat our opinions whenever we speak to a powerful person. In a deep hierarchy, that process is repeated many times, until the truth is utterly concealed inside a thick layer of sweet-talk8230Traditional organizations are badly equipped to benefit from a decentralized process of trial and error8230(yet) the more complex and elusive our problems are, the more effective trial and error becomes, relative to the alternatives. Yet it is an approach that runs counter to our instincts, and to the way in which traditional organizations work. Building on these principles, he suggests the recipe for successfully adapting is comprise of three essential steps: Try new things, in the expectation some will fail Make failure survivable, because it will be common Make sure you know when you8217ve failed. What you want to do as a company is maximize the number of experiments you can do per unit of time. - Jeff Bezos Much as I enjoyed Tim8217s book, I was blown away by The Connected Company. Simply stated, I suspect it will go down as one of the most important management books of the early 21st century. It is a remarkable treatise on the new optimal organizational framework for businesses of the Information Age. I8217ll admit to some bias as I don8217t think I could have written a more articulate or complete account of the philosophy and theory underlying our approach to building Anthemis . We are reaching a complexity tipping point, beyond which organizations will not be able to succeed without a change in structure. 8230And if the world is constantly changing, the only sustainable competitive advantage is to be the one most responsive to change. That means that the speed at which you can learn is the only thing that can give you a long-term sustainable advantage. The problem is that while today8217s companies are very good at processing information and producing outputs, they don8217t know how to learn. Indeed the fractal (Dave uses the term 8220podular8221) nature of how we are building Anthemis is a direct attempt to create a more adaptable 8211 and ultimately more resilient 8211 company fit for the challenges of the 21st century. By explicitly embracing a networked rather than hierarchical structure we have built in the ability to experiment and fail while at the same time giving us many more chances to succeed. Dave also highlights that this new type of organization is in essence a complex adaptive system and some of you might recall from previous posts and presentations that the work of Herbert Simon on this subject has had a profound impact on our thinking. To design connected companies we must think of the company as a complex set of connections and potential connections, a distributed organism with brains, eyes and ears everywhere, whether they are employees, partners, customers or suppliers. Most importantly, a connected company must be able to respond dynamically to change, to learn and adapt in an uncertain, ambiguous and constantly evolving environment. A connected company is a learning company. We see Anthemis as a network, an ecosystem where our main responsibilities are (1) to articulate and evangelize a robust vision 8211 re-inventing finance for the Information Age 8211 and (2) to create a fertile environment where passionate, talented individuals, teams and companies pursuing various components of this vision are provided with the tools 8211 capital, talent, connections 8211 that materially improve their chances of succeeding. Anthemis as a city (as opposed to a traditional company) is another interesting metaphor for our approach that Dave also explores: Taken together, agile teams, service contracts, composability and loose coupling allow the creation of complex service clusters and networks that operate in a peer-to-peer, citylike way. In fact, these kinds of 8220service cities8221 can sometimes be so complex that the only way to manage them is not to manage them. Instead, the company focuses on creating an environment within which they can thrive. The key to creating a successful organization in an era of unrelenting (and often accelerating) change is to build for agility. However the traditional organizational structures that were so successful in the Industrial Age are fundamentally unable to respond to this challenge: Many business systems are tightly coupled, like trains on a track, in order to maximize control and efficiency. But what the business environment requires today is not efficiency but flexibility. So we have these tightly coupled systems and the rails are not pointing in the right direction. And changing the rails, although we feel it is necessary, is complex and expensive to do. So we sit in these business meetings, setting goals and making our strategic plans, arguing about which way the rails should be pointing, when what we really need is to get off the train altogether and embrace a completely different system and approach. Dave highlights Amazon as one of today8217s leading companies that has already adopted many of the tenets of the connected company. He describes their approach as breaking big problems down into small ones distributing authority, design, creativity and decision-making to the smallest possible units and setting them free to innovate. At Anthemis, we take this one step further as most of the teams focused on each of these 8220smaller8221 problems are actually companies in their own right with their initial connection into the Anthemis ecosystem being forged via a financial investment. Aside from our legal structure however, the important distinction between ourselves and a venture capital fund is our clear long-term vision of creating a new leader in financial services: the vision is the glue. The way we think about it is, on those big things, we want to be stubborn on the vision and flexible about the details. - Jeff Bezos Essentially our job (at the Anthemis Group node) in this context boils down to designing and building the structure and system that supports the people and businesses in our network and then operating that system. Further we have a key role in creating and supporting a broad and diverse portfolio of experiments in order to maximize our chances of discovering and building the best and most sustainable financial services businesses in a context of rapid technological change and an evolving competitive landscape. And perhaps in a future updated edition of his book, Dave will be able to point to us as a great example of a successful 8220connected company8221 Power in networks comes from awareness and influence, not control. - Dave Gray Update: In this video. Gary Hamel talks about many similar themes, highlighting that our existing management and organizational paradigms are 100 years old and increasingly anachronistic in a world of accelerating change. Related articles The micro-cracks are turning into fissures, soon to be gaping crevasses as (finally) the obsolescence of our industrial age banking system plays itself out in spectacular front page headlines. Meanwhile it would seem that our society and our leaders are (mostly) frozen in some kind of macabre trance 8211 eating popcorn and mesmerized by the inevitable Crash. If you look at the LIBOR scandal in the context of the technology of the fast emerging information economy, it is absolutely mind-boggling that such an anachronistic process even exists in the world of 2012. In a world where every financial flow is digitized and only really exists as an entry in a database. In a world where truly enormous real-time data sets (ones that make the underlying data required for a true LIBOR look puny) are routinely captured and analyzed in the time it takes to read this sentence. In a world where millions (soon billions) of people have enough processing power in their pocket to compute complex algorithms. In a world where a high school hacker can store terabytes of data in the cloud. In this world, we continue to produce one of the most important inputs into global financial markets using the equivalent of a notebook and a biro WTF. The rate at which an individual Contributor Panel bank could borrow funds, were it to do so by asking for and then accepting inter-bank offers in reasonable market size, just prior to 11.00 London time. For each (of 10) currencies, a panel of 7-18 contributing banks is asked to submit their opinion (yes, you read right) each morning on what each rate (by maturity) should be. The published rated is then the 8220trimmed arithmetic mean8221 basically they throw out the highest and lowest submissions and average the rest. No account is taken of the size or creditworthiness or funding position of each bank and the sample size after the 8220trimming8221 for each calculation is between 4-10 banks. However, the BBA assures us that this calculation method means that: 8230it is out of the control of any individual panel contributor to influence the calculation and affect the bbalibor quote. You don8217t need to be a banker or a quantitative or statistical genius, or an expert in sociology, or even particularly clever to figure out that this is a