What is Morgan Stanley cooking up?


October 14, 2020

PLUS: The startup bringing live music to your home.
October 14, 2020
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The Big Idea

Morgan Stanley is doing some serious wheeling and dealing. Why?

Last week, Morgan Stanley announced its $7B acquisition of Eaton Vance.

If you’re thinking, Who is Eaton Vance?, the answer is not the captain of a Northeastern prep school rowing team — but rather one of the oldest money management firms on Wall Street.

This news comes mere days after Morgan Stanley closed an $11B deal for brokerage firm E*TRADE.

What’s going on?

After the ’08 financial crisis, the Federal Reserve forced banks to hold more capital on their books and limited risk-taking so that, er… they wouldn’t blow themselves up again.

While trading can be a big moneymaker, it can bring some staggering losses. Remember that whale that cost JPMorgan $6.2B? Or the UBS trader that swindled away $2B?

Investment banks are shedding their Wolf of Wall Street ways

Morgan Stanley’s CEO James Gorman — a smooth Aussie who once famously told his employees to leave if they were tired of lower bonuses — is all about predictable (albeit) boring businesses.

And asset management hits the mark.

Unlike trading — which can swing from wild profits to brutal losses — asset management generates revenue from fees that grow steadily with the amount of wealth the firm oversees.

E*TRADE brings in retail wealth while Eaton Vance brings in institutional wealth.

These deals are a continuation of what started in 2009…

… when Morgan Stanley acquired Smith Barney to form the world’s largest wealth manager.

In recent years, the rise of free trading has been a boon to retail investors, with lower commissions forcing money managers to find revenue in new places.

The consolidation started when Charles Schwab spent $26B to buy fellow brokerage TD Ameritrade last year. Expect