Great post – as an excel monkey myself can’t help but be concerned I may be out of a job in several years. To what extent has backtesting been done on automated forecasting technology? Would be interested to backtest ML forecasting relative to the human equivalent. Also, I’m interested to see how this changes (devalues?) the role of the private equity and investment banking professional. If a machine can make educated projections, why pay analysts? Both businesses are forecasting related at the entry level but relationship based at the top so interested to see how this technology changes the hierarchy of these organizations – will the bottom of the pyramid (analysts and associates) even be necessary in the future?
The post and the coments implicitly define sustainability as the reduction of mankind’s impact on the environment. The goal of this sustainability is to help all living things prosper despite human population growth – however, it is difficult for humans to prosper when beef is arguably not good for us. The rates of heart disease, cancer, and many other maladies in the developed world relative to undeveloped world are empirically correlated to animal product consumption (Source: The China Study-the most comprehensive nutritional study ever conducted). So while “fart bags” and other solutions do help environmental impact, they don’t address the issue that human beings are simply not designed to eat meat as often as we do (Source: What The Health – a riveting documentary currently available on Netflix).
*Other good documentaries include Forks Over Knives and Cowspiracy.
Thought provoking post. I think the viability of digital mortgages for Wells has everything to do with the ultimate destination of each loan: i) is the loan fannie/freddie conforming and will be sold to the agencies, ii) will it be securitized in Wells Fargo’s own securitization shelf, or iii) will Wells keep the loan on balance sheet? (not sure what Wells’s current mix of these 3 is). Digital mortgage origination works for i) above, but would be, in my view, difficult to implement in ii) or iii). It’s a good way to maximize volume for an originate-and-sell model. Howeve,r if Wells is forced to retain the credit risk (iii), then it needs to understand the physical collateral it is lending against, which is difficult to do remotely – someone must be sent onsite. Suppose, for example, Wells develops an algorithm that values a home at $1 mil, and wells extends a 650k mortgage to the borrower. Then, suppose during an economic recession the house’s value drops to 650k, the borrower also defaults on monthly payments, and wells seizes the home. Finally, Wells tries to auction the home off thereafter to receive recovery of its principal, only to find that there is asbestos in the home that will cost $100k to remediate. Wells is forced to incorporate this cost as a discount to the selling price and can only sell the home for $550k, taking a 100k loss on its position.
This scenario would also dangerous for ii) above. Since new risk retention regulations went into effect December 2016, banks are now forced to retain 5% of each securitization they issue to the marketplace, so wells would still have to eat its own cooking.
Great post David. This is a classic case of US3 pointing at a threat without understanding opposition’s context. The UAE has, throughout its history, been a hub for global trade. A little known fact is that Dubai has little oil, and evolved as a trade center for the pearling industry. As a result of this strategic location the British began their protection of the Trucial States long before oil was discovered there in the 1950s. The UAE’s extension of this identity into the modern era is seen in its airlines. As countries with i) oil and ii) a strategic location between Europe and Asia – and few other resources – it only stands to reason Qatari and Emirati governments would allocate disproportionate subsidies toward airlines. This becomes increasingly important in a “low for longer” oil price environment and a depressed GBP environment in which flights for UK business travelers are comparatively more expensive. On a go forward basis substantial subsidies are warranted. In my view, ME3 is uniquely positioned to win in terms of global international travel.
And don’t get me started on the laptop ban – it’s my own conspiracy theory that this was an underhanded attempt at the same agenda you describe (https://www.theguardian.com/us-news/2017/jul/20/us-ends-laptop-ban-flights-middle-east)
Great post Sahil. While I wouldn’t portend to fully understand the regulatory hurdles to this, I think your point about cross-selling is spot on. As part of their buildup to black Friday Amazon began selling high-margin Echo devices out of low-margin yet high foot traffic stores. Unclear how to isolate the impact of this particular cross selling strategy but they also substantially outperformed on black Friday sales this year. The extent to which they are able to continue to cross sell products will have a huge impact on their success. This is undoubtedly brick and mortar cross selling but their decision to pursue this strategy likely came (hopefully) from some sort of data driven conclusiion regarding the income demographic of the Whole Foods shopper.
I do wonder – is there a risk of forgery/fraud here? Information security regarding sending pills to an address would certainly be a concern relative to the status quo of presenting a valid ID in a pharmacy.