pretty sub-optimal way to calculate any sort of index, let alone one that has an impact on the pricing and outcomes of trillions of dollars worth of contracts In the 1980s when LIBOR was invented 8211 and (lest the angry mob now try to throw the baby out) it should be said an important and good invention 8211 this methodology just might have been acceptable then, as the 8220best practical solution available given the market and technological context.8221 Banks used to have to physically run their bids in Gilt auctions to the Bank of England (thus why historically banks were located in the City, tough to compete on that basis from the West End or Canary Wharf, at least without employees a few Kenyan middle distance Olympians) But you know what And this is shocking I know8230 They don8217t do it that way anymore. So if LIBOR is important (and it is) . how should we be calculating this in the 21st century Here8217s a few ideas: include all banks participating in the market 8211 and not necessarily just those in London 8211 how about G(lobal)IBOR collect and maintain (in quasi-real time) important meta-data for each contributing bank (balance sheet size and currency breakdown of same by both deposits and loans, credit rating, historical interbank lending positions, volatilityconsistency of submissions, derivative exposure to LIBOR rates, etc.) collect rates and volumes for all realized interbank trades and live (executable) bids and offers (from say 9-11am GMT each day) build robust, complex (but completely transparent and auditable) algorithms for computing a sensible LIBOR fixing arising from this data consider open-sourcing this using the Linux model (you might even get core LIBOR and then forks that consenting counterparties might choose to use for their transactions, which is ok as long as the calculation inputs and algorithms are totally transparent and subject to audit upon request 1 ) This is not only possible, but in fact relatively trivial today. Indeed companies like the Climate Corporation. Zoopla. Metamarkets. Palantir. Splunk (and dozens and dozens more, including newcomers like Indix and Premise Data Corp ) regularly digest, analyze and publish analogous datasets that are at least (almost certainly far more) as big and complex as the newLIBOR I8217m suggesting. Indeed, the management of this process could easily be outsourced to one 8211 or better many 8211 big data companies, with a central regulatory authority playing the role of guardian of standards (the heavy lifting of which could actually be outsourced to other smart data processing auditors) In theory this 8220standards guardian8221 could continue to be the BBA (the 8220voice of banking and financial services8221) but the political and practical reality is that it should almost certainly be replaced in this role, perhaps by the Bank of England, but given the global importance of this benchmark, I think it is also worth thinking creatively about what institution could best play this role. Perhaps the BIS. Or ISO. Or a new agency along the lines of ICANN or the ITU - call it the International Financial Benchmarks Standards Insitute (IFBSI) The role of this entity would be to set the standards for data collection, storage and computation and vet and safekeep the calculation models and the minimum standards (including power to subsequently audit at any time) required to be a calculation agent (kitemark.) Under this model, you could have multiple organizations 8211 both private and public 8211 publishing the calculation and in principle if done correctly they should all get the same answer (same data in same model same benchmark rate.) Pretty basic 8220many eyes8221 principal to improve robustness, quickly identify corrupt data or models. As my friend (and co-founder of Metamarkets and now Premise Data Corporation) David Soloff points out: TRUST ONLY THE MACHINES. If nothing else, this weeks revelations show why it is right for British political figures, such as Alistair Darling, to call for a radical overhaul of the Libor system. They also show why British policy makers, and others, should not stop there. For the tale of Libor is not some rarity on the contrary, there are plenty of other parts of the debt and derivatives world that remain opaque and clubby, and continue to breach those basic Smith principles even as bank chief executives present themselves as champions of free markets. It is perhaps one of the great ironies and hypocrisies of our age and a source of popular disgust that chief executives would now ignore at their peril. Rather than join the wailing crowd of doomsayers, I remain optimistic. The solution to this 8211 and other similar issues in global finance 8211 either exist or are emerging at a tremendous pace. I know this because this is what we do here at Anthemis. But I8217m clear-headed enough to know that we only have a tiny voice. Clearly it would seem that our long predicted Financial Reformation is starting to climb up the J-curve. I just hope that if Mr. Cameron does launch some sort of parliamentary commission that voices that understand both finance and technology are heard and listened to. Excellent, robust, technology-enabled solutions are entirely within our means, I8217m just not confident that the existing players have the willingness to bring these new ideas to the table. Disclosure: I have an equity interest, either directly or indirectly in these companies. 1 There may exist some good reasons for keeping some of the underlying data anonymous, but I think it would be perfectly possible to find a good solution whereby the data was made available to all for calculation purposes but the actual contributor names and associated price, volume and metadata were kept anonymous and only known to the central systemic guardian. Of course you8217d have to do more than just replace the bank name by some static code, it would need to be dynamically changing, different keys for different calculation agents etc. but all very doable I8217m sure. You8217d be amazed what smart kids can do with computers these days. Related articles Though your towers were tall and your powers were grand you could not understand how you fell from great heights and you burrowed with speed a kingdom you did lead from heaven to hell 8211 A Fistful of Swoon, Vandaveer Excuse me if I seem a bit sarcastic but I can8217t help but smile. Slowly but surely the masters of the universe seem to finally be waking up to the inevitability of the eventual obsolescence of the archetypal business model of 20th century banking. I8217ve been talking about this for a decade and the fact that it only took, let8217s seea gigantic global financial crisis and several years of messy aftershocks for these great and good to even start thinking about switching horses Well, you just have to laugh because the alternative is simply too depressing. I happened to be traveling a fair bit this past week, which for me means I actually have a few minutes of downtime to read the Financial Times (thanks to British Airways and the rules forcing everyone to turn off all electronic devices upon take-off and landing) and stumbled upon three articles that caught my attention. First up on Tuesday was Hugo Banzinger 8211 Deutsche Bank8217s Chief Risk Officer 8211 highlighting the fact that 8220Banks must regain investors8217 trust8221 on the op-ed pages. Really You think Banks have also remained remarkably silent on how they plan to adjust their business models. Lenders will have to demonstrate that their future business models are beneficial to society, that they can be run safely and that they are able to restore profitability to make them attractive investments again. Many investors shy from investing in bank equity. Business models and future profitability are too uncertain. Restoring bank profitability is of utmost importance, requiring drastic actions. The standardisation of products and automation of process has to replace the tailor-made approach of many trading desks. IT investment costing billions will be necessary. The number of people on trading floors will have to drop to levels seen at exchanges. Salaries will have to normalise to levels comparable to other services industries. Capital intensive inventory for securitisation will have to return to its originators. Market making will have to be networked and back offices will have to adopt lean production methods as seen in modern manufacturing. These changes will eventually lead to a process revolution of the kind we experienced in retail banking in the early 1990s. All good stuff. I concur. Indeed in April 2002 I wrote 1 : The industrial revolution in investment banking is all about creating a new paradigm for the execution of capital markets business. It is about reinventing the organisational mindset, replacing the traditional front, mid - dle and back office with a highly flexible and efficient product factory attached to a profes - sional cadre of relationship managers and solution providers who work with customers and clients to tailor products and solutions to be produced and executed