Justifying Microsoft’s biggest bet since inception

Microsoft just announced to acquire LinkedIn for $26 Billion which is almost 50% higher than the public market valuation. For the sake of comparison, Google purchased YouTube for $1.65 billion 10 years ago. Facebook paid $715 million for Instagram in 2012 and $19 billion for WhatsApp two years ago. (more…)

2018-11-23T22:26:55+00:00June 15th, 2016|

One line that changes your approach

In old times Kings had strange requests and they had advisors whose jobs was to fulfill them. Failure to do so results in punishments that varied from imprisonment, demotion or in severe case even death penalties. (more…)

2018-12-08T17:20:20+00:00March 29th, 2016|

Important vs Urgent – Who takes the lead ?

Time is the most limited commodity that any successful person have & time management is one of the most sought after skill for majority of us. Urgent & Important are the two major parameters used in prioritizing where to focus our resources on.

Eisenhower matrix is ever-green cheat sheet for any one looking to help prioritize their day. Biggest issue we struggle with is “urgent” taking priority over “important”.

Eisen Hower Matrix

If you give some one two tasks with following
– Task A is urgent
– Task B is important

99% of the times, they will go with the urgent one. There could be multiple reasons for this behaviors, but following two are the most common one.

– Urgency creates emergency giving you the adrenaline rush for the day
– It is easy to get motivated while accomplishing a task that is time driven because it could be quantified

The most urgent decisions are rarely the most important ones.
– Dwight D Eisenhower

However, while focusing on urgent task, we oversee important tasks requiring our attention. It could be a business goal as well as personal goal. Such as joining a gym, going on a vacation, spending time with your family, calling an old friend or be by yourself. Even in business, we mightn’t have updated our website or done a SWOT analysis or the most important one – sitting down with the team over dinner.

So next time, there is a choice between Urgency or importance, chose wisely!

2016-03-21T16:13:11+00:00March 21st, 2016|

It’s March – but interest rates are stable

Yesterday, FOMC announced that they are not making any changes to the interest rate. Later last year, they made an upward move after almost a decade.

They also changed their stance on frequency of changing the interest rate. Earlier they indicated that they would change interest rate 4 times in 2016, but it was not well received in the market. Now they have backed-off to resonate with their counterparts. While it’s not as exciting, this will bring stability to the economy. Stable interest rates are boring but it is good in the long run. Feds assurity about the stable interest rate will bring confidence to investors so they can plan and forecast better. Low interest rate acts like a catalyst to economy by encouraging people to rotate the money and invest rather than just leaving it in fixed deposit.

The new stanceis similar to what European Central Bank ( ECB) and Bank of Japan are taking to boost their economy. This however would affect the USD strength against other currencies. People will prefer to invest in alternative assets, making USD less in demand as an asset class. There are both pros and cons of weaker currency, but overall there are always advantages for a stable currency. So if you are an importer, you should be unhappy and if you are an exporter you should be happy. Historically, Fed movements can be well predicted in advance, which is a good indication of them being more realistic with the economic condition. In near future, we should be assure that interest rates are going to be stable and FOMC meetings would have no exciting news to share.

2016-03-17T20:02:34+00:00March 17th, 2016|

Privacy == Liberty

I recently had an honor to meet Mike Janke ( Co-founder & Chairman Silent Circle – Encrypted Communication Firm), which prompted me to write over this issue.

Mike Janke - Silent Circle

From Wikileaks to recent open letter by Apple in response to request for a backdoor in iOS , there are arguments on both sides on privacy and surveillance acceptability. While there is no denial that better information leads to better decision making which will be helpful for the agencies to protect us, however it might violate the citizen rights which includes privacy. There is a reason why we have private house rather than sharing a big house. While I live in an apartment and like people around me, most of the people have economic reasons to live in shared housing.

People in favor of allowing security agencies to access personal data are making a very strong argument that if there is nothing wrong, why do I need to hide? As popular as it looks like, this is not as simple as it looks like.

Many people have camera or stage phobia. As perfect they are in their job, when asked to perform the same job in front of people, they get nervous or are unable to reproduce the same results as they would individually. This is not because they are bad at what they do, it’s because of the external pressure that they have to be extra cautious. Now take the same example and apply it on your daily life.

