Can i industry sign banking arkansas ppt easy
[Music] I'm very happy to be here at exponential finance while my slides are loading I will actually maybe cause a little bit of a stir loved amines presentation great set up for what we do however here's where I would disagree with his point of view we believe that yes we're in a in a deflationary world because of all of the innovation that's evolving at the same time today there are five platforms evolving they're all deflationary and we believe that the public equity markets may be overvalued if you're talking about the indexes but the most undervalued part of any equity market and I mean private or public is innovation in the public markets now consider the source it's what I do innovation in the public markets the other disagreement however would be on the yield curve the last time the yield curve inverted and was inverted during a very strong period of economic activity was during the last period of massive innovation it was in the late 1800s Early 1900s the 50 years to 1929 the yield curve was inverted more than half of the time with the steepest inversions taking place during periods of the most rapid growth the innovations back then of course were electricity telephone and the internal combustion engine we've never seen we had until that point never seen such a period of innovation so we believe and have believed for some time that the yield curve will continue to flatten because of this natural deflationary but good deflationary force at work in the economy enabled by technology and that the short end of the curve will actually go up especially when these trade tensions are settled the short end of the curve will go up relative to the long end and maybe the entire curve will shift up and we would not be surprised to see an inverted yield curve and no recession so with that I've got my slides and let's go innovation platforms what do we consider an innovation platform we Center our research on something called rights law rights law is and you'll get this sense of exponential growth here rights law says that for every cumulative doubling in units produced costs decline at a consistent rate mr.right derived this formula during the early days of airplane manufacturing and he noticed for every cumulative doubling and airplay in the number of airplanes produced costs declined at a consistent rate when costs decline at a consistent rate they tend to prices come down and unleash waves of demand that's what we're talking about when we talk about exponential growth you can see in the middle panel here that's electricity the the start of electricity and you can see how quickly it spread throughout the manufacturing sector in the United States and then the third characteristic so so innovation platforms are characterized by declining cost curves they cut across economic sectors cut across the world and the third characteristic is they spawn more innovation so the innovation platforms that are evolving today you can see on the right there we are publishing a paper this week on this chart and what we're trying to communicate here is we have never been in a period of innovation like we are now if we were measuring this on the Richter scale in terms of impact on the global economy this would be a nine compared to maybe a five or six in the late 1800s Early 1900s so you can see you have to look back that far to the late 1800s early to see multiple innovation platforms evolving at the same time so back then as I mentioned telephone electricity internal combustion engine today we have blockchain technology deep learning robotics energy storage and artificial intelligence these innovation platforms are going to impact every sector and are traveling around the world as I mean and will set us up to understand very very quickly so they're gonna transform every company and every industry here you can see the five innovation platforms are the biggest bubbles on this chart but there are other technologies each of the five is going to be multiple trillion dollars of market cap we believe in the financial markets during the next five to ten years you can see other technologies evolving with them and you can see the one specific to fin tech which is what this conference is mostly about so you can see mobile value transfer devices artificial intelligence in the cloud and blockchain technology so two of the big five are at work in the fin tech space so you can see that modern financial industry evolved over roughly a thousand years so in the 1100s we had the first foreign exchange contract in the 1600s the first stock exchange not until amazon did its one-click payment system did did the modern age we think start to take off so that was in 1999 and then you had P PayPal's email payment system and then you had Olli pays out payment system and you see the explosion explosion in China's mobile payment volume so in in 2017 when I first saw the number nine trillion it was 8.6 that China was reporting for its mobile payment volume I just didn't believe it I didn't believe it because its economy was 11 trillion dollars and the consumer was 35 40 percent of that and so I was thinking very narrowly and incorrectly and shame on me because I have an economics background what we're seeing here look at this one trillion dollars in 2014 in China China's mobile payments to 26 trillion dollars that's only four years that was 2018 talk about exponential growth it's two times their economy and China accounts for more than 90 percent of all mobile payments globally they have run with this and if you go into China into the into tier three tier four cities you will see merchants in huts using only WeChat WeChat pay they don't want cash they're afraid of counterfeit cash and they've and these are 70 and 80 year olds you do not see