by the factory. It is about viewing the services we provide as two distinct value propositions, one resting on the creativity and knowledge base of the bank and its bankers, and the other resting on the efficiency and accuracy of production and execution. Much is promised by banks in terms of putting the customer first and delivering solutions not products however the reality is that, even if this is the good faith intent, the current structure of the banks is still aligned to the delivery of financial products as a holistic package with all the ancillary bits (settlement, research, payments, etc.) thrown in to a greater or lesser extent. An essentially analogue model for an emerging digital world. The digital model breaks down all aspects of the business into dis - crete component parts and allows for each to be optimised (either in-house or out - sourced) and then packaged and delivered to the client according to their needs. Through this industrialization of the process, the skills and functions of the bankers must equally realign, with expert designers, engineers and manufacturers on the production side, and state of the art customer service representatives on the other. I guess I just must have been saying8217 it wrong Next, a bit later in the week, the infamous Sallie Krawcheck 8211 yes the former Citigroup CFO amp Head of Strategy, former CEO Citigroup Wealth Management, former President of the Bank of America Global Wealth amp Investment Management division 8211 was also given a slot by the Financial Times editors to explain to us that 8220JPMorgan shows fighting complexity is futile8221. Gee, is this complexity stuff a recent development But despite coming a bit late to the game, she nails it: It is complexity that in good part defines Wall Street and forms some of finances highest barriers to entryIn the main, the response from regulators to the perceived causes of the downturn has been to fight complexity with complexity. Im not suggesting that no economies of scale make sense in banking or financial services more generally, only that they are subsumed by complexity within these integrated financial behemoths. I even have some sympathy for the seductive logic underlying integrated business models, however in my view the theoretical benefits of an integrated model while possibly intellectually robust on paper are impossible to exploit in reality. It ignores what I describe as corporate entropy: ie in any corporate process there exists an inherent tendency towards the dissipation of useful energy. Indeed sticking with the chemical analogy and without writing a book about it it would be fair to say that giant bank mergers are at best an (intrinsically unstable) intermediate product in the reaction coordinate and to make any sense need to be followed by a subsequent division into multiple new end products (which individually release the benefits of economies of scale and synergy without the instability engendered by excessive complexity.) So Citigroup (or UBS or HSBC or RBSABN Amro, etc) should naturally decay to form multiple specialist firms that are more focused and efficient than the multiple firms that had been combined first to form these giants. And too little competition (in the form of disruptive new entrants in particular): Of course more regulations hurt the large financial institutions, but they hurt new entrants more. And competition is a whole lot scarier than regulation to incumbents. If you want to get a sense of this, you could do worse than reading Aaron Greenspans take on US payment regulations moneysciencepgbookmarksAdminread77403held-hostage-how-the-banking-sector-has-distorted-financial-regulation-and-destroyed-technological-progress-pdf. And similar examples exist across the spectrum of financial services and across the globe. The irony is that most financial regulations are born through the desire to protect the little guy from losses, and to some extent they achieve this on one (direct) level but following the law of unintended consequences, the result to often is to create an environment where far larger risks (and losses) are incurred at a systemic level. And who pays for that Well as we all know now, increasingly its all of us (including of course, the little guy.) Via government subsidies, interventions, increasing costs to maintain ever larger and more complex regulatory regimes, all of which need to be paid for with higher taxes and more importantly slower economic growth. Here the bankers are right, all these new regulations make our current system less able to produce growth which of course hits the 99 hardest. But then the bankers stop before asking for a level regulatory playing field that would pour fuel on the smouldering fire of new, innovative, disruptive entrants. Please Lord deregulate me, but not just yet. But of course if you are reading this, you already know we8217re working hard and investing big to help change this. And despite my slight snarkiness above, I am actually excited to see views I8217ve held dearly for many years starting to be adopted by (some of) the leaders and personalities of the financial services establishment. (Indeed, Sallie if you8217re reading this, I8217d love to have the opportunity to tell you about Anthemis and compare notes on the future of finance. And good to see you on twitter. Welcome to the (financial) reformation ) The third article was about Senator Sherrod Brown trying to revive new legislation is the US which would mandate a break-up of the megabanks. He states: I am confident that we will see the government over time requiring some divesting of assets because if big banks keep getting an advantage in the marketplace, and they keep growing and having a higher percentage of assets, its basically a government-endowed advantage. Thank you, US taxpayers. I wonder if we might eventually see something along the lines of the break-up of ATampT. a process that was initiated in 1974 but took ten years and lots of litigation before taking effect in 1984. However ultimately, the problem with banking is not just about size. In this respect, I have some sympathy for the banking lobby: creating 5 or 10 mini-JPMorgans or BoAs is not really the solution (although it could be an intermediate step.) Sheila Bair has also been making the case for smaller, less complex banks: Yet instead of waiting for the government or shareholders to act, the leadership of these megabanks should take the lead in downsizing. The best way for Dimon to provide a better return to his investors is to recognize that his bank is worth more in smaller, easier-to-manage pieces. Let8217s face it, making a competitive return on equity is going to become even harder for megabanks as their capital requirements go up, their trading and derivatives activities are reined in, and their cost of borrowing rises as bond investors recognize that too-big-too-fail is over. If, by downsizing, Dimon can achieve valuations comparable to the regional banks8217, he will potentially release tens of billions of value to his shareholders. More importantly, I think we will inextricably move towards a fundamental reconfiguration of the industry: away from vertically-integrated monoliths and towards an ecosystem or 8220stack8221 of firms focused on different components of the industry. The stack metaphor I think is particularly apt, not only because it is a useful conceit to describe the financial system but also because finance is essentially an information technology business and much useful inspiration can be taken from observing the evolution of the ICT industry as it moved from the mainframe to the internet to the cloud era. And it8217s not entirely coincidental that I first presented these ideas at a telecommunications conference in 2009. In such a world, it would not be inconsistent to have several megabanks with enormous balance sheets, but these would likely be very simple constructs 8211 highly regulated and limited utilities, providing a basic deposit taking and liquidity providing function to the system. As I suggested in my AmazonBay video in 2005, the ultimate destiny of (the core) of the global megabanks might to simply become 8220giant regulated pools of capital.8221 Such banks would have relatively few employees, extremely robust but relatively limited infrastructure, and would make consistent but modest returns on their capital. They would sit towards the bottom of the financial stack, the financial equivalent of the massive (but usually faceless) data centers that run the internet As you might suspect, we have a number of ideas of how this reconfiguration might play out, and this thesis deeply informs our investment process and some aspects of it are already reflected in our portfolio, other aspects not yet but soon we hope. I was thinking of writing an article that would map out how we see banking services being organized in say 2022 but rather than give too many of our secrets away here and now, I think I8217ll keep some of these in reserve for the moment. Especially since the industry seems finally to be starting to pay attention