The OCC and Banks, Credit Karma selling dreams, NYC pension funds and gun violence, and the basketball mecca’s NBA mediocracy
Stretch Four Insights Volume 36
This week’s edition of the Stretch Four Insights Newsletter is brought to you by Future…
I am ramping my cardio and my trainer Alex has been kicking my ass lately. I have not set a date yet for the half marathon I plan to run in 2023, but if you stay ready you never have to get ready. Alex has adjusted my workout regime and I have been working my way up to 15 miles a week and the plan is to ramp up from there. Alex still has me getting strength training in and Future makes it all possible if nothing else it gives me digital accountability. Alex sends me a text every day.
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Happy Saturday,
Hello from San Francisco, where we are fully healing from the COVID-19 impact I have to say the city feels more alive than I can remember pre-COVID with lots of new people moving here and ironically many moving back that had left. My mom is in town visiting for the weekend and my wife is out of town on a girls trip, so this newsletter has a bit more than normal and is a bit late.
There were some interesting storylines in tech, business and the NBA this. To start off, Kara Swisher hosted her final Code Conference down in LA, I missed out but Eric Newcomer dropped a pretty well articulated recap of what it feels like to be at one of these events.
This week I will highlight a few things I read, listened too, and was impacted by across my stream of content including:
Some insights and learnings from Blue Ridge's OCC Agreement and the never-ending saga of PPP and EIDL loan scams
Credit Karma’s “Pre-Approved” credit offers hook that got exposed
NYC Pensions head press down on Mastercard to track gun purchases and transactions
The terrible disaster that is professional basketball in NYC
Let’s dive in.
Quote of the Week:
The late Tom Konchowski on Michael Jordan emerging as the ultimate competitor before the AAU basketball circuit emerged in the book Michael Jordan: The Life
He developed at a time before AAU. I don’t think he would have had this all consuming competitiveness. With AAU there’s always another game, you play three games in a day. Michael was obsessively competitive if he played in AAU he may have lost his competitive nature.
Tweet of the Week:
The accelerator wars are really on. Last week, I mentioned Garry Tan taking over as the YC CEO starting in 2023. Well, this week current YC Partner and Managing Director of Early Stage Michael Seibel took what I would call a subtile jab at none other than Sequoia, who recently launched Arc, which I mentioned in volume 31. It is there in-house accelerator where they invest $1M into early stage companies and offer their own training program.
Sequoia previously was one of the larger LPs investing in YCombinator’s accelerator but is no longer funding future funds and is likely putting that money into Arc companies.
I spent my twenties witnessing what are called bottle wars in hip-hop in night clubs on the east coast. This is when a two separate groups have bottle service and try to outdo each other as the night turns to morning. My thirties have mostly been spent in Silicon Valley, witnessing power wars. This now consists of venture funds launching competitor programs to other accelerator programs like YC and Techstars. This war is just getting started and at the crux will be the 1% of companies who apply and are accepted into YC and funded with a fresh $500k. It seems like a select cohort is getting offered another $1m from Sequoia to complete the Arc program sequentially. This validates one thing. The early-early stage venture funding market is still flush with cash and getting more and more competitive. However, I do see what Michael is saying. Getting high signal early stage dollars means absolutely nothing if you do not have a product that customers love. The only issue is that YC has profited and led the commercialization of accelerator programming which exist to get into the best companies as early as possible. It has also created an opportunity for many founders to get up to $1.5 million in low risk capital from high signal early stage investors like YC and Sequoia within the same year.
Fintech Business Weekly covers Blue Ridge OCC and more
I read all the way through Jason Mikula’s newsletter so you do not have too. He did the best job of explaining how Blue Bridge Bank’s run in with the OCC has implications throughout the fintech community and ecosystem. Two big winners here are technology companies like ModernTax and other that help banks complete customer due diligence, and enhanced due diligence processes this includes confirming beneficial owners for the business entities looking to receive banking services. He also, highlights another winner which is an emerging area, compliance-focused consulting firms. These firms help implement systems so fintechs can even offer bank products.
