10/8/19

When Prices Drop To Zero — Robinhood

What happens to a business when your service is commoditized such that the price — the market price — is ZERO?

This is the problem facing the discount brokerage business today.

To refresh your memory:

 1. A long, long time ago, being a stockbroker was a great gig.

You wore a snazzy suit to work, came in just before the markets opened at 9:00 AM EST, read the Journal (maybe the NY Times back when it was a real newspaper), you called some clients, peddled some advice, entered trades for your customers, had lunch at your desk, and you collected commissions on those trades.

You, arguably, got paid for people following your advice. Let me translate that for you: You told people what to do and then those people paid you for following your advice.

Seems like a self-generating cycle? Move to the head of the class, please.

 2. Markets were open for restricted hours, ensuring that stockbrokers always got home on time for dinner and the chance to play nine before the sun went down.

No Saturdays, Sundays clear.

 3. Along comes this young geeky chap, Charlie Schwab, who understood the “back of house” trading of stocks — sort of like a guy who knows exactly what goes into sausage.

Look at those freakin’ dinosaur computers. Now you carry more than 100X that computing capability in your back pocket.

 

 

 4. Opines Charlie, “Why is the stock trading commission a percentage of the trade when it is the same work for electrons to run down a wire for 1,000 shares of a $10 stock as it is for a $1000 stock?”

Such is the nature of true genius, asking logical, obvious questions and ferreting out the answers.

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06/19/17

Zelle — The Empire Strikes Back

Zelle? WTF is Zelle, Big Red Car? You got some ‘splaining to do, Big Red.

Big Red Car here on the edge of a new dawn in the ATX. [Drama queen is the Big Red Car.]

One of my favorite notions is the idea that a startup “disrupts” a legacy industry or business and then expects the legacy old folks to lay there and just take it. Silly rabbit!

The legacy brethren didn’t get to be the approved solution by being dummies. They may not be lean, nimble, and agile, but they can rent that talent.

WTF are you talking about Big Red Car?

Nowhere does it seem more obvious that the legacy tribe is not going to give up their franchise than in FINTECH.

So, let me tell you the story of PayPal v Zelle.

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