and I don8217t want to lose our 10 year head-start on designing the future of finance as it makes my job so much easier As William Gibson said, 8220the future is already here, it8217s just unevenly distributed8221. Related articles When we set out to create Anthemis Group. we thought long and hard about how it should be structured. We wanted a structure that would: optimally support our core mission to build the leading 8220digitally native8221 diversified financial services group of the 21st century fundamentally and structurally align our key stakeholders: investors, management, employees and our portfolio companies and their founders create transparent economics that are clearly driven by long term wealth creation through capital growth be as simple as possible while remaining operationally and tax efficient We wanted a structure that would avoid: misaligned economics 8211 in particular any structure which would incent management to raise capital without regard to cost we want to be in the business of investing and growing capital not collecting it misaligned horizons - in particular having our investment decisions driven by tactical (time-driven) rather than fundamental considerations the tail should not wag the dog undue complexity 8211 in particular where it might lead to reduced transparency or fundamentally drive management or investment decisions as simple as possible but no simpler And so we very deliberately 8211 against the grain of many (smart) people8217s advice 1 8211 decided to set Anthemis up as a company, or more specifically as a group of companies with a simple holding company at the top of the group structure. In order to give you some insight into why we made this choice, I8217ve tried to distill what we believe to be the key advantages of this structure in the context of our business model, vision and goals: We have one clear, measurable and transparent objective: grow the value of Anthemis shares over the medium to long term. All of our management decisions 8211 which can essentially be distilled into allocations of human and financial capital and assessing the opportunity costs of both 8211 are guided by our best judgement as to how these choices will affect the long term value of our shares. We get this right and everyone is happy. We win (or lose) together with our people, our shareholders and ultimately our portfolio companies and their founders. 2 All investors are invested in the group8217s parent company: Anthemis Group SA, a Luxembourg Societe Anonyme. We have only three classes of shares: preferred (with a simple 1x liquidation preference), common (essentially arising from the exercise of employee performance options) and founder shares (which are economically identical to common shares but carry certain limited governance rights and more onerous vesting and transfer provisions.) Investors and employees don8217t need an advanced degree in financial modeling in order to understand the value or performance of their holdings. Beneath the parent company we have a small number of both operating and holding entities all of which are 100 owned by the Group, the corporate form and domicile of these entities has been chosen to ensure a tax efficient and compliant structure that is also cost effective to run. It is exceedingly simple to understand which we believe has its own value. We have an enormous opportunity in front of us, one which requires our full attention and all our energies. Opacity is a tax on efficiency and productivity. It drains your mental energy. It increases entropy. Transparency sets you free. If nothing else it means that you never have to remember what you said to whom when. More importantly it builds trust which is the currency that fuels networks and ecosystems. Of course it is much easier to be transparent when your structure is simple and aligned across stakeholders. Paraphrasing Warren Buffett. 8220our guideline is to tell our stakeholders the business facts that we would want to know if our positions were reversedand we believe candor benefits us as managers: the CEO who misleads others in public may eventually mislead himself in private.8221 Building great businesses takes time. Typically at least 7-10 years in our opinion, sometimes longer. And having invested in and built a great business, why would you want to sell it Or more precisely it would seem crazy to have to sell it. And yet that is exactly the constraints faced by traditional GPLP venture funds. Sure a GP can ask for an extension, but that doesn8217t change the fundamental truth that irrespective of circumstances, they have an obligation to exit their investments. Aside from the misalignment of fund terms with optimal venture capital investment horizons (which, to be fair, could to a largely be remedied if fund lives were 15 or 20 years rather than 10 ), the other disadvantage of being structurally forced into shorter, time-limited investment processes is that one inevitably risks being seduced by the siren call of high IRRs to the detriment of building real, tangible long term wealth which ultimately arises from actual cash on cash returns. An evergreen 8211 ie equity 8211 capital structure is the simplest, most elegant solution. We also believe in robust and conservative balance sheet management: to use the trader8217s vernacular, we believe in running a matched book. Equity financed with equity. If we do our job successfully, the last thing investors should want is to be given their capital back before they want or need it. If we are successful, there will be any number of ways to create liquidity event(s) as and when required by our investors. If on the other hand we are unsuccessful, quite frankly the structure won8217t make a damn bit of difference to our investors8217 outcomes. In fact they may well be better off holding corporate equity rather than distressed fund units, but almost certainly they would be no worse off. Broken business models are the new black Last week, the Kauffman Foundation published a very comprehensive and well written report concluding that 8220the Limited Partner (LP) investment model is broken8221 as 8220too many LPs invest too much capital in underperforming VC funds and on misaligned terms.8221 There are more than simply structural differences between Anthemis and a venture capital or private equity fund the most important of these is our ambition to build a coherent yet diversified group of companies that is perennial. This means that our investments (and eventual disposals) are framed in the context of optimizing our business portfolio and overall return on invested capital and are considered through a lens of corporate development rather than simply as individual financial investments. The fact that our current investments (we currently have 20 companies in our portfolio ) have been entirely concentrated on 8220venture8221 stage companies reflects quite simply our thesis that the global financial services sector is at the early stages of what we believe will be a secular transformation of the industry as 8220industrial age8221 business models are disrupted and ultimately replaced by 8220information age8221 or as we like to call them 8220digitally native8221 business models. Over the next 10-20 years, our plan is to initiate, grow and consolidate our positions in the companies that emerge as leaders in this new economy. At the same time we plan to continue to make investments in disruptive startups emerging on the 8220innovation frontier8221 in order to maintain a vibrant pipeline of emergent technologies and business models in order to retain our immunization to the innovator8217s dilemma . We believe that the optimal organizational paradigm of the information age will be predicated on networks, not hierarchies and have crafted our approach to building the leading financial services group of the 21st century to be inherently aligned with this hypothesis. Our vision is to build Anthemis into a strong but loosely-coupled network of complementary businesses focused on financial services and marketplaces not to build a monolithic, hierarchical conglomerate. We never want to become too big to fail, our clear aim is to become too resilient to fail. Although our investment thesis is fundamentally different, from a structural or even philosophical point of view our approach is very much inspired by Berkshire Hathaway. (Spookily, upon founding Anthemis, Uday and I happened to be very close to the same ages respectively as Warren Buffet and Charlie Munger when they 8220founded8221 Berkshire Hathaway in 1965. Here8217s hoping history repeats) As an aside, Henry Kravis once called Berkshire Hathaway 8220the perfect private equity model8221 . though why KKR didn8217t or hasn8217t adopted a similar structure is interesting. (One wonders if it isn8217t as a result of the relative riskreward (fee-driven) profile for the GP in a traditional private equity structure vs. the (equity-driven profile) of a foundermanager in corporate holding structure) Other examples of thematically or industry focused groups from whom we draw inspiration