A weekly summary of what I’ve found interesting at the intersection of economics, finance and technology.
A good ten years after the global financial crisis and its resulting perennial low rates of return, funding avenues for corporations seem to have changed noticeably, with more and more investors piling into venture capital and private equity, rather than the public markets. The result of this is a glut of funding available for start-ups, especially in the tech sector. Desperate to deploy the capital they have at their disposal, VC/PE principals conduct ever larger financing rounds, and end up providing too much funding.
On the flip side, now faced with an expectation to reach astronomical valuations in a short time, the start-ups embark on often ill-advised global expansions of an unproven business model (“blitzscaling”), burning millions in the process. Recent examples include Uber and Lyft, with less than stellar IPO’s as a result, or dockless bike sharing companies, to name just a few.
This evolution has an impact on public markets as well. Whereas an IPO was the easiest and most obvious route to raise a large amount of capital 20 years ago, many startups now delay an offering for far longer, or skip it altogether. In turn the public exchanges face a reduction in liquidity and in attractive investments, which primes a negative feedback loop. South-east Asia is a striking example, with the Singapore stock market shrinking in total market capitalisation, and local companies opting to finance through VC’s or the vast private wealth in the region instead.
Arguably, there are also wider social consequences to this. Small and medium-sized companies that do not fit the mould of the “blitzscaling” startup are ignored by the private capital, and now also lose the public markets as a funding avenue. Conversely, on the investor side, the high returns that are generated by the winning investments will remain concentrated among a handful of investors, rather than being spread more widely among retail investors who could have participated in an IPO…
The latest alarming findings in the vast, ongoing race to collect and capture all data everywhere relate to browser extensions. Seemingly offering innocuous functionality, it turns out quite a few of them merrily pass along all the browsing history, including URLs to sensitive and confidential information, to analytics firms who use it-no prizes for guessing-to better target advertising.
Every time a story like this surfaces, the overall feeling of sleaziness is just striking. It doesn’t help that the company in question here markets its services under the tagline “is this even legal?”, although one could also argue it’s an unusual display of self-awareness.
Bottom line for end users: avoid installing browser extensions, unless 100% positive that they won’t engage in this kind of behaviour.
Facebook managed to unite pretty much everyone against its Libra cryptocurrency, even though practical interventions are still a way off… Read (Wired)
Inevitably, there seems to be increasing scepticism about Libra in the tech industry, with some expecting it not to launch at all. Read (CNBC)
More generally, a few years after the initial enthusiasm, blockchain projects are being evaluated more soberly now and it turns out most of them don’t produce any significant cost savings or other returns… Read (Reuters)
This kind of fintech product is clever and I’m sure there’s solid technology involved, but what’s the revenue model and does this marginal increase in convenience justify these kinds of valuations? Read (Techcrunch)
On the other hand, this Dutch company offers a seemingly more interesting application of Machine Learning. They built an algorithm that tailors the wording of late payment notices to each individual customer, optimising it both for effectiveness in getting payment and to maintain a good customer relationship. Read (De Tijd $, in Dutch)
Some big corporations, including Apple, are advocating for privacy and use it as a selling point, but are less cooperative when it comes to actually try and enact legislation. Read (Washington Post)
What can voyeur TV show “Love Island” teach us about living under constant surveillance? Read (NYT $)
Sort of related, Vice’s Motherboard obtained a Palantir user manual, which gives an interesting insight into the data US law enforcement has at its disposal. Read (Vice)
What is it with people broadcasting very serious press conferences on Facebook with the cat filter on? Read (Twitter)
That’s it for this week’s edition. As always, thanks for reading and please forward this to anyone who you think might be interested, it would be much appreciated.