Gnutrade Online Trading Plattform

5 gode spill for å lære aksjemarkedsstrategi Kraften til praktisk læring er ubestridelig. Men når det gjelder å investere pengene dine på aksjemarkedet, kan det imidlertid koste deg mer enn bare selvtillit ved å lage en nybegynners feil. Heldigvis gjør Internett det enkelt å øve med virtuelle penger. Det finnes en rekke online investeringsspill som Investopedia og gnuTrade som spiller med virtuelle penger, men ikke alle er enkle for nybegynnere. Her er fem av de beste gratis (fordi du ikke må bruke ekte penger til å spille med falske penger) online spill for å få føttene våte. 1. Wall Street Survivor Invester 100.000 i virtuelle penger via rullegardinmenyvalg. En vennlig tegneserieversjon av lagerguru Mark Brookshire hjelper deg med å gjøre din endelige avgjørelse ved å gi noen karakternumre når du legger inn en aksje. Disse inkluderer en vurdering for overlevende sentiment, grunnleggende, teknisk og Motley Fool Rating. For ytterligere hjelp til å velge aksjer, har nettstedet et imponerende ressursbibliotek som spenner over nybegynner, mellomliggende og avanserte nivåer. Start med Investing 101 og vurder å dra nytte av fellesskapfora hvis du har bestemte spørsmål. De som trenger litt hjelp med å komme i gang, kan også velge å tilpasse en av de forhåndsdefinerte porteføljene som er opprettet av anerkjente forhandlere. Mens 100.000 konkurransen er mest populær, kan noen på nettstedet lage en konkurranse. Prisene varierer, men består oftest av konkurransedyktig stolthet. 2. HowTheMarketWorks eid av samme firma som Wall Street Survivor. dette spillet er flott for investorer som ønsker å få erfaring med en ny type portefølje. I tillegg til aksjer og indekser er det muligheter for å eksperimentere med Forex porteføljer, penny stocks, fond og kortsalg. Nybegynnere kan utføre markedsordrebaserte handler i en morsom modus uten å bekymre seg om ting som angitte timer, maksimalt antall handler per dag, per aksje og ordreutløp. En realistisk modus forsterker kompleksiteten etter at de har mestret begynnernivået. Spillere kan styre opptil tre aksjeporteføljer og tre Forex porteføljer på nettstedet samtidig. For hver portefølje velger de en startverdi mellom 100 og 500 000 og angir hvor mye virtuell provisjon du belastes per handel. Konkurranseaspektet er valgfritt. Generelle månedlige konkurranser gir hver spiller 25.000 som et virtuelt utgangspunkt. Andre offentlige konkurranser inkluderer utfordrende begrensninger som bare korte eller eneste penny-aksjer. Brukere kan også lage sine egne passordbeskyttede spill, som er en funksjon som lærere finner nyttige for å lage klassekonkurranser. 3. Young Money Stock Market Game Young Money Magazines børs spill er lett å lære, men også ganske realistisk, noe som er en vanskelig balanse å streike. Realistiske aspekter inkluderer en virtuell kommisjon som er tatt ut av hver handel, holder seg til markedstider og regler om hvordan du kan investere. I motsetning til mange investing spill, handles det til en realtidspris. Læringsaspekter inkluderer praktiske hjelpesymboler på nøkkelord og et intuitivt tabbedgrensesnitt. Nettstedet driver en månedlig konkurranse med en 100 (ekte) pengepremie som går til den som har den høyeste prosentandelen. Spillere kan også lage sine egne konkurranser eller delta i andre brukerkonkurranser. 4. MarketWatch Fantasy Earnings Trader Game MarketWatch vil kjøre denne mock aksjemarkedskonkurransen i totalt fire uker, og tildele vinneren av hver uke med en iPad. Dens på uke tre akkurat nå, men det er fortsatt tid til å komme inn på konkurransen i uke fire. Du må ha dine valg plukket før uken starter på mandag. Aksjene du velger, kjøpes på mandager, og vil selges automatisk fredager i nærheten. Fangsten er at alle spillere kun kan bruke de 15 til 20 symbolene som er valgt for hver uke. Selskapene er valgt av spillets eier for selskaper som projiserer inntektene sine hver uke. Lining up plukker er enkle spillere bare dra selskapets logo til deres trading card og utpeke om de vil selge kort eller gå lang. Selv om det er noen fordeler å spille, er dette spillet spesielt håndterbart for nybegynnere på grunn av de begrensede aksjeopsjonene for hver uke. Som Young Moneys-spill har UpDown nyttige ikoner som forklarer nøkkelbegreper for nybegynnere. Flere omfattende ressurser i utdanningssenteret dekker nå selv de mest grunnleggende av investeringsbegrepene. Fellesskapsfunksjoner, som muligheten til å samarbeide med en gruppe og for å se de mest kjøpte og mest solgte aksjene, er også nyttige