are companies like LVMH or Richemont (luxury and branded goods) or Naspers and DST (media and internet) but ultimately we have the sense that what we are seeking to build is somewhat unique, something new. An evolution in corporate organizational structure which is adapted to the emerging social and economic landscape of the global information economy . (excerpt from LVMH Group Mission:) The Group8217s organizational structure is decentralized, which fosters efficiency, productivity, and creativity. This type of organization is highly motivating and dynamic. It encourages individual initiative and offers real responsibilities 8211 sometimes early on in one8217s career. It requires highly entrepreneurial executive teams in each company. For both Anthemis investors and for the companies in which we invest, our focus and approach provides an interesting and complementary alternative to traditional venture capital funds. Although it would be naive to pretend there is no competitive overlap, our conviction (confirmed by our experience to date) is that we are in fact a positive new entrant in the venture ecosystem that complements rather than competes against more traditional venture investors. Not 8220eitheror8221 but 8220and8221. For the startups in which we invest, we know that building an investor syndicate of diverse and complementary talents which includes the networks and company building skills that the best VC partnerships bring to the table is the best way to ensure their chances of success. Our portfolio companies are much stronger for being able to combine our (sector-focused) talents and resources with those of leading VC firms such as Atlas Venture. Bessemer Venture Partners. IA Ventures and others too numerous to mention. And it is equally clear to us that Anthemis is strengthened by the continuous learning and exchanging of ideas that comes with having the privilege of working alongside so many smart and seasoned partners and associates of these VC firms. For our investors, we offer a unique and efficient way to gain intelligent exposure to the future of financial services. And while clearly there are some similarities in our riskreturn profile with that of a traditional venture fund (given that a very significant proportion of our balance sheet is invested in early and venture stage companies), we are nonetheless not strictly speaking substitutable (in the way say traditional 8220bluechip8221 generalist VCs might be.) And as we grow 8211 just as for the startups in which we invest 8211 our risk profile will naturally evolve. Indeed one could think of Anthemis as a financial services 8220meta-startup8221. That said, when considering Anthemis I suspect that many of our existing and potential future investors would characterize Anthemis as a direct venture-stage investment, with any allocation coming from within their venture capital (or private equity) bucket. As such, I thought it would be interesting to examine how Anthemis might stack up in the eyes of an investor in the context of the five recommendations of the Kauffman report. (1) Abolish VC mandates Not sure if this is directly relevant to Anthemis. However we would agree that anything that encourages a return to substance over form in the context of LP asset allocation is a good thing. A private equity investment process that focuses more on the 8220what8221 rather than the 8220how8221 strikes us as being more sensible given the heterogeneity and illiquidity of these types of assets. (2) Reject the Assumption of a J-curve Traditional venture capital theory (useful it seems when justifying reporting opaqueness) states that investments in startups (and thus portfolios of startups in a particular vintage fund) go through a cycle by which their valuations initially decline before later increasing in the goodness of time as the big winners in the portfolio emerge (and are fed more capital) and the losers fall away (with relatively limited capital having been invested.) Kauffman however found that this theory while it sounds good, isn8217t borne out by reality rather most funds experience an 8220n-curve8221 whereby valuations increase substantially in the first 2-3 years (driven by follow-on venture financings at higher and higher 8211 but generally unrealizable and almost always unrealized 8211 valuations), only then to deteriorate over the remaining life of the fund. (ie Big winners often don8217t emerge) Unsurprisingly, they also found that these increases in (paper) value topped out at almost exactly the same time that GPs sought to raise their next fund, producing a flattering backdrop upon which their LPs could tick the track recordhistorical returns box. The reader can draw their own conclusions, but Kauffman concludes that 8220too many fund managers focus on the front end of a fund8217s performance period because that performance drives a successful fundraising outcome in subsequent funds.8221 Investors in Anthemis don8217t have to worry as to whether there is a J-curve, an n-curve or an 8220any-other-letter8221-curveas they are owners of preferred equity in Anthemis. We don8217t raise subsequent funds. The Anthemis founders and management are significant shareholders whose performance compensation is largely equity-driven. Any time Anthemis raises new equity capital (our analog to raising a new fund), both our focus and the new investor8217s focus is on future expected returns on this capital. Full stop. If we go to raise new capital and investors think the share price on offer is too high (or at least too high to offer them the risk-adjusted returns they expect), they won8217t invest. If the Anthemis Board thinks the share price offered is unattractively low (insofar as the cost of capital exceeds the company8217s expectations as to it8217s projected risk-adjusted returns andor those available from new investments), it won8217t issue. Every smart entrepreneur and venture capitalist understands the intrinsic tension between capital and dilution which acts as a powerful aligner of interests. We simply embrace this dynamic, aligning our returns to those of our investors and removing path dependency and our ability to arbitrage the structure at the expense of our investors. (3) Eliminate the Black Box of VC Firm Economics I must admit that before reading the Kauffman report, I didn8217t realize how little information VCs provide to their LPs. It8217s pretty ironic given that most VCs spend more time negotiating (and are more dogmatic about) the nuances of control and information rights in the companies in which they invest than pretty much anything else, including valuation. The report highlights that 8220LPs seem to lack the conviction to require the information from GPs in the same way the GPs themselves require it8221 and apparently don8217t use the leverage that they potentially have to force the issue, according to one GP quoted in the report 8220LPs never walk away.8221 Sure. Um, that sounds like a robust and healthy investment process. Yikes. But the boxes are ticked and the forms all filled in nicelyand so everyone8217s happy. Another perceived top-tier GP agreed with our view about the importance of transparent partnership economics and he admitted 8220no good answer8221 as to why LPs couldn8217t receive the same information about his fund, except that the information is 8220never shared.8221 Ok so you can get away with it, fine, but why Why not be transparent It sounds like a bunch of derivatives bankers that won8217t share the model because they8217re afraid the client will find out just how big their margin is and 8220won8217t understand8221 all the costs (systems, people, capital 8211 immediate and contingent) that this gross margin needs to support. (Irony alert: of course these same bankers usually hold up this gross margin to their managers as profit, blithely ignoring these same items in the pursuit of a 8220fair fx8221) Imagine Joe Entrepreneur saying to Jim VC: 8220Just write the check and trust me. It8217s complicated, I don8217t want to cause you any unnecessary anxiety or have you misunderstand the numbers. That would be distracting. I8217ll let you know when I need more. Thanks.8221 Come to think of it Jack Dorsey could probably get folks signed up on those terms So Anthemis is not a black box. We treat our investors like any startup would treat their VC investors. We have certain information and governance rights written into our articles and in general we respect and are open with our investors, doing our best to keep them informed and making ourselves available when they have ideas or questions they would like to discuss. We have audited financial accounts, a clear remuneration policy (overseen and approved by the Board including at least one Investor director) and quite frankly a pretty transparent and straightforward approach to investor relations. We can8217t imagine having a conflictual, non-trusting relationship with our investors. What we are trying to build is hard enough as it is, we need our investors to be on board: not just financially, but intellectually and