that in in certainly not in the United States and in the developed world they didn't have the financial rails to begin with they didn't have a deeply entrenched banking system most people in China were unbanked now now they have a bank in their pocket so and you can see two times GDP how can that be well it's because of the velocity of money in the United States the velocity of money is five so five times our GDP would be a hundred trillion dollars five five times China's today would be sixty five trillion but they are soon going to pass the United States so we are talking about and they are showing the way to the rest of the world Africa same situation you don't have the financial rails entrenched like we do we have kind of good enough and a lot of inertia but you can run with this you can run with this and you know at leapfrog the developed world here are some of the other reasons this this incorporates the velocity concept so GDP just measures value-added at each stage of processing where each transaction captures all stages of processing of course in FinTech and then we've got gifting Retta envelope day in china is huge p2p transfers tipping so all all measure of activity that is not captured by GDP so here we are for the the global economy is roughly eighty eighty five trillion dollars multiply that by five so four hundred five hundred trillion dollars in activity we believe FinTech will touch during the next five to ten years you can see the digital companies that have spawned this movement actually Amazon and and Alibaba had to really start this digital wave off with the one-click payment system and app based app based payments and now you're seeing you're seeing many other more pure-play FinTech companies move into into the game and and turbocharged it square with square cash the digital wallet which actually can buy and sell Bitcoin with no transaction fees wire card in Germany Ali Ali I mean PayPal in the United States Shopify Shopify is enabling a lot of the Chinese goods to its the e-commerce platform for many American companies so that they can accept Chinese good so now Millennials are accelerating the FinTech revolution and here you can see where we're harkening back well first of all this is venmo if you don't know what venmo is it's peer-to-peer you can Millennials will go to a restaurant and they'll all share a meal then on venmo they'll just venmo each other for whoever pays the others will venmo their payment and it's very social you can see who's doing what there are some private privacy settings but most people just are able to see well who paid me back and who didn't and there's a little bit of peer pressure there for forty percent plus use venmo more than once per day now that's the Millennials you can see other age groups are beginning to catch on but they're away be half way behind and we go back to social media the adoption of social media back in 2006 Millennials were moving on to social media about 40% of them were involved and you can see here again much lower in the older age groups actually if you go back you can see that the older age groups are adopting FinTech a little faster relative to Millennials then they did social media and part of the reason for that is I know in my own case my children want me to use venmo they want me to be on venmo because guess what it's a way for me to get money to them really quickly whereas with social media they did not want me to be on Facebook or any other place so I think FinTech is taking off for that reason a little faster you can see 12 years later how much every age group was participating in social media and we do think the same thing is going to be true of FinTech although perhaps much faster you can see that the unbanked there are about 1.7 billion I'm sure you've heard that number and we'll hear it many times at this conference but more than 1 billion of the unbanked around the world have a mobile phone and therefore they will and they are beginning to carry their banks around with them in their pockets or their purses even in the United States 20 million people out of roughly 330 million our unbanked that is about the same size as the number of us customers that Citibank has so it's a lot of people and a huge unmet need out there one point four trillion cash transactions per day in in the world so lots of room for FinTech to move in and take over so I don't have to go through a lot of the technology I mean that's such a good job on that but we do think digital wallets are going to become ubiquitous we are looking as an investor we are looking for the companies that are going to win in this space those are going to be huge investment opportunities because it's going to be winner take most in the United States the square cash app has a really good opportunity there and venmo does as well so you can see it's not the traditional banks that are in the lead here many of the banks I think in the last few years thought that Square and venmo were nipping at their heels you know kind of a nuisance really Millennials only and so forth but you can see what has happened here if you look at the number of digital customers now this is just for the US because this is the data that's easy to get if you look at the number of US customer digital asset accounts you'll find that venmo is already number two right behind JP Morgan and squares cash app is number six what you don't see in this chart is that both of them will probably they're growing so much faster Square passionate roughly 80% and venmo at roughly forty percent that they are going to surpass the the banks in terms of number of digital accounts very very soon within the next few years at the same time this is going on another phenomenon is taking place and it's actually being led by Goldman Sachs goldman sachs