for nybegynnere. Vaktlisteverktøyet gir et praktisk betjeningspanel for overvåking av potensielle valg. UpDown sponsorer en månedlig konkurranse som belønner spillere som slår markedet med ekte penger. Flere forretningsmessige ressurser fra Mashable: Nesten alle som har vært involvert i finansmarkedene i lengre tid og har viss suksess, vet at disse markedene ikke er effektive. Og takk og godhet. Vel slags. Tusen takk fra investorens synspunkt, fordi dette skaper muligheten til å generere meravkastning. Men de fleste investorer, mest fordi helt ærlig 8211, men sjelden innrømmer det 8211 de prøver ikke engang. Det er mange grunner til at markedene ikke er effektive, de fleste med rødder i det faktum at markedene per definisjon er komplekse adaptive systemer som stadig forandrer dynamikk og lokale likeverd. Men en av hoveddriverne som bidrar til dynamikken til dette systemet, er de psykologiske forstyrringene som har blitt effektivt innlemmet i DNA i det moderne 8220industrial8221 eiendomsfordelingsparadigma. Den naturlige og instinktive herdemekanismen som er bygget inn i måten menneskene tenker på. For de fleste er det ikke mulig å slå av det beste man kan håpe å gjøre, er å ha høy selvbevissthet og forsøke å kompensere for denne forspenningen. Interessant, noen mennesker fysiologisk savner disse mentale banene. Som et eksempel, tenk på folk som rammes av Asperger8217s syndrom. I8217m ikke en lege, men noen av de mest (konsekvent) vellykkede handelsmennene som jeg har hatt privilegiet til å møte eller jobbe med de siste par tiårene, synes sikkert å ha personlighet og atferdsegenskaper som stemmer overens med (minst milde) versjoner av Wikipedia-definisjon av disse forholdene. I8217m ganske sikkert at dette ikke er tilfeldighet.1 Men generelt, de fleste (og dermed institusjonene de representerer) gjør (investerings) beslutninger låst inne i Keynesian Beauty Contest 8211 prøver å gjette hva alle andre mener er pen, ikke søker etter egenartet prettiness. Og dette er ofte en rimelig strategi, det vil si at de ikke oppfører seg irrasjonelt. Selv om det aldri vil produsere konsekvent sterke avkastninger 8211 absolutt ikke absolutt, vil det i lange perioder unngå konsekvent dårlig relativ avkastning, og selv om absolutt avkastning er dårlig (eller til og med katastrofalt), er det betydelig og veldig reell sikkerhet ved å ha falt (hoppet ) utenfor klippen i en flokk. Folk liker å dekke sin rumpa. Feil sammen i stedet for vellykket alene. Tap aversjon. It8217 er en rasjonell overlevelse strategi. Og denne oppførselsrammen gjelder gjennom hele aktivaallokeringskjeden 8211 LPs til Funds to Companies 8211, noe som betyr et par ting: de store tendensene til å bli større (kjøpe IBM) er det en ekstremt høy energibarriere for nye aktører (på alle nivåer av matkjeden) en aktør8217s evne til å skaffe kapital er den viktigste faktoren i deres evne til å skaffe kapital (rekursiv), og for kapitalforvaltere blir deres kjernevirksomhet innsamlet (ikke investerer) kapital (halevognhund) 2 som skaper en stor opportunityrisk-par3 (eller sett fraktalpar): (for individuelle aktører) en mulighet: for de som kan bryte seg bort fra dette kognitive og atferdsrammen for å gi overdimensjonert meravkastning hvis deres overbevisninger er fundamentalt forsvarlig (for samfunnet) en risiko: som i seg selv er verdiskapende investeringer (midler, selskaper) er sultet av kapital, mens mange middelmådige 8220m-for8221 investeringer er overkapitalisert. Etter min mening er det ingen presis, grunnleggende 8220right8221 op tidsbalanse i dette paret, eller absolutt ikke en som er konsekvent i alle miljøer, men jeg mistenker at vår nåværende tilstand er ganske langt fra et potensielt optimalt område. It8217s flott for et (veldig lite) antall skuespillere som kan ha ferdigheter og lykke til å utnytte. Men kollektivt dårlig for våre samfunn og økonomier. Systemisk sprø. Fra dette samfunnsmessige synspunkt synes jeg det er viktig å minst prøve å rette opp denne balansen. Jeg har ikke en magisk løsning for å gjøre det, men som foreslått ovenfor, kan selvbevissthet være ganske effektiv for å bidra til å redusere (i hvert fall en god del) av systemiske forstyrrelser. Det vant å eliminere Keynesian Beauty Contest-paradigmet, men det vil i det minste dempe det. Leter du at I8217m overdriver omfanget av denne herdingskonteksten bakt inn i world8217s kapitalallokeringssystem, la meg dele litt av min førstehånds erfaring med dette. I nesten et tiår var jeg en syndikatleder. For de av dere som ikke er kjent med investeringsbanksjargong, var