emotionally. And so I hope Warren doesn8217t mind if we adopt Berkshire Hathaway8217s first Owner8217s Manual principle as our own: Although our form is corporate, our attitude is partnership. Udayan, Nadeem and I think of our shareholders as owner-partners, and of ourselves as managing partners. (Because of the size of our shareholdings we are also, for the moment and for better or worse, controlling partners.) We do not view the company itself as the ultimate owner of our business assets but instead view the company as a conduit through which our shareholders own the assets. (4) Pay for Performance Our first hand understanding of how this principle was being misapplied in much of mainstream finance and asset management was yet another proof point for our thesis that financial services business models were ripe for disruption. It is the shield the industry wraps itself in: 8220we may be paid well, but we are a meritocracy and our pay is justified by our performance.8221 This may have been true once 8211 and in some firms in some activities it probably remains true today 8211 but these are too often the exceptions not the rule. It8217s a whole other essay as to how and why this is and how it came to be so, but I8217ll spare you the details and jump straight to the punch line: too many compensation models are structurally biased to favor human over financial capital and worse, compound this bias with path-dependent outcomes that reinforce the skew, sometimes dramatically so. The standard 2 and 20 fund compensation paradigm is one of these. There is nothing fundamentally wrong with the principal behind it 8211 you get a management fee to cover your overheads and a performance kicker if you generate returns (even better if there is a hurdle rate which should be based on the risk-free return plus possibly some margin for the extra risk or illiquidity depending on the strategy.) And frankly, this model can and does work, especially when the managers have a substantial stake in the fund (both in absolute terms and in terms of a of their net worth) and when the fund has performance high-water marks andor hurdle rates. Good examples of this model working are often found in the hedge fund world, where principals often own much or even most of the fund and their holdings represent a very substantial proportion of their total net worth. In cases where these conditions aren8217t met it often doesn8217t work out so well. The fixed percentage management fee acts as an opiate, driving managers over time to focus their energies on asset gathering (not management.) The temptation to increase AUM to the largest (credible) size is strong as doing so essentially gives the managers a free upside performance option as the management fee alone becomes enough to pay themselves handsomely. Heads I win, tails you lose. 3 This pathology is bad in any asset management context, but is particularly toxic with respect to venture capital given that it is an strategy that involves investing in a limited number of essentially illiquid securities. If you are a macro hedge fund investing in FX and interest rates, the fact that you are managing 100mn or 100bn possibly doesn8217t matter (especially if a big chunk of the capital is your own.) If you are investing in venture 8211 or for that matter small cap public equities 8211 a strategy that is highly successful with 100mn of capital can be a struggle to execute when you have 1bn or more to play with) Unsurprisingly you often see some of the best VCs (who have easy access to capital) drift towards growthprivate equity strategies where they can intelligently deploy larger sums. Done well this can be a good strategy (for all) but still we wonder why LPs aren8217t more flexible and proactive in negotiating more tailored fee structures, either on a per fund andor per firm basis. In this context, our relatively simple, transparent 8220corporate8221 approach to compensation is an interesting alternative 8211 it aligns management (who are also significant investors) with outside investors under all circumstances. First, not only is there no incentive for management to raise capital (grow assets) for the sake of it, there is actually a strong disincentive to do so: more capital means dilution. It has a cost. Raising capital is only interesting at a price that allows Anthemis to improve the risk adjusted returns of its existing and potential future portfolio of businesses. If the cost of raising equity is too high (ie the price of our shares is too low), it is financially more attractive for Anthemis (and our existing shareholders) not to raise more funds and to simply manage our existing portfolio of assets. To be clear 8211 especially given the nature of our assets 8211 I8217m not suggesting that it is possible to create a spreadsheet that will spit out a definitive share price at which we should issue or not 8211 there are too many subjective and uncertain inputs and pricing the opportunity cost of capital (which is essentially what I8217m talking about) is as much art as science, especially at this stage of our development. But what is clear 8211 and structurally friendly to shareholders 8211 is that there is symmetric risk and reward for management when raising capital. Just as there is for the founders of companies that VCs invest in everyday. You don8217t see Jane Entrepreneur raising 100mn on a 1mn pre-money because she could then afford (to pay herself) a big salary rather she is going to look first at what is the minimum amount (including a margin of safety) of capital needed to achieve her key value-creating milestones (while paying herself a reasonable salary.) If the price offered is unattractive, she8217ll probably err on the side of raising less capital if the price offered is generous, she8217ll probably err on the side of raising a bit more. Semplice. Valuation matters. Dilution matters. And most importantly, what is good for Jane in this context is (almost) always good for her existing investors. Alignment. So how do the management and employees at Anthemis get paid Basically there are three components, all of which are easy to understand and ultimately transparent to our investors: Baseline: We pay our people competitive salaries and annual fxes based on their experience and market value this gives us some flexibility and resilience with respect to managing operating cash-flow while allowing us to attract excellent people who don8217t have to be independently wealthy to finance their employment with us. Note that a very significant part of our overhead costs including salaries and fxes are actually financed by our successful advisory businesses which are profitable on a stand-alone basis. These businesses then give a decent return on capital to the group while more importantly enabling significant operating leverage vis-a-vis our investing activities. Under a traditional GPLP structure, given the size of our balance sheet, we would currently only be able to align a small fraction of our professional resources to support our principal investment activities. (And we would not be able to leverage the extremely valuable strategic and informational advantage arising.) Performance fxes (cash): With respect to our advisory businesses, insofar as our operating revenues permit, we accrue a performance fx pool. The size of this pool depends on achieving a certain net operating margin target as set and is agreed by the board. Long term incentive plan (equity): Each time we raise new equity capital, we create an option pool equivalent to 20 of the amount raised these are options on common shares and have an exercise price equal to the price paid by investors in that round and are subject to standard vesting provisions. The options are then allocated to staff over the expected deployment period of the capital raised, based on a number of criteria (skewed towards their respective contributions to the development and performance of our portfolio participations) 8211 again all agreed by the board. Some are also held back in reserve for new hires and exceptional performance rewards. In our opinion, this option structure offers a competitive performance incentive to Anthemis management and employees with a payout profile that does a much better job (than traditional GP carry structures) of aligning the interests of management and investors. Unless we increase their value and create liquidity in our shares, we don8217t get paid. (5) Measure VC Fund Performance Using a Public Market Equivalent (PME) Earlier I mentioned that we were inspired by Berkshire Hathaway one of the elements of their approach that we most admire is their very simple but obviously relevant approach to creating value 4 : Our long-term economic goal is to maximize Berkshires average annual rate of gain in intrinsic business value on a per-share basis. We do not measure the economic significance or performance of Berkshire by its size we measure by per-share progress. Intrinsic value is formed by three components: the value of investments, the value and growth of operating earnings and a third, more