Imagine a person watching everything that you do; Every word you spoke and every action you did is recorded in an archive which is saved for decades and is accessible by a person unknown to you. How would you feel about it?

Not taking it to an extreme where you are also observed while you are singing in your bath tub, but imagine being watched in your living room. While there is nothing wrong about watching a hockey game with your friends at your home, but would you be able to enjoy it with a camera over you? Taking example of house might turn off a lot of people, even recording the conversations at a dinner-date is totally awkward as well. Next time when you are having a conversation over a phone, imagine an unknown 3rd party listening to it or even worse recording it.

Here is Obama portions from SXSW’16 on encryption

Cell phones, laptops are very personal now and we spend most time with them than any other living or non-living object. It’s no longer the phone that the entire house shared to communicate, but it’s like a private diary.They possibly have the most amount of data or attachment than anything else and allowing it to be watched all the time makes me uncomfortable. Law enforcement is a difficult job and I am thankful to all the wonderful people who are working day and night to ensure our safety but liberty is what allows us to enjoy it the fullest. There should be no absolute stance from either parties & I hope there would be a good balance between liberty and security as we transform into a more progressive society.

2016-03-15T18:18:46+00:00March 15th, 2016|

Weaker Loonie against USD – Who’s getting hammered here ?

From Acuras to iPhone applications, suits to sweet potatoes, Canadians will be paying more for imported products, on account of the loonie’s fall against the U.S. dollar. It has dropped by almost 10% in last 12 months which is a significant drop in a short horizon of time. Although it’s not the highest one, but certainly rank among them.

Weaker Loonie

“Who wins and who loses when the loonie gets hammered”

Obviously it’s the end customer who will be paying more. Increasing costs are passed on the end customers and if they are earning in CAD, too bad. It’s now happening . Food costs have been expanding for quite a long time. Attire, while regularly made abroad, has a tendency to be evaluated in U.S. dollars and has additionally been getting more costly. So too a first-class thing that Canadians are purchasing in record numbers. Automakers have begun to raise sticker costs on Canadian vehicles.

The Automobile Protection Association says Toyota and Honda, among others, brought costs up in the primary week of January. A few extravagance brands, including Lexus, Acura, and BMW have additionally rolled out improvements to their valuing, with Audi purportedly set to follow in mid-January, the affiliation says. The APA says the greater part of the expansions are unassuming, an additional couple of hundred dollars for every vehicle. Be that as it may, it says Honda has raised the proposed retail cost on its 2015 CRV Touring, all-wheel-drive model by an amount of $750.”Auto organizations will take each open door that they can to expand exchange costs or minimize their introduction to the conversion scale,” says Jason Stein, distributer and supervisor of Automotive News.”We do see costs expanding. We’ve seen costs expanding crosswise over North America. Will they build a smidgen all the more quickly north of the fringe, because of the conversion standard? I believe that is presumably the case.”

It doesn’t cut both ways. Stein, a Canadian who lives in Windsor, and goes for work in Detroit, echoes a portion of the disappointment of some Canadians, who feel automakers were much slower to drop costs in this nation when the Canadian dollar was high. “Interestingly, when the Canadian dollar was over the U.S. dollar, a year, 18 months prior, you didn’t see costs dropping.” Loonie oil costs could fall much even further, Don Pittis said.

A week ago, Apple brought costs up in its Canadian App Store. The 99-penny applications will now cost $1.19 Canadian, a 20 for every penny increment. Different applications under $10 went up by around 15 for every penny. Apple says the expansion is connected to the conversion scale. Different countries feel it as well

However, it’s not every terrible new. The loonie isn’t the main cash falling against the greenback. “This is not imagination of a powerless Canadian dollar story. Some of it is a solid U.S. dollar story,” says BMO’s Porter. “The U.S. dollar is inclining against a considerable measure of monetary standards. So a few things we won’t not be paying significantly more for. For example, a few things from Europe or from Japan, won’t not be going up that much in cost in light of the fact that their monetary forms are additionally debilitating.”

In any case, with the U.S. representing about portion of all Canadian stock imports, the dollar’s doldrums will hit most Canadian shoppers in the wallet.

2016-03-09T16:47:55+00:00March 5th, 2016|

Negative Interest Rate Policy (NIRP) – Friend or Foe?