jobben min å håndtere prosessen med å skaffe kapital (i en industrialisert, repeterbar prosess.) Mens fokuset mitt var fast inntekt (obligasjoner) (noe som betyr at jeg hvert år var involvert i å håndtere hundrevis av avtaler 8211 dvs. datasettet gir meg en anstendig utvalgsstørrelse), kapitalinnsamlingsprosessen 8211 om du reiser en frøkapitalrunde fra engler, gjør en børsnotering eller selger et obligasjonslån 8211 er fundamentalt det samme. Og hvis jeg skulle tegne en graf over de første spørsmålene investorer spurte under markedsføringen av et nytt utstedelse av verdipapirer, ville det ha sett noe slikt ut: (Ja, dessverre, Virginia, dette er hvor for mange av de tradisjonelle lederne av din spareramme deres beslutninger8230) Men for de smarteste investorene (definert av de som konsekvent leverte bedre avkastning, som 8211 i min stilling som syndikatleder 8211 var for det meste et lite antall hedgefond), ble denne grafen inversert. Det er ikke slik at de ikke bryr seg om hvor stor boken var, eller hvem andre var å investere, men at disse var strukturelt sekundære, taktiske spørsmål for dem. Først gjorde de seg selv om de trodde at investeringen var overbevisende og først da gjorde de faktor i avtale dynamikken i deres budtaktikk. Jeg ble påminnet om dette og inspirert til å skrive dette innlegget (i håp om å bidra til å øke den systemiske selvbevisstheten som er nevnt ovenfor) av et par innlegg som jeg snublet over i min sengetid, lesing i går kveld, som fremhevet forstyrrelsene (feil) av investorer i risikokapitalen matvarekjeden (LPs og VCs.) I 8220Hvor å overbevise investorer8221. Paul Graham fremhever atferden I8217ve beskrevet ovenfor: Hvis du kan gjøre så bra et tilfelle som Microsoft kunne ha, vil du overbevise investorer Ikke alltid. Mange VCer ville ha avvist Microsoft. Sikkert noen avviste Google. Og å bli avvist vil sette deg i en litt vanskelig posisjon, for som du vil se når du begynner med innsamlinger, vil det vanligste spørsmålet du får fra investorer 8220 hvem andre er investing8221 Hva sier du om du har vært innsamlet for en stund og ingen har engasjert ennå Mens Eghosa Omoigui av EchoVC snakker om riskopportunity paret som oppstår fra 8220Trough of Conviction8221 at LP og VC er utsatt for å bli sittende fast: Konvensjonell visdom har alltid vært utrolig forførende. Spesielt som det krever lite eller ingen intellektuell innsats. Jeg danner sakte en hypotese at mønstermatching i VC viser lignende egenskaper, merkelig nok. Today8217s VCs faller byttedyr til minefeltet av såkalte aksiomer masquerading som truisms. Så å stikke til x for y eller a for b-plasser er enkel, troverdig og dermed finansierbar. Jeg har ingen problemer med dette rammeverket. Det hjelper entreprenører å fortelle en historie, og VCs elsker å finansiere fortellere. Men det implodes når den står overfor forstyrrende innovasjon, som jeg har sett gjentatt presenterer seg som et uoppdaget versus ubehøvlet behov. Så alt dette koker ned til den tilsynelatende forkalkningen av mønstergenkjenning (formel VC), og avviket fra den tosidige risikovillingsmarkedet (entreprenør og venturekapitalist) som alltid var en viktig del av tidlig stadiums venture. En fulltidssikkerhet på mønsterpassing når du ikke følger med oppgaveformasjonen, betyr at du vil savne de store vinnerne. Som ærverdige Tom Perkins erklært, hvis du ikke hadde noen risiko, hadde du allerede savnet båten.8217 Og han fortsetter å sitere Elon Musk: Jeg synes det er viktig å begrense fra første prinsipper enn analogi. Den vanlige måten vi utfører våre liv, er vi grunn analogt Vi gjør dette fordi det er som noe annet som ble gjort .. eller det er som hva andre mennesker er doingslight iterasjoner på et tema Første prinsipper er en fysikk måte å se på verden hva som egentlig betyr at du koker ting ned til de mest grunnleggende sannhetene og så grunnen til at det tar mye mer mental energi Noen kan og folk sier at batteripakker er veldig dyre og det er akkurat slik de alltid vil være fordi det er slik de har vært i det siste. Nå kanskje ved å godkjenne dette se meg selv, lider av bekreftelsesforstyrrelser. DNA-en av Anthemis Group er trolig helt oppgavedrevet (både i de virksomheter vi støtter med kapital og i hvordan vi organiserte Anthemis og vår tilnærming.) Selv om det er for tidlig for meg å definitivt si at vår avhandling er bevist. Når det er sagt (selvbevissthet), er dette rammeverket det samme som informerte meg om mine største tidligere (investerings) suksesser 8211 Betfair. Markit. Weather. Zoopla 8211 som har