Another area he covered is a financial area that has impact on my day to day business and continues to deliver more news around fraud. He highlights, 15,000 accounts at Green Dot Bank being used to fraudulently acquire EIDL Small Business loans. The learning for me is that there is nearly just as much fraud happening in new online banking products than anything. More and more fraud and KYC companies are launching and there just is not enough ways to track across so many new financial products.
Credit Karma’s “Pre-Approved” credit offers hook that got exposed
If you are one of the eighty or so million people who use Credit Karma you have likely received a “pre-approved” offer. The FTC is giving Credit Karma a slap on the wrist regarding these types of offers. Credit Karma got hit wit a $3 million fine, likely one days worth of revenue for the market leader which was acquired by Intuit for $7.1 billion in 2020. What is interesting here is how this market is now evolving. I get offers from each financial institution, personal finance app, and not to mention snail male I receive. The FTC ruled that this type of practice is called dark patterns and hurts consumers when they are not approved for the financial products companies like Credit Karma advertise them to be. Alex Johnson had a good summary statement on the implications.
If you are one of the eighty or so million people who use Credit Karma you have likely received a “pre-approved” offer. The FTC is giving Credit Karma a slap on the wrist regarding these types of offers. Credit Karma got hit wit a $3 million fine, likely one days worth of revenue for the market leader which was acquired by Intuit for $7.1 billion in 2020. What is interesting here is how this market is now evolving. I get offers from each financial institution, personal finance app, and not to mention snail male I receive. The FTC ruled that this type of practice is called dark patterns and hurts consumers when they are not approved for the financial products companies like Credit Karma advertise them to be. Alex Johnson had a good summary statement on the implications.
From Alex Johnson Fintech Takes,
More broadly, the way that Credit Karma (and most companies that do customer acquisition in consumer banking) does pre-qualification needs to change. The default model for pre-qualification in the U.S. today is to get a consumer’s permission to “see if they qualify” for a lending product and then soft pull their credit file and evaluate it using the lender’s qualification criteria, and then letting them know if they are pre-qualified. This process isn’t ideal from the consumer’s perspective because it’s not a guarantee. They still have to officially apply for the lending product that they are pre-qualified for and face the possibility that they won’t actually be approved.
NYC Pensions head press down on Mastercard to track gun purchases and transactions
Three New York City pensions are pushing credit card companies like Mastercard and American Express to do a better job of tracking gun sales. This is a new approach to attaching the gun violence issue we have in America. The pensions want the credit card companies to establish a standalone gun and ammunition store code similar to what already exists for clothing, sporting goods and other services. This would allow red flags to pop up when someone like spends nearly $100,000 on guns and ammunition on their American Express. This is exactly what happened in 2017 when a gunman killed 59 people. Pension funds have power, in this case the NYC pension funds own nearly two million shares combined in both Mastercard and American Express. This is a developing flex that pension funds can make to get companies to do more. I think it is net good for all, however I think there are other things that need to be done and this alone will not prevent the wrong people from getting guns.
The terrible disaster that is professional basketball in NYC
Ethan Strauss broke down how both of New York’s professional basketball teams in only the way he can. Strauss brings to light a lot of facts I was not aware of and how the agency model deployed by a growing amount of NBA teams (i.e. Klutch Lakers) have all kinds of back dealings happening. One he referenced that fell through for the “CAA Knicks” was the recent Donavan Mitchell trade. Mitchell is a client of CAA basketball, Leon Rose the former CAA agent is now the president of the New York Knicks and he was supposed to get the deal done and acquire Mitchell in a trade. He didn’t and Strauss alludes to it being simply because Danny Ainge an old school front office executive said “fuck it” and traded Mitchell to the highest bidder — the Cleveland Cavaliers. In summary, basketball as well as football is pretty embarrassing in New York as both the Knicks and Nets have problems across the board.
What’s Next
I am still working on Long Four Edition 3 and more long four editions.
At Moderntax, we are still working on V2 of our product and we will be doing demos across the event circuit over the next few months.
Hiring roles: Chief Architect, Full Stack Ruby/React Engineers, Head of Business Operations
Investing in ModernTax: investing information
Back to the trenches.