Whenever we borrow any amount, we expect to pay an interest on top of the principal amount. Recently it was increase after almost a decade however buzz word of negative interest rate have started to circulate in financial world. It’s not a new concept and currently exist in multiple EU countries.

Banks - Haseeb Awan

“Consider it as a Tax on your balances without even defining it to offset loss in revenue due to reduced economic activities”

NIRP is a desperate attempt to boost economy in tough times. As the name states, instead of giving the depositors profits, they are punished to hoard the money by returning them reduced amount. As an example if the interest rate is -.03%. In this case banks will start deducing .3% of the total amount from the deposits. Now consider if your cash is decreasing day by day, you are more inclined towards investing it in alternative asset such as real estate, gold etc. Interest rate operate on pure principle of supply and demand however NIRP is like a steroid for the economy.

NIRP is an incentive for individuals and institutes to circulate the money rather than hoarding it. During challenging times, fear leads to cutting down costs and saving as much resources as possible to overcome any unforeseen circumstances. This creates a ripple effect with conditions getting worse and recovery becomes more challenging in such stagnant society.

Here is excerpt from Mises in 1912

[This view of money] regards interest as a compensation of the temporary relinquishing of money in the broader sense — a view, indeed, of unsurpassable naiveté. Scientific critics have been perfectly justified in treating it with contempt; it is scarcely worth even cursory mention. But it is impossible to refrain from pointing out that these very views on the nature of interest holds an important place in popular opinion, and that they are continually being propounded afresh and recommended as a basis for measures of banking policy.

Cash register
NIRP is charged by central bank and in few cases retail banks take the hit themselves without affecting their end users. While negative interest rate does circulate the money, it drives up the valuations of possible investments such as real estate, gold etc. high creating a bubble. Recent hike in stock, tech and private companies’ valuations are by-product of decade old almost zero interest rate.

People take more risks due to availability of cheap debt & have led to economic crashes. People buying houses at high rate and in-experience people starting their businesses are all high-risk loans which are threat to the financial system. While it looks pretty lucrative to implement it, best practice is to leave it as it is, so businesses can at-least be certain about this aspect.

2016-03-06T15:44:34+00:00February 29th, 2016|

11 facts about Cayman Island

I was in Cayman Island recently and was fascinated by how developed it is. Sharing some of the interesting facts here

1 – Cayman has its own currency; the Cayman Island Dollar (CI$). This is tied to the U.S. dollar and does not fluctuate from it. The cash exchange rate is CI$1.00 = US$1.25.

2 – There is no income tax, capital gains tax, or corporation tax. There is a 10 percent government hotel tax and a stamp duty ranging from 7 ½ to 9 percent on the value of real estate at sale. A departure tax of CI$20 is also collected when you leave the Caymans
3 – Grand Cayman is the 5th largest financial center in the world. It ranks after London, Tokyo, New York and Hong Kong.

4 – There are more than 449 banks and 115 trust companies licensed in the Cayman Islands.

5 – There are no casinos on the Cayman Islands.

6 – You will see equal number of left hand and right hand cars.

7 – The world-famous ‘Seven Mile Beach’ is actually only 5.2 miles long.

8 – There are no embassies in Cayman Island but 13 consulates.

9 – The birthplace of recreational diving. There’s over 150 diving sites on Grand Cayman Island. The island will soon have 365; one for each day.

10 -There is a place called Hell in Cayman Island.

11 -The Cayman Island Turtle Farm is home to 16,000 green sea turtles at any given time.

I have posted few pictures at my facebook page.

Cayman Island

2016-03-06T15:44:45+00:00February 10th, 2016|

Three Ways To Stay Current In The Financial Services Industry

The financial services industry is a cutthroat market with razor-thin margins, making it one of the toughest industries in which to generate profit. Yet, for Fintech startups, it is one of the least chartered, most lucrative sectors.

Accenture recently reported that fintech investments grew 201 percent in 2014 compared to the previous year. As a comparison, overall venture capital investments grew only 63 percent in the same period.

There is little doubt that today’s financial systems are inherently complex, outdated and inefficient. The potential to innovate within this sector has never been higher. Because of wide-scale technology adoption, mobility and digital money, banking and financial institutions are facing imminent threat from fintech startups for products such as loans, money transfers and stock trading.