vesentlig oppveiet de som ikke trente. (Interessant nok, et eksempel på en dårlig investering som I8217ve laget, var i et selskap som heter GnuTrade. Og selv om GnuTrade didn8217t lyktes, dannet et selskap på nesten samme tid med samme visjon som heter eToro 4, lyktes spektakulært. Oppgave bekreftet, støttet feil hest .) Så min 8220call to action8221 er at alle som leser denne som har ansvaret for å gjøre investerings - og kapitalallokeringsbeslutninger, kjemper vanskeligere mot sine forstyrrelser for å bare følge veien til minste motstand 8211 mengden 8211 og å utvikle og omfavne sann overbevisning som skyldes en robuste kognitive rammeverk, og å handle på dette. Selv om bare ved margene. Let8217s beveger nålen. Vi skylder det til våre barn å prøve. 1 Jeg ble litt overrasket over at jeg ikke kunne finne noen undersøkelser som hadde blitt publisert på dette emnet som kunne bevise denne korrelasjonen 2 Noen venture-støttede selskaper kan også falle inn i denne trap8230 3 Jeg tror at muligheten og risikoen er som grunnleggende partikler som bare eksisterer i universet i par, to forskjellige sider av samme mynt så å si. 4 Anthemis er stolt av å være en liten investor Hvilken sti har du tenkt å ta, sa Nell8217 Constable, som hørtes veldig interessert. 8216Konformitet eller opprør8217 Ingen av dem. Begge måtene er enkle 8211 de er bare for folk som ikke kan takle motsigelse og tvetydighet. Neal Stephenson, Diamond Age På Anthemis Group mener vi at nøkkelen til suksess i informasjonsalderen ligger i å bygge sterke, livlige, sammenkoblede nettverk av smarte mennesker og bedrifter. De digitale verktøyene fra det 21. århundre gjør det mulig for oss å gjøre dette med en dybde, bredde og hastighet som ikke er mulig å forestille oss bare for et tiår siden. Og likevel kraftig, erstatter disse verktøyene ikke verdien av ansikts-til-ansikt-tilkoblinger. Hvert samfunn må spørre seg selv, 8220 Hvem er de som skal drive dette fellesskapet fremover i de neste 10 årene8221 og finne ut hvordan de skal støtte dem. 8211 Charlie O8217Donnell Med dette i tankene, arrangerte vi forrige uke vårt andre Anthemis HackingFinance retrett (AHFR13) som samler 60 fantastiske personer 8211 oppstartstiftere og ledere, investorer, designere, ledende økonomitjenester, tankeledere og Anthemis-teamet 8211 i den magiske alpine innstillingen av Meribel. Vi ba dem om å ta et skritt tilbake fra sine travle profesjonelle liv og koble til. Med hverandre. Med miljøet. Med fremtiden. Og i minst noen flyktige timer, tenk på hvordan dette samfunnet, dette økosystemet kan bidra til gjenfinning av finansielle tjenester. Tenk på hvordan vi sammen kan bygge bedre forretningsmodeller, skape bedre produkter og tjenester, forme bedre regulering. Tenk på hvordan vi kan fjerne en sti som tar oss fra den åpenbare forældelsen av industrialderfinansiering til et nytt paradigme for å yte finansielle tjenester som er naturlig tilpasset den teknologiske, økonomiske og kulturelle virkeligheten til det 21. århundre. Hackere tror at noe alltid kan bli bedre, og at ingenting er fullført. De må bare fikse det 8211 ofte i ansiktet av folk som sier at det er umulig eller er tilfreds med status quo. 8211 Mark Zuckerberg Anthemis er fortsatt et veldig ungt selskap. Ressurser og innsats 8211 tid, penger, folk 8211 som var nødvendig for å organisere og være vert for denne retretten, var viktige for oss. Som et oppstartsselskap er it8217s vanskelig å bygge en tradisjonell økonomisk modell for å måle verdien eller prøve å kvantitativt måle ROI. Og likevel er det rikelig klart for oss at verdien som er skapt av en slik begivenhet, er veldig ekte 8211, ikke bare for Anthemis eller vår porteføljevirksomhet, men for det bredere økosystemet. Verdi som oppstår direkte fra energi, lidenskap og engasjement som hver deltaker brakte med seg. For det er jeg utrolig takknemlig. We8217ve forsøkte å bygge Anthemis som et underlag: Freskt jord hvorfra fantastiske bedrifter kan vokse, frøet av talentfulle mennesker som deler en felles lidenskap og føler den åpenbare muligheten som eksisterer for å skape en bedre økonomisk fremtid. På blomsterspråk betyr anthemis (kamille) tålmodighet i motgang. Det var kjent som urt av ydmykhet fordi, som en plenplantasje, jo mer det ble trodd på, jo raskere det vokste i Biodynamikk, fremmer kamillepreparatet en god sammenbrudd av proteinene i komposten til humane plantenæringsstoffer, og forhindrer proteinet bryte ned til ammoniakk som ville gå tapt til atmosfæren. Det hjelper jord til å beholde nitrogen og kalsium, holde dem i