subjective element Buffett calls the what-will-they-do-with-the-money factor. In other words the efficiency with which management deploys cash (from retained earnings and new capital raised) in the future. This last factor unfortunately for those who love algorithms is extremely important to the determination of intrinsic value and yet unmeasurable, it8217s a judgement call. As an imperfect proxy to intrinsic value, Berkshire Hathaway tracks the per share book value and it8217s performance vs both the SampP500 and the SampP Property amp Casualty Insurance indices, believing that over the long term this measure at least gives a reasonable indication (although understates) the change in intrinsic value of the business. Obviously we are not Berkshire Hathaway and so it would not (yet) be meaningful for us to simply take an identical approach to reporting, but we are adopting the same intrinsic value-based approach to evaluating and analyzing our performance and valuation. And once we have enough data to be meaningful, we will certainly look to track and publish (at least to our investors) a similar proxy metric that will allow our investors to compare our performance to the relevant benchmark(s). The Kauffman Foundation in their report suggests that the Russell 2000 is an appropriate benchmark against which to measure generic US venture capital returns. Given that we invest globally and predominately in financial services and related businesses, I suspect we will need to look at other potential benchmarks andor perhaps a mix of 3 or 4 different indices. In the past two years since creating Anthemis, the SampP500 is up c. 11 and the MSCI World Financials index is down c. 10, I8217m happy to report that so far we8217re doing better than both As an aside, if there are any index geeks out there reading this who have suggestions as to which index or indices would be the most appropriate benchmark for Anthemis, I8217d be happy to hear your thoughts. For most of my career I worked in capital markets and investment banking and mostly found it to be an incredibly stimulating environment and felt privileged to work every day alongside so many smart and ambitious people. I was particularly fortunate to have worked in fixed income at Paribas for most of the 908217s where I serendipitously found myself at the heart of the birth of the Euro bond markets, with the opportunity to participate directly in building new markets, products and businesses. And once the Euro came in to being, I naturally looked for the next big thing to build, the next big innovation, only to realize (slowly, over the course of several years) that the Euro project truly was exceptional in every sense of the word and that 8211 like most big successful industries 8211 there was actually very little interest in change or disruptive innovation. That 8220if it ain8217t broke, don8217t fix it8221 was the overriding philosophy. (Actually it turns out to be worse, 8220even if it is broke, don8217t fix it8221) It is difficult to get a man to understand something, when his salary depends upon his not understanding it. 8211 Upton Sinclair And so I left. And when I immersed myself in the world of startups and venture capital, I was very excited to be leaving this mentality behind 8211 after all venture was all about the new new thing, right And although I found this to be true of the founders and companies financed by venture capital, and just as in investment banking was thrilled to find myself amongst another group of incredibly smart, ambitious and (new) passionate people, I was surprised to find this didn8217t extend to how VC partners thought about their own business and business models. In this respect, they were collectively just like the bankers I had left behind. (And given the context, this was even more cognitively unsettling) Uday and I (and our newest partner Nadeem) set up Anthemis because we were convinced that a very big opportunity exists to do things differently in finance. And while it wasn8217t at the core of our mission, if you think about it venture capital itself is part of the financial services pantheon and without having set out deliberately to do so, perhaps we will play a small role in catalyzing disruptive change here as well if our model proves to be successful. Meta-disruption anyone Thinking about it, I suspect our model could work for other industries and sectors 8211 especially for those where there are strong network effects and where companies and businesses form an interdependent ecosystem andor value chain. For example an Anthemis for retailing health energy As an investor, I would certainly be interested in building a portfolio of these. Think of it as the the equivalent of sector-focused ETFs but for disruptive, emerging growth companies. Untilunless they were listed, it would be hard to short these companies so it would be impossible to run a balanced longshort strategy in both directions. But a more adventurous or aggressive investor could at least express an even more aggressive view on industry disruption by shorting an index of the incumbents in each sector (against a long position in the innovation holdcos.) 5 What is clear is that change is coming to the world of private capital markets, whether it is sector-focused holding companies like Anthemis, platforms like AngelList. CapLinked or even Kickstarter and others, private company exchanges like Second Market and SharesPost. new approaches to the VC model like A16Z , Y Combinator. 500 Startups and many other ideas I8217m sure that will emerge. Given our nature, I guess it8217s not too surprising to find ourselves disrupting on this dimension too Interesting times indeed. Stay hungry. Stay foolish. 1 The consensus advice was not to 8220rock the boat8221 by doing anything that might be perceived by potential investors as innovative or different. It8217s not that we didn8217t believe the advice 8211 indeed we were certain that in the case of the vast majority of traditional private equity LPs, this was going to be true. (And has been confirmed by the Kauffman report who note that 8220GPs indicated that they and their partners had discussed offering alternative structures and received very negative reactions.8221 ) So are we stupid Well I hope not. Our decision to ignore the advice to pursue a traditional venture capital LPGP structure was based essentially on four points, in order of importance: conviction: a fund structure fundamentally did not correspond to our vision, objectives and business model and would have forced us to make material comprises in all three which we were unwilling to do ethics: having worked in investment banking and capital markets for many years, we had a clear and deep understanding of the traditional incentive models in the asset allocation and management value chain and we believed that in many cases these were fundamentally broken, causing (mostly avoidable) misalignments of interests with often toxic outcomes we did not want to be a party to this 8211 we wanted Anthemis to have a fully transparent and aligned structure strategic: we wanted our shareholders to deeply understand and endorse our vision, to become truly our partners for the long term and be able to weather the good and the bad and intelligently hold us to account because they get what we are building and believe in the opportunity it may sound crazy (for someone who wants to raise capital) but by making it harder for investors with a 8220box-ticking8221 or 8220herd-following8221 mentality to invest, we felt this would help us ensure that those that did were both smart and aligned with us as founders pragmatism (or cynicism): we believed that even with a plain-vanilla, consensus structure, we would struggle to tick all the boxes of a traditional LP who would rather invest in the 4th fund of a serially underperforming VC fund or even the first fund of a GP with years of junior experience at an established VC, than in a team of seasoned operating professionals with a clear vision, who8217s track record of success wouldn8217t however fit neatly into their approval grid we weren8217t IBM and we figured they probably weren8217t going to risk getting fired by investing in us 2 There are two main ways in which our performance can have a positive effect on our (minority-held) portfolio companies: if our performance is good and our share price is strong, this gives Anthemis (greater) access to (relatively) cheaper capital which will allow us greater scope to support the growth ambitions of our portfolio companies as opportunities arise their success drives our success which in turn helps us be an even better, stronger strategic shareholder to them if our shares perform strongly, this creates an interesting currency that we can offer to the founders and executives of our portfolio companies, allowing them a mutually attractive third alternative to hold or sell if and when the day comes when they would like or need to reduce their holding in their company we hope and expect that this will create a unique and powerful incentive that allows us to retain