launched an online bank and savings service no bricks and mortar and they are while while square app square cache app and venmo might have been nipping at their heels from the bank's point of view marcus is coming right at the banks head marcus is offering interest rates of two and a quarter percent for deposits deposit accounts compared to fifty basis points or less for traditional accounts how can they do this it's no bricks and mortar compared to to the traditional banks so their expenses are much lower and just to give you a sense how quickly it's spreading the Marcus phenomenon first of all goldman sachs is a great name great brand and my bookkeeper shifted my account or some of my accounts to marcus automatically without even talking to me because she knew I'd be ok with it the brand name and so forth so you know this is a real problem for the banks artificial intelligence so we believe now as the reason we believe that artificial intelligence is ready for primetime you know we've heard about it for years and years and it's been great for science fiction but until recently until Amazon and Netflix started making suggestions for what we might like to buy our watch and and Apple launched facial recognition until those goods and services came about it didn't really affect our lives so why do we think artificial intelligence is ready for primetime now it's ready because we've taken the human programmer out of a large part of the equation so we've we do a lot of work on autonomous vehicles for example and and in autonomous vehicles we know that a programmer cannot possibly imagine every permutation that might happen in terms of intersections and lane changing and so forth just not possible however you unleash big data and iterative algorithms and supercomputing power and just push those together this is very hard for a human being to accept but they will come up with better answers and can imagine many more permutations once we train them and we just need to train them with data and algorithms and supercomputing power to reach an outcome that a human being does set I'd like to get from a point A to point B safely and as quickly as possible so so as we have analyzed the the opportunity for artificial intelligence we we took a look back at the former computing wave so the PC wave was the first one that's responsible right now for about four trillion dollars in market cap then over the following 20 years to 2018 another ten billion we can now attribute to the internet and we believe over the next 20 years that there will be 30 trillion dollars worth of market cap out of there created because of artificial intelligence compared to 1.5 trillion right now so that's a 14% compound annual growth rate I believe that is way too conservative because all we're doing is assuming that artificial intelligence has the same amount of impact on on the market as the internet did globally we believe that artificial intelligence is going to impact every line item of the income statement and any business leader not trying to figure out you're gonna hear a lot about AI here not trying to figure out how it applies to his or her P&L line is going to be in competitive trouble so here of course other ways and again I won't dwell on these but I mean did in his videos show how biometric is going to become very very important in terms of preventing fraud and analyzing credit risk so we're pretty excited about what artificial intelligence is going to continue to do to give you a sense of what AI is already doing you can see on the right hand side traditional lenders versus square square in case you're not familiar with it is if you've ever seen a mobile phone you'll see I don't know if it's in this country yet I don't think so but a little they'll be able to put a little square on top of the mobile phone so that we can swipe our cards and you've got merchants running businesses on their mobile phone with squares apps so and and because Square is able to monitor every transaction every minute of the day of these businesses it it has so many more data points than a traditional lender when when Square says to merchant you know it looks like you might need a working capital loan or you might you might want to invest some in some equipment so it's starting to help small small businesses build their businesses because it has all of this data and is able to under understand the kind kinds of risks its dealing with but look at the difference between Square and and traditional lender it has three hundred thousand data points to make decisions on where as a tradition traditional lender has eight hundred its able to make these decisions in seven minutes maybe not two seconds like a
mean set for a leap a but seven minutes compared to sixty to ninety days for a traditional lender in the world of small business is a world of difference and you can see the difference between the kinds of data they're dealing with continuous real-time data for square and discontinuous and discrete for the traditional lender so there's no competition here there's just no competition and then finally bitcoin why is Bitcoin ready for for primetime Bitcoin is ready for prime time because it's serving a huge unmet need now in the US when we we were the first asset manager the first public asset manager in I think the world to gain exposure to Bitcoin through the Bitcoin investment trust in 2015 when it was at 250 dollars as you know today I think it's close to nine thousand dollars having round trip from twenty thousand to three so we're still in very early days but what we're already beginning to see is it serves for low-cost remittances and for faster trade settlements I've always wondered as an investor I can trade something in a millisecond and maybe thousands of milliseconds but it still takes two