levende rike og hindre tap av atmosfæren. Kamillepreparasjon styrker plantens regenerative livsaktivitet og gjenforenes dette med det fysiske. Denne evnen har ført til at kamille blir referert til som plantens lege i folklore. Det har blitt sagt at hvis du har en sviktende plante, bare plant kamille ved siden av den og det vil gjenopplive. (fra kamille planters lege) Den har alltid vært lett for oss, og det er vanskelig å bygge en bedrift. Å øke kapitalen er vanskelig 8211, spesielt når du avviger fra status quo på noen måte. Men vi visste at det gikk inn. Jeg tror ikke det er for mange ting i livet som er virkelig verdt å gjøre det aren8217t hardt. Og blir omgitt av utrolige mennesker som stoler på og støtter deg 8211 Entreprenørene vi har støttet til tross for våre beskjedne ressurser, de tidlige investorene som har støttet vår visjon, de som har hjulpet oss på tusen forskjellige måter, bare fordi de trodde det vi prøvde å bygge var verdt å bygge 8211 gjør alle de tøffe øyeblikkene bare det, øyeblikkene. Og gjør det klart at 8220 saften er verdt presset.8221 I løpet av de kommende ukene vil vi gjøre vårt beste for å destillere learningsene som oppsto fra de mange samtalene som ekko over de alpine enger og topper. Og hvor relevant, we8217ll bidrar til å oppmuntre og bistå med å implementere mange av ideene og potensielle samarbeidene som oppsto. Og hold deg innstilt på vår YouTube-kanal for å få en smak av hva som skjedde (og i mellomtiden kan du få et glimt av det siste året8217-arrangementet nedenfor.) Selv om det var 827 år et år, begynte vi allerede å drømme om neste år8217-event, kanskje vi skal se deg der Du forandrer aldri ting ved å bekjempe den eksisterende virkeligheten. For å endre noe, bygg en ny modell som gjør den eksisterende modellen utdatert. 8221 8211 Buckminster Fuller It8217s er ikke en tilfeldighet for oss at noen av de mest produktive og kreative samlingene er vert i fjellene: Allen 038 Co.8217s Sun Valley-konferanse, Aspen Ideer Festival (og mange andre), Dialog, Davos (før den hoppet på haien) etc. 8211 man kan ikke annet enn å få et nytt perspektiv og tenke store tanker når man møter et så majestetisk landskap. Også innsatsen som kreves for å komme til disse stedene, bidrar til å forsterke koble fra one8217s daglige bekymringer og rutine. Jeg kan ikke takke nok alle hackerne 8211, hvorav mange reiste fra de lengste rekkevidde av kloden for å bli med oss. Spesielt I8217d liker å takke Kirsten Dunlop og Suncorp som ikke bare reiste hele veien fra Sydney for å bli med oss, men som sponset vår åpningsmiddag vennlig. I8217d liker også å takke hele Anthemis-teamet for deres positive energi og vilje til å gjøre det som ble bedt om å gjøre vår retrett til en suksess, men spesielt takk Simrat og Pascale og min kjære kone Sandrine uten hvem retrettet bare ville har ikke vært en suksess. Alle som er interessert i innovasjon og forstyrrelse i bank - og finanssektoren, vil ha lagt merke til at verden ser en kambursk eksplosjon av oppstart som er rettet mot denne bransjen. It8217 er en spennende tid for oss på Anthemis Group. som vi har jobbet for å posisjonere oss selv for denne bølgen av forandring i mange år. 8220Skjul til hvor pucken vil være8221 som de sier8230 Den eksplosive veksten av nye aktører i finansielle tjenester 8211 både av enkeltbedrifter og universet til slike selskaper 8211 er selvfølgelig spennende for oss, men utgjør noen utfordringer, hvorav de fleste kommer fra ressurs begrensninger, spesielt tidsbredde og kapital. Vi jobber hardt for å takle og overvinne disse utfordringene når vi vokser vår unike 8220meta-company8221-modell, men det fortsetter å pusse meg hvor mye ny kapital som fortsatt blir pløyet inn i 8220 industrielle age8221 forretningsmodeller, spesielt i bank. To (ikke-relaterte) artikler som dukket opp i nyhetsstrømmen denne helgen, inspirerte meg til å stille spørsmålet høyt. Mens jeg tror at Metro Bank har en (mye) bedre tilnærming til tradisjonell avdelingsbank enn de fleste etablerte, og jeg kan tro at det er troverdig at Rainbow-grenene bedre kunne administreres som en selvstendig enhet, selv om jeg ikke klarer å se hvordan av disse strategiene vil føre til langsiktig, bærekraftig suksess og sterke investeringsavkastninger for sine støttemenn. Det er heller ikke nativt tilpasset overgangen til forretningsmodellene som vil fremstå som Informasjonsalderledere. Deres økonomi er fundamentalt feil, blir mer effektiv bedre styrt, vil gi dem en fordel over de etablerte, kanskje tilstrekkelig for noen kortsiktige (2-5 