“This is a project a few ex-bankers put together to share our favourite business books. Currently 135 books have made the list, 26 are ranked Tier 1, 26 are ranked Tier 2, and 45 are ranked Tier 3.“
These are two very contrasting views on the future of banking.
The first is a very neat newsletter from Hosking Partners that presents banking in as simple light as possible.
Banks are trusted to hold deposits, to transform their maturity and take diversified credit risk. As a result they have high earning power. The latter is tough to beat and large banks will beat challengers on customer facing technology reaping the cost savings.
Contrasting this are two pieces from Net Interest, chronicling his journey through the evolving world of decentralised finance (DeFi – for those interested this is a good background on the topic).
First he tries to start his own decentralised bank and then writes about Maker DAO, an existing one.
Decline in the number of bank branches appears to be accelerating.
Executives seem to agree – “Of 305 senior global executives quizzed by the EIU for Temenos, 65% think the branch model will be gone within five years, up from 35% four years ago.“
“However, house prices are close to a record high relative to average incomes. This is important because it makes it even harder for prospective first time buyers to raise a deposit. For example, a 10% deposit is over 50% of typical first time buyer’s income. A potential buyer earning the average wage and saving 15% of take home pay would now take five years to raise a 10% deposit.”
“Despite the increase in house prices to new all-time highs, the typical mortgage payment is not high by historic standards compared to take home pay, largely because mortgage rates remain close to all-time lows – in fact, on this measure affordability remains broadly in line with its long run average, as shown in the chart“
It makes the distinction between a winner’s game (where you win by winning) and a loser’s game (where you win by not losing).
He argues that investing has become the latter but does offer some advice:
(1) play your own game – “Impose upon the enemy the time and place and conditions for fighting preferred by oneself.” Simon Ramo suggests: “Give the other fellow as many opportunities as possible to make mistakes, and he will do so.“
(2) keep it simple – “Play the shot you’ve got the greatest chance of playing well.”
(3) concentrate on defence (selling) vs. offence (buying).
Poland’s InPost, that recently listed, has an interesting story and strategy.
It almost went bust but now handles 36% of Poland’s eCommerce volumes and is aiming for 50% margins.
They believe “slipper distance” lockers are the future of eCommerce parcel delivery – they are greener, more convenient than convenience stores, and safer than leaving parcels on a porch.
It will be interesting to see if this strategy is indeed the future.
“People exhibit a bias blind spot: they are less likely to detect bias in themselves than in others.“
“Most people recognise that other people are likely to be biased when judging an attractive person, for example, but think that their own judgment of an attractive person is unaffected by this type of halo effect.“
Clearly, the majority of people cannot be less biased than their peers – hence the blindspot.
Fascinating article on the ballooning software requirement in cars.
“Even low-end vehicles are quickly approaching 100 ECUs and 100 million of lines of code as more features that were once considered luxury options, such adaptive cruise control and automatic emergency breaking, are becoming standard“.
A must read essay on what leadership means and what solitude (seemingly a contradictory state) has to do with it.
Lessons here for investors – solitude, concentration, introspection, original thought.
This quote was also a gem – “I used to have students who bragged to me about how fast they wrote their papers. I would tell them that the great German novelist Thomas Mann said that a writer is someone for whom writing is more difficult than it is for other people.“
Bastiat’s broken window fallacy states: breaking a window may seem to generate economic activity through its repair, but it’s actually a loss once you take the opportunity cost into account.
But what if things looked different at scale? Does destruction lead to positive effects?
What if we all “both underestimate the costs of being stuck in bad equilibria, and overestimate the pain caused by burning down the system.“
This article explores this idea, by reviewing several fascinating economic papers.