days to settle that doesn't make any sense there are too many toll collectors too many middlemen around the way along the way that is going to change Australia is going to launch its blockchain solution I think in a year or so it's quite delayed but we do believe that is the way these markets are going to go as far as remittances we we are already seeing solutions I know from South Korea to the Philippines the remittance market is a six hundred billion dollar market even though Western Union and others charge eight percent eight percent and in some cases I've heard in Nigeria for example 25 percent to to send money back home so it's ridiculously expensive ultimately what we think the Bitcoin blockchain is going to do specifically is allow for much cheaper its money over IP think voice over IP I don't know if many of you remember but technology futurists were saying when my parents lived in California and I lived in New York voice is going to be free and I was thinking yeah I bring it on because it was very expensive to call today I have three children they're in their 20s they cannot believe I ever paid for a phonecall right sounds crazy but that was voice-over-ip this is money over IP it's going to become the free transmission of money over IP and we do think the Bitcoin blockchain is the most secure out there and we'll be the biggest enabler for this ready for primetime the Bitcoin blockchain last year accommodated 1.3 trillion dollars in transactions now this is not trading activity this is transactions the Bitcoin blockchain is completely transparent so you can follow an IP address and and figure out the transactions 1.3 trillion is more than twice PayPal's Network so this and PayPal is very well developed in the United States and it is spreading internationally so how did this happen in the United States many investors don't believe this number but and it's because we're not seeing it this in the US the huge unmet need is not in the u.s. at least not yet it's in Venezuela where those people the people in that country are losing their purchasing power it's collapsing around them terrible monetary policy terrible fiscal policy and that's where you're seeing it around the world you're also we've done Studies on confiscation of wealth I think if the if the princes in Saudi Arabia had understood what was going to happen to them they might have had a private key number in their head and had some assets on the Bitcoin blockchain because they wouldn't those would not have been confiscated no one would have known about them so if you if we've done lots of studies and just that application alone confiscation of wealth if you take the highest net wealth individuals in the world and you make the assumption that they're trying to hedge against a 5% chance that their wealth will be confiscated that alone and I'm talking about not that many people in the world that alone would be a two point seven trillion dollar opportunity for a Bitcoin blockchain the other huge unmet need is in countries where cross-border trading and I know this is true in Africa where cross-border trading is very very expensive just because of the currency conversions so if you look at the average transaction size in that 1.3 trillion dollars of transactions it's $15,000 and some will quip oh yeah that's a drug money the drug money is not on the Bitcoin blockchain anymore because it's too transparent it's going more to the dark chains Z cache perhaps but not to Bitcoin know these we believe our business-to-business transactions it's b2b and we're pretty excited about what the Bitcoin blockchain future holds we do believe there will only be a few crypto currencies now right now there are more than 2,000 crypto assets we believe there will only be two three or four crypto currencies much like we see now the reserve currency today in the world is the dollar we know now from the crash that we saw from twenty thousand to three thousand dollars that bitcoins market share of the crypto asset ecosystem went from the low 30s to up to now sixty that is what happens during a flight to safety the the world reverts to the reserve currency the reserve currency of the crypto asset ecosystem we believe is Bitcoin and there will be a few more currencies just like there are the yuan the euro the yen so we do believe and and we're looking for those but we also believe that most of the 2000 crypto assets in the world today will be pretty worthless because the velocity it's back to velocity an economic concept here the velocity of many of them is going to be enormous because those who are working in the crypto asset ecosystem are always going to default to reserve currency and we do think that will be Bitcoin so with that I think I'm I think I might have time for a question or so if if if that's if we can allow that here any questions I don't know if this is a Q&A forum or not anyway well anyway thank you we're really excited about the future we think the biggest undervaluation out there is in the public markets innovation specifically because what has happened since the tech and telecom crash and the oh eight oh nine meltdown there's been a shift to what what investors perceive is safety so there's been a lot of indexing and passive investing guess what they are in harm's way because those indexes are filling up with value traps value investors know this they know their biggest risk is a value trap caused by innovation growth investors don't understand this yet but if we're right growth investors are holding right now a bunch of value traps because the world that we are in is moving so blazingly fast as you saw and China is setting the pace in many ways as you saw from that mobile payments chart one to twenty six trillion dollars in four years that's crazy all right thanks so much [Applause]