år) gevinster. Men på lengre sikt er de like utsatt for forstyrrende nye modeller som i dag8217s etablerte (kanskje moreso gitt deres mangel på TBTF-tröghet.) (På den annen side, hvis de er i stand til å utnytte deres utfordrerstatus, tilgang til kapital og mer fornuftig ledelse til å samarbeide med eller skaffe seg noen av de nye Banking 3.0-lederne, kanskje de kan dukke opp som vinnere på lengre sikt8230) Økonomien til virkelig nye aktører som Fidor Bank. Enkel. Moven og dusinvis av andre er ikke bare marginalt bedre, men i noen tilfeller en størrelsesorden (eller flere) bedre. Klart som nye deltakere står de overfor mange (ofte forskjellige) risikoer for å få tiltak og skalering. Og mens suksessen til ethvert enkelt selskap blant disse 8220digitalt innfødte8221 nye deltakere ikke er sikret, vil jeg foreslå at de store vinnerne av banken fra det 21. århundre nesten helt sikkert vil bli funnet blant disse typer virksomheter (og ikke fra rekkene til tradisjonelle, sentriske modeller.) Som sådan finner jeg det ironisk at mye mer investeringskapital (tilsynelatende en størrelsesorden eller mer) jager disse gamle modellene. Etter å ha jobbet i kapitalmarkeder og investeringsverden i et par tiår, forstår jeg faktisk den dynamiske på jobb 8211 personer (spesielt de som jobber for store institusjoner) føler seg vanligvis mer komfortable å investere i 8220 mer av samme8221: bedre, raskere og smartere versjoner , men but8230 Det er selvsagt lettere å lage lineære fremskrivninger fra fortiden inn i fremtiden. Investering i nye modeller krever at folk anerkjenner diskontinuiteter og eksponensialer, som selvsagt er harde. Saken er, hvis du er midt i en epokal endring i økonomiske og samfunnsmessige rammer (som jeg tror er tilfelle), er dette det eneste rasjonelle valget. For alle som tenker på å investere i bankens fremtid, inviterer I8217d dem til å sammenligne beregningene (kunder, eiendeler, volumer, enhedsøkonomi, etc.) av disse digitale nykommerne med selskaper som Metro eller Rainbow per dollar eller pund investert kapital. Nå tenk på hva noen av disse selskapene kunne gjøre med 100mn, enn si en 1bn8230 pucken kan være i hjørnet for nå, men i8217d heller være foran nettet. Beslektede artikler For mange år siden ble enterprise software skrevet for å kjøre på mainframe datamaskiner. Dette var den beste (eneste) løsningen på den tiden som hadde det nødvendige minnet og prosessorkraften til å kjøre disse applikasjonene, og så 8211 til tross for kostnadene, ufleksibiliteten og operativkompleksiteten. 8211 mainframes representerte den optimale databehandlingsmodellen for virksomhetsapplikasjoner. Inntil en ny datamodell ble oppstått. Basert på kraftige, rikelige og rimelige bladservere og en rekke nye standard programvarekomponenter ble denne 8220technology stack8221 den nye optimale databehandlingsmodellen for å kjøre flere og flere av bedriften. LAMP var den nye 7007000. Ikke bare var denne nye modellen billigere, mer robust og mer motstandsdyktig, det var mye mer tilpasningsdyktig. Videre oppmuntret de åpne standardene til en enorm mengde innovasjon og eksperimenter, noe som igjen bidro til utvikling av et bredt spekter av spesialiserte, men kompatible variasjoner. Dette muliggjorde skreddersydde løsninger for ulike applikasjoner og miljøer som enkelt kan utvikles uten at det er nødvendig å bygge en ny plattform hver gang. Og da hver komponent i stabelen hadde en svært spesifikk rolle eller hensikt, kunne designen optimaliseres uten kompromiss. Den tradisjonelle bankvirksomhetsmodellen speiler hovedrammen: En vertikalt integrert, alt-i-ett-løsning med alle ressursene og verktøyene som trengs for å levere bankprodukter og tjenester i en stor (svart) boks. I sammenheng med det konkurrerende og teknologiske landskapet fra det 20. århundre fungerte dette fint. Det var den optimale løsningen. Men som hovedrammen i databehandlingsverdenen er all-in-one 8220big iron8221-tilnærming til banker ikke lenger den optimale forretningsmodellen som effektivt og lønnsomt skal betjene bankkunder i dag. En ny tilnærming, basert på å samle spesialistleverandører av komponentelementene som kreves for å levere sluttprodukter og tjenester, vil vise seg å være den nye, optimale forretningsmodellen for bankvirksomhet. Velkommen til (bank) stakken. Ta for eksempel prosessen med å lage et lån. Dette bryter faktisk ned i en 8220prosess stack8221 som på et høyt nivå ser noe ut som dette: Hvert lag i denne stakken krever forskjellige ferdigheter og ressurser. Verdidriverne for hver aktivitet er forskjellige. Hver