Indeed, customers today have more options with third-party financial service providers when it comes to choosing products. However, running a profitable fintech startup is very challenging.

With higher cost of customer acquisition, most fintech startups are surviving on venture capital funding. Because they are new, Lifetime Value (LTV) is not yet realized. It would be very difficult for a financial institution to survive on a single product, so they must diversify their portfolio of services to maximize LTV.

No one can unequivocally predict the future. However, here three ways to stay current in the financial services industry.

Existing Banks Must Innovate

Banks are not as slow as they are perceived to be. In fact, they are very smart at focusing on revenue-generating sectors and ignoring less-profitable ones, such as money transfers, small loans, etc. While startups in the space are claiming to take over the money-transfer business from banks, this area is purposely ignored by the banks.

As an example, Western Union, a money-transfer company that controls approximately 18 percent of the money-transfer market, had revenues of $5.6 billion last year, while JP Morgan earned $102.1 billion.

Lending, on the other hand, is considered a profitable service, but bank shares within this sector are decreasing. As per a Goldman Sachs estimate, 20 percent of money lending will move to alternative finance companies, costing the banks $12 billion in lost revenue (this is 7 percent of the total profits for the banking sector).

Banking and financial institutions are facing imminent threat from fintech startups.

Banks have the resources to acquire the best talent, infrastructure and whatever it takes to get the job done. However, the scale of business reduces chances of upward mobility. Fortunately the banking sector has an extremely low churn rate when it comes to core products — deposits and lending.

As per a Consumer Intelligence survey report, approximately 3 percent of people change their banks in any given year. Other findings indicate that 57 percent of people have been with their banks for the last 10 years, and 37 percent are trusting their banks even after 20 years.

Banks have the leverage of a huge customer base, experience, licenses and deep pockets. They will try to stay relevant, but if they fail to innovate faster, they could be looking to acquire winners in the niche product markets. In this case, financial companies retain the monopoly.

The Emergence Of Fintech Banks

The biggest challenge for any company is to acquire customers. High acquisition cost can kill any venture. However, once you have acquired a satisfied customer, you can always cross-sell other financial products to maximize ROI. For instance, a lending platform can sell mortgages. Once they are selling mortgages, they can sell insurance and ancillary services, and so on.

Banks initially started with deposits and lending, diversifying their product offerings later on. Most startups are currently focused on a singular niche product to take incumbent market share away from a profitable line of business. Because of the technology-centric nature, they are better at analyzing data and offering better products and a better customer experience.

The key here is to expand horizontally by being equally good at it.

If you are already using a money-transfer company, why not store money with them, as well? Or, if you are a lending platform, why not take customer deposits to strengthen the deposit base? Rather than going through resource-intensive banking licenses, there are many financial institutions open to giving access to their licenses. This will not just be limited to fintech startups, but also social giants like Facebook, WeChat, etc. that are eager to enter the financial space.

In this case, a technology startup can be the bank of future.

3.0 Brokerage Banks

There is no secret sauce to running a financial institution, but the bottom line is always the same: Keep your operations as efficient as possible.

However, it is almost impossible to be good at every product facet. A lending platform might not be able to beat their competition in the money-transfer space, and vice versa. Similarly, the lending company may struggle when it has to issue insurance.

If banks are unable to innovate faster or startups are struggling with distribution, this creates an opportunity for a marketing company to consolidate all the services under their brand name.

There is little doubt that today’s financial systems are inherently complex, outdated and inefficient.

Rather than developing any expertise, they just take the role of an intermediary and route the transactions through the best possible partner. For example, they may direct a money transfer of $150 to Pakistan via one of their partners, whilst they might use another provider for mortgages. It is not an uncommon practice in other industries. However, such an amalgamated model is rarely found in the financial space if you are just a marketing company.

It would not be out of place to say that by 2020 you might be a marketing brand, showcasing and selling repurposed/repackaged products to the consumers — but at the back end, you are neither a technology company nor a bank.

There might not be enough space for multiple players to exist without venture capital in this cutthroat industry. It will be interesting to watch who wants to be the bank of 2020.

But be it a financial, technology or marketing company, the customer will always win.

This article originally appeared in Techcrunch.

 

 

 

2016-03-06T15:45:08+00:00January 27th, 2016|