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BNPL has already exploded though, but good call. Klarna is down about 90% in the private markets, Affirm about the same from all time high. Another good candid

BNPL has already exploded though, but good call. Klarna is down about 90% in the private markets, Affirm about the same from all time high. Another good candidate is "AI-powered" insurance i.e Lemonade.

steveBK123 4y ago
ZIRP is a hell of a drug. There's not a lot of innovation to be had on lending that is actually going to be considered legal. Unless they obfuscate it with AI, they are going to run afoul of some sort of anti-discriminatory laws. Credit score&history, income, capital.. go. Most of what BNPL actually turned out to be was just dumb money.
- mamonster 4y ago
  Its also the fact that in a bear market / recessions usually most correlations go to 1(on the way down) and whatever risk metric you used previously justify having low default provisions suddenly doesn't work anymore. Wonder whether we will ever see the actual datasets that BNPL founders saw that made them decide it is a safe business. Probably like you said ZIRP,bullmarket delinquency percentages.
  - steveBK123 4y ago
    Yes, though they were already taking on serious credit losses before any normal creditors were.
  - astrange 4y ago
    Part of the supposed appeal of BNPL is that if the market gets risky, you have much more choice about how much new credit you can offer, since you're free to offer it per-purchase not per-customer. It makes more sense for a large retailer to run it themselves, though; there's not necessarily any value in a dedicated company selling it straight to customers.
skippyboxedhero 4y ago
Insurance is already "AI-powered"...insurance companies employ statisticians to build prices, and they have been using low-cost distribution since the 90s. Speaking generally, insurance was one of the first industries to deploy technology effectively in their core business. They are still doing that. The issue with companies like Lemonade is that they are rebranding the same product as "AI" (afaik, Lemonade is just taking share by offering cheaper prices...doesn't sound quite as appealing as "AI").
- rhaway84773 4y ago
  This. I’m not sure what Lemonade does differently from other insurers than providing a nicer UI. They likely also have lower costs due to eliminating the middle men whose job is to translate text on the screen into words spoken to a customer. So their lower costs could actually be legitimate.
  - skippyboxedhero 4y ago
    Obviously this does vary because retail insurance is usually sold locally but the middle men were eliminated years ago. First, it was phones. This happened in the early 90s. Then it was internet which was largely finished by the early 2010s. The only exception for this is that online price-comparison websites have added back some distribution costs...but you still need to spend on marketing if you are online (generally speaking, online ads aren't cheap, I know insurers in my market that have moved away from price-comparison/online advertising because of the cost).
    - weswilson 4y ago
      There are still plenty of middle men in insurance. There are Carriers, MGA's, Agency Networks/Aggregators, and Brokers. Large insurance carriers (think Geico, etc) with enough market share (and captive agents) have the vertical integration that eliminates the middle men, but there is a whole world of insurance that most people don't realize each taking their cut.
      - 4y ago
FormerBandmate 4y ago
Their stock value is down, but they still are financially solvent. Lehman didn't explode when it fell from $60 to $6, it exploded when it went bankrupt. They're a lot closer to it now then a year ago, however
- twelve40 4y ago
  they are losing like what, $700 mil a year? with the current cost of capital, probably not solvent for very long.
  - FormerBandmate 4y ago
    Yeah, they’re fucked. They’re just not dead (yet)
boppo1 4y ago
How do you keep track of private markets? Are you involved in the business?
- mamonster 4y ago
  Well the place where I work at has a PE/VC arm that unfortunately decided to invest in Klarna sometime in 2021(not my call and not my loss), so naturally this year when it took a huge markdown, I became aware of it. To track private markets you either need to basically know someone in VC/PE and just ask for a specific company you are interested in, or use something like Pitchbook. The first option is much better, as you can get an estimate of prices even when deals aren't getting done(i.e a VC/PE person can tell you how much they would pay for X company even when X company isn't raising).

steveBK123 4y ago

ZIRP is a hell of a drug. There's not a lot of innovation to be had on lending that is actually going to be considered legal. Unless they obfuscate it with AI, they are going to run afoul of some sort of anti-discriminatory laws. Credit score&history, income, capital.. go. Most of what BNPL actually turned out to be was just dumb money.

mamonster 4y ago
Its also the fact that in a bear market / recessions usually most correlations go to 1(on the way down) and whatever risk metric you used previously justify having low default provisions suddenly doesn't work anymore. Wonder whether we will ever see the actual datasets that BNPL founders saw that made them decide it is a safe business. Probably like you said ZIRP,bullmarket delinquency percentages.
- steveBK123 4y ago
  Yes, though they were already taking on serious credit losses before any normal creditors were.
- astrange 4y ago
  Part of the supposed appeal of BNPL is that if the market gets risky, you have much more choice about how much new credit you can offer, since you're free to offer it per-purchase not per-customer. It makes more sense for a large retailer to run it themselves, though; there's not necessarily any value in a dedicated company selling it straight to customers.

skippyboxedhero 4y ago

Insurance is already "AI-powered"...insurance companies employ statisticians to build prices, and they have been using low-cost distribution since the 90s. Speaking generally, insurance was one of the first industries to deploy technology effectively in their core business. They are still doing that. The issue with companies like Lemonade is that they are rebranding the same product as "AI" (afaik, Lemonade is just taking share by offering cheaper prices...doesn't sound quite as appealing as "AI").

rhaway84773 4y ago
This. I’m not sure what Lemonade does differently from other insurers than providing a nicer UI. They likely also have lower costs due to eliminating the middle men whose job is to translate text on the screen into words spoken to a customer. So their lower costs could actually be legitimate.
- skippyboxedhero 4y ago
  Obviously this does vary because retail insurance is usually sold locally but the middle men were eliminated years ago. First, it was phones. This happened in the early 90s. Then it was internet which was largely finished by the early 2010s. The only exception for this is that online price-comparison websites have added back some distribution costs...but you still need to spend on marketing if you are online (generally speaking, online ads aren't cheap, I know insurers in my market that have moved away from price-comparison/online advertising because of the cost).
  - weswilson 4y ago
    There are still plenty of middle men in insurance. There are Carriers, MGA's, Agency Networks/Aggregators, and Brokers. Large insurance carriers (think Geico, etc) with enough market share (and captive agents) have the vertical integration that eliminates the middle men, but there is a whole world of insurance that most people don't realize each taking their cut.
    - 4y ago

FormerBandmate 4y ago

Their stock value is down, but they still are financially solvent. Lehman didn't explode when it fell from $60 to $6, it exploded when it went bankrupt. They're a lot closer to it now then a year ago, however

twelve40 4y ago
they are losing like what, $700 mil a year? with the current cost of capital, probably not solvent for very long.
- FormerBandmate 4y ago
  Yeah, they’re fucked. They’re just not dead (yet)

boppo1 4y ago

How do you keep track of private markets? Are you involved in the business?

mamonster 4y ago
Well the place where I work at has a PE/VC arm that unfortunately decided to invest in Klarna sometime in 2021(not my call and not my loss), so naturally this year when it took a huge markdown, I became aware of it. To track private markets you either need to basically know someone in VC/PE and just ask for a specific company you are interested in, or use something like Pitchbook. The first option is much better, as you can get an estimate of prices even when deals aren't getting done(i.e a VC/PE person can tell you how much they would pay for X company even when X company isn't raising).