krever en annen blanding av teknologi, design og talent og anvendelse av fundamentalt forskjellige forretningsmodeller og kapitalressurser. Som en forsøk på å huske dem alle i samme organisasjon, betyr det at noen eller alle disse aktivitetene drives på en suboptimal måte. Jo sterkere kulturen er, desto bedre er det banken er (i sammenheng med tradisjonelle, hierarkiske modeller), jo mer akutte er dette problemet. Når det er sagt, så lenge marginene forblir høye og konkurransen dempet, med konkurrenter som opererer mer eller mindre effektive og dyktig utførte versjoner av samme forretningsmodell, stod det med 8220mainframe8221-modellen, var omtrent tenable. Men dette er ikke lenger tilfelle. Nye aktører 8211 unburdened av eldre teknologier og mindsets 8211 kommer frem over stabelen med forretningsmodeller som er tilpasset ikke bare for å utnytte dagens teknologier, men som også adresserer de forandrede forventningene til kundene når det gjelder prising, design og brukeropplevelse. I mange deler av stabelen finner de etablerte institusjonene det vanskelig å konkurrere som de beste av disse nye aktørene får trekkraft. Den beste klarte av dagens 8217s ledende institusjoner vil tilpasse seg dette skiftende landskapet. Hvordan Ved å slippe av sine tradisjonelle forretningsmodeller, åpne opp verdikjeden og gjøre en ærlig vurdering av hvor i stabelen de har en bærekraftig konkurransefortrinn, og hvor de ikke gjør det. Dette er ikke en triviell forandring for de fleste tradisjonelle banker, og bortsett fra justeringer i teknologi og forretningsmodell vil det medføre, kanskje det mest utfordrende aspektet i denne overgangen vil være å forandre kulturen og tankegangen til disse institusjonene for hvem åpne arkitekturer og samarbeid er ofte anathema. Men for de institusjonene som er i stand til å gjøre disse endringene, vil belønningene være betydelige. Ved å fokusere sine ressurser og talenter på områdene av stabelen der de har en ekte konkurransefortrinn, utvider andre områder hvor de er strukturelt konkurransedyktige og samarbeider med (og investerer i) selskaper med forstyrrende nye og kraftige verdsettelser på disse områdene, vil de vellykket navigere overgangen til å bli en informasjon alder bank. Med eksemplet ovenfor er det allerede klart at de tradisjonelle modellene for opprinnelses-, tegnings - og foredlingslån ikke lenger er konkurransedyktige. Nye modeller fra selskaper som FundingOptions. Zopa. OnDeck Capital. Kål og mange andre viser seg å være mye mer effektive og økonomiske. Tradisjonelle banker bør være opptatt av samarbeidspartnere med selskaper som disse og spesielt bli långivere og levere sentrale transaksjonsbanktjenester, områder der de har en reell konkurransefortrinn. De skal også utnytte sine sterke distribusjonskanaler for å drive kunder til disse plattformene i bytte for ledende generasjonsavgifter. Selvfølgelig for ledere og ansatte som er ansvarlige for disse funksjonene i tradisjonelle banker, vil overgangen være smertefull, i siste rekke vil jobbene deres forsvinne. Imidlertid er dette utfallet uunngåelig, da deres verdioppstilling og konkurranseposisjon blir stadig mer kompromittert. Ved å omfatte forandring og arbeid innenfor kornet i dette nye paradigmet, kan de etablerte bankene gjøre mye for å sikre deres fremtidige suksess og overlevelse, og vil finne det mye lettere å gjenoppbygge tillit 8211 med kunder, regulatorer og deres lokalsamfunn 8211 redusere kortsiktige smerter og innstilling seg selv på vei til bærekraftig lønnsomhet. Alternativet er å fortsette å gjøre det samme og sakte, men sikkert ruste bort. De beste bankledere i morgen må være så kjent med APIer og SDK som de er med APR og RAROC. Relaterte artikler 12. september markerer 50 års jubileum av John F. Kennedy8217s berømte tale på Rice University, som lanserer prosjektet som ville sette Neil Armstrong på månen mindre enn 8 år senere. Når man hører på sin tale igjen i dag, kan man bare bli inspirert av visjonen og ambisjonen 8211 i møte med en enorm utfordring 8211 som fanget fantasien til nasjonen og verden. Og man kan bare lure på hvorfor denne samme ambisjonen, den samme energien, synes samme følelsesform altfor ofte å være helt fraværende i dag. Hvorfor våre ledere 8211 i politikk som i forretninger 8211 virker altfor ofte for å sette baren så bemerkelsesverdig lav, og rasjonalisere denne mangelen på ambisjon som pragmatisme. Bare å være 8220realistic8221. Ja, det er et sted i denne verden for pragmatisme, for realisme. Men dette unnskyler ikke apati 8211 eller verre kynisme 