Robinhood, 3M, Remaking Banks and Original Big Tech: The Week’s Most Interesting

In his book “21 lessons for the 21st Century”, Harari writes that the debate is no longer about Capitalism or Socialism. Both were made for the industrial era. Capitalism solved a bunch of problems. But models need to evolve. And we don’t have a model for the age of Info Tech and Bio Tech. We don’t know what is the business philosophy when data is more valuable than land, when jobs can be automated. It is fascinating as the world is devoid of an economic religion for the first time and so capitalism is taking quite a hit. So I have been thinking about what can work. If it has to work then all stakeholders need to be happy about it and you can sometimes see the signs of a model before it is made. This week, I found multiple articles written last week itself which on some level ask one question. What is the role of every stakeholder.


The discussion of stakeholder management was shut down five years back because the term meant the topic was moving one of two ways. A) Capitalism is bad or B) Climate change is because of businesses. In this week’s edition, I promise you I won’t touch on both. Because there is another interesting aspect that I have noticed in the last couple of years. My area of fascination lies in what is the role of each stakeholder in the corporate and sometimes national ecosystem and how does that affect each one. For example, who is the consumer, is the product for him or is he the user of a feature and becomes the product. My interest is not all in capitalistic profit, I am an unabashed believer of it. But the best systems in the world have boundary conditions to ensure that no one is harmed beyond a point and no one benefits from that harm. It seems like a very simple area, but our idea of what is right and wrong was made well before the internet. And post that era there is lesser work done on it.


So this week we start from a trading app made for the videogame generation and earning money from Wall Street Czars. We move on to a personal favorite, the story of 3M, but the article underlines the stakeholder mismanagement in Hospitals. We end with a new model to regulate banks and tie it back to consumer success. And we end with who are the stakeholders that governments have to appease. Is the retention of power more important than the people they were elected to serve? 


1.Vladimir and Baiju decided that finance was too narrowly controlled. Wall Street and complicated brokerages. Tech had the power to Democratize Finance. They made an app. Now they had to think of a name. In medieval times there was a hero who stole from the rich and gave to the poor. Seemed fit. They called it Robinhood. Now the videogame generation could press buttons fast on Wall Street. A person who entered the world of investing yesterday started doing Options trading today. And Robinhood is helping the little guy. But is it? Traditionally the concept of primary consumer was who you served, because the flow of goods and value was a binary transaction. So if Robinhood is helping the average Joe get into the world of investing, then shouldn’t it be earning from them or that be their primary source of GMV/Revenue. But Robinhood’s primary source of revenue comes from somewhere else. They take all the information about people investing in their platform and then tell it to large wall street firms who then add this information into their algorithms. So essentially everyone wins except the little guy. Robinhood has an absolutely fascinating story and this remains one of my favorite articles of the past few months. Sometimes in finance, the marketing is to convince you that you are the customer, when you are the product. Maybe you want to “SEARCH” for a few examples.

https://www.forbes.com/sites/jeffkauflin/2020/08/19/the-inside-story-of-robinhoods-billionaire-founders-option-kid-cowboys-and-the-wall-street-sharks-that-feed-on-them/#7a8f65f1268d

2. For too many years, I have wanted to write about 3M. It’s an old fashioned successful company, which never falls short on innovation. Their products never make the headlines, because of their taken for granted use and the company never makes splashy headlines mostly by design. Companies are like stocks or weight loss. Too much good news or publicity for a year usually means there is something murky or it is just a flash in the pan. For a company that has produced innovation for over 100 years, and has stood stable and grown, it is shocking how little people tend to know of it aside from Post-IT notes. Do read through it. It’s an institution that teaches quite categorically about genuinely hard work and longevity. My stakeholder analysis here is not about 3M or the US government, My point here is about Hospitals and the medical industry. When do you sacrifice profits, when do you say, let me prepare for a pandemic because otherwise too many people would die. 

https://marker.medium.com/how-3m-gambled-its-reputation-on-the-n95-mask-e266a2fd8933

3. In the US, student debts keep increasing, and banks keep profiting off that and the same for many other areas where banks operate. With Banks expected to be the most profitable of the industries, across the world not too many systems have been created that envisage a win for both the individual taking a loan and the bank. Which is why it is a revolutionary idea to tie banks profits to consumers’ financial health. A healthy downside ensures that banks don’t lend to individuals who are already on edge and would not make use of the money in a productive way, helping both the parties involved and the upside is much better for both.  Read it for it contains ideas and structures to implement any new framework also.

https://hbr.org/2020/08/its-time-to-tie-bank-profits-to-customers-financial-health?ab=hero-main-text

4. I think with India’s density of population the debate of privacy and data security always seems a bit too first world. When you in Bombay probably overhear the lives of 4 families in your own house without trying, the concept of privacy seems quite redundant. But this is the first article in a long time that focuses on data beyond Google, FB and Apple. The erstwhile Big Tech of the 90’s are still huge enough and probably have even more information. Also a revelation in terms of how Israel uses this data. You might misinterpret my idea with this article to mean that I ask who are the stakeholders of the telecom giants. Nah. They are just following orders, My question to you would be to figure out who are the stakeholders of the government in a connected world.

https://thecorrespondent.com/621/the-original-big-tech-is-working-closer-than-ever-with-governments-to-combat-coronavirus-with-no-scrutiny/81373317498-76dea099

Hope you had fun reading!

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