talented people within our ecosystem over the long term, which we consider to be the single most important driver of sustainable long term success 3 To be fair, as Kauffman points out in their report, LPs are enablers of this and if a manager can charge 2 (or more) of AUM and their customers (the LPs) are willing to pay this, there is nothing intrinsically wrong with this if it is justified by performance. I would however suggest a modification that would both allow great managers to charge whatever the market will bear and better align outcomes. For all management fees above the operating costs of the firm, the GPs could 8220re-invest8221 this surplus in the fund. Note this throws up some complications in a fund structure (in an equity structure such as ours, this would simply mean paying out surplus 8220management fees8221 as restricted equity) but I don8217t think it would be impossible to come up with a decent solution. Even if not perfect, it would clearly drive a better GPLP alignment. Indeed this is effectively what (most) of the best hedge fund managers do, essentially re-investing their surplus income back into their fund(s). Clearly this is easier with a hedge fund that will often have daily or at least monthly NAVs but again I don8217t think it would be impossible to come up with a reasonable methodology to enable something similar for venture GPs. 8220Intrinsic value is an all-important concept that offers the only logical approach to evaluating the relative attractiveness of investments and businesses. Intrinsic value can be defined simply: It is the discounted value of the cash that can be taken out of a business during its remaining life. The calculation of intrinsic value, though, is not so simple. As our definition suggests, intrinsic value is an estimate rather than a precise figure, and it is additionally an estimate that must be changed if interest rates move or forecasts of future cash flows are revised. Two people looking at the same set of facts, moreover and this would apply even to Charlie and me will almost inevitably come up with at least slightly different intrinsic value figures. That is one reason we never give you our estimates of intrinsic value. What our annual reports do supply, though, are the facts that we ourselves use to calculate this value Inadequate though they are in telling the story, we give you Berkshires book-value figures because they today serve as a rough, albeit significantly understated, tracking measure for Berkshires intrinsic value. In other words, the percentage change in book value in any given year is likely to be reasonably close to that years change in intrinsic value. You can gain some insight into the differences between book value and intrinsic value by looking at one form of investment, a college education. Think of the educations cost as its book value. If this cost is to be accurate, it should include the earnings that were foregone by the student because he chose college rather than a job. For this exercise, we will ignore the important non-economic benefits of an education and focus strictly on its economic value. First, we must estimate the earnings that the graduate will receive over his lifetime and subtract from that figure an estimate of what he would have earned had he lacked his education. That gives us an excess earnings figure, which must then be discounted, at an appropriate interest rate, back to graduation day. The dollar result equals the intrinsic economic value of the education. Some graduates will find that the book value of their education exceeds its intrinsic value, which means that whoever paid for the education didnt get his moneys worth. In other cases, the intrinsic value of an education will far exceed its book value, a result that proves capital was wisely deployed. In all cases, what is clear is that book value is meaningless as an indicator of intrinsic value.8221 5 Indeed, I kind of regret not having done so with Anthemis by shorting one or two of the broad public financial sector indices at the same time as going long Anthemis. Although having been very long financials in 2006 (structurally as a result of my 16 years in banking), I can8217t complain too much having sold down as quickly as possible my direct holdings and implicitly 8211 by leaving my job 8211 my ongoing embedded exposure As an example, Weatherbill (now Climate Corporation ) where I led the angel round in 2006 is now worth upwards of 9x where I invested, whereas Allianz (where I worked via DrKW) is down c. 40 If you use Commerzbank as a proxy for Dresdner (RIP) it8217s down by c. 95. And yet investors still consider public stocks like these less risky than venture stage companiesgo figure. Related articles Last Thursday I had the great privilege of having been invited by the remarkable Laurent Haug to present a snapshot of our vision of the new emerging universe of 8220digitally native finance8221 at the wonderful Lift12 conference in Geneva. Twenty minutes is not a long time (and thank goodness Laurent indulged me with a couple minutes more) to convey both the context and the substance of what we believe to be a fundamental shift in the paradigm of the financial services industry, but I hope I was able to give at least a good high-level overview. Most importantly, I hope I was able to convey the excitement we feel at the vastness of the opportunity and the winwinwin (for the customerscompanieseconomies) available to those who embrace the opportunity for technology-enabled disruption in financial services by introducing them 8211 however superficially I8217ll admit 8211 to just a handful of companies who are at the vanguard of this wave of change. For those that are interested, my presentation and video (updated) is below: For those that are interested, here are links to all the companies mentioned in the presentation, those in which Anthemis is invested are marked with an asterisk. Clearly this is just the tip of the iceberg and there are many, many more companies and entrepreneurs and venture stage companies now focusing on creating the future of financial services 8211 a veritable Cambrian explosion of innovation: (note: this selection is somewhat random and driven by a desire to show an interesting representative cross-section rather than trying to pick out the most important or most successful companies in the space) (in no particular order) Personal finance Simple 8211 Worry-free alternative to traditional banking Fidor Bank 8211 Banking with friends Movenbank 8211 Spend, save and live smarter Zopa 8211 A marketplace for money Wonga 8211 Payday loans alternative Billguard 8211 People-powered antivirus for bills Holvi 8211 Smart Banking for Group Activities ArchiveMe 8211 Invoices and expenses in a minute Payoff 8211 Money made simple, social and fun Markets and trading eToro 8211 Your investment network StockTwits 8211 The financial communications network AlphaClone 8211 Follow the smart money Trefis 8211 What8217s driving the stock Estimize 8211 Uncover the real consensus Risk management insurance The Climate Corporation 8211 Total weather insurance OpenGamma 8211 Unified financial analytics Wealth management Betterment 8211 A better investment Blueleaf 8211 Simple, personal financial tracking Covestor 8211 Find and follow investing leaders Nutmeg 8211 Smarter saving and investing Business banking FeeFighters 8211 Comparison shopping for SMB finance Kabbage 8211 Green to help you grow FundingCircle 8211 Online lending marketplace AxialMarket 8211 Online network for MampA professionals Bilbus 8211 Locate your liquidity Payments Square 8211 Mobile payments system Stripe 8211 Payments for developers The Currency Cloud 8211 FX payments automation service Dwolla 8211 The cash inspired payment network Ixaris 8211 Open payments solutions Leetchi 8211 Group payment application And just in case you are interestedcurious, here are the other companies currently in the Anthemis ecosystem: FinanceACar 8211 World8217s first car finance comparison site MileSense 8211 Turning data into intelligent risk analysis Metamarkets 8211 Fast insight for big data BluFin 8211 Look at finance in a new way MoBank 8211 Cutting edge mCommerce solutions PayPerks 8211 Powering innovative solutions for the financially underserved PeerIndex 8211 Understand your social capital Hooplo 8211 Social games publishing platform Visual. ly 8211 Data visualization platform for big data As I said in my presentation at Lift12, it is an incredibly exciting time in this space, and it is tremendously satisfying to see all the work we8217ve done to position Anthemis at the heart of this opportunity space starting to bear fruit. Working with the amazing entrepreneurs and companies in our portfolio is a privilege and we are constantly impressed by their vision, focus and energy which is infectious. And beyond our existing portfolio, we have an incredibly strong and varied pipeline of new companies we hope to bring into our ecosystem over the next year or so. You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete. 8211 Buckminster Fuller Related articles