8211 av samfunnet vårt mest heldige og mektige i møte med stor mulighet og risiko (for disse to er bare forskjellige ansikter av samme mynt.) Bevar jobben min. Min makt. Min hovedstad. Ingenting virkelig verdt i et hvilket som helst domene av menneskelig prestasjon har noensinne blitt oppnådd av mennesker eller samfunn som ble styrt av denne tankegangen. Og likevel er det gjennomgripende. Som vårt globale samfunn og økonomi overgår fra industrien til informasjonsalderen. Størrelsen og omfanget av utfordringene vi står overfor er enda større enn de som er involvert i å sette en mann på månen. Hvert aspekt av våre institusjoner (regjeringen, næringslivet, utdanningen, kulturen) må rekonfigureres de neste tiårene hvis vi skal overleve og til slutt trives i denne nye verden. Vi trenger ambisiøse, lidenskapelige, energiske mennesker til å stå opp og omfavne denne muligheten for gjenoppfinnelse. Ledere. Doers. På Anthemis. Jeg er enormt heldig for å kunne jobbe med dusinvis av slike mennesker som bringer sine talenter og energi til å bære hver eneste dag og arbeider mot vårt store viktige mål om å finne oppfinansiering på nytt. De gjør dette ikke fordi det er enkelt, men fordi det er vanskelig. Ikke fordi suksess er sikret, men fordi det er viktig for dem å lykkes. Jo, det er enklere å være kynisk. Å si det kan gjøres. Vi velger å gå til månen. Vi velger å gå til månen i dette tiåret og gjøre de andre ting, ikke fordi de er enkle, men fordi de er harde, fordi det målet vil tjene til å organisere og måle det beste av våre energier og ferdigheter, fordi den utfordringen er en at vi er villige til å akseptere, en vi er uvillige til å utsette, og en som vi har til hensikt å vinne, og de andre også. 8211 John F. Kennedy Vi har valg. Fremtiden er vår oppfinnelse. Bli med oss. Relaterte artikler I forrige uke var jeg borte med familien min i noen dager. På et sted der det ikke var noen fungerende Internett-tilkobling og et veldig sketchy 3G-signal. Som en oppstartsgrunnlegger med en uendelig å gjøre liste, var dette ganske forvirrende (spesielt da det var uventet.) Så bortsett fra å freaking ut i noen dager, hadde jeg ikke annet valg enn å fange opp både søvn (jeg hadn8217t skjønte helt klart hvor stort søvnunderskuddet mitt hadde blitt) og lesing. Som endte opp med å minne meg om at frakobling fra tid til annen kan betale utbytte. På vei ut av døren, fra min haug med bokstavelig talt mange bøker 8220 til å lese8221, hadde jeg skjedd å ta to bøker til å ta med meg: Tim Harford 8216s The Undercover Economist og en pre-release kopi av Dave Gray 8216s The Connected Company. Undercover Economist er en fantastisk redegjørelse for hvordan økonomien driver atferd og hans syn på hvordan en forandring i våre underliggende økonomiske drivere fundamentalt undergraver våre eksisterende (tradisjonelle) organisatoriske og institusjonelle rammer spesielt resonert med meg: 8230 økonomer mener at det er en viktig forskjell mellom å være i favør av markeder og å være til fordel for næringslivet, spesielt bestemte bedrifter. En politiker som er i favør av markeder, tror på viktigheten av konkurranse og ønsker å hindre at bedrifter får for mye knapphetskraft. En politiker som også påvirkes av bedriftens lobbyister, vil gjøre det motsatte. På slutten av boken inkluderer han introduksjonen til en senere bok Adapt: ​​Hvorfor suksess begynner alltid med feil. Han forteller historien om en ung russisk ingeniør Peter Palchinsky som utfordret topp-down, hierarkisk tenkning av første tsarist og deretter kommunistisk Russland for hundre år siden: Hva Palchinsky innså var at de fleste virkelige problemer er mer komplekse enn vi tror8230Han metode 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 ar e 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 fundamentall y 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 bonus8221) 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. Simple. 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 bonuses 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 bonuses 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 bonuses (cash): With respect to our advisory businesses, insofar as our operating revenues permit, we accrue a performance bonus 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 inte lligently 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 performan ce 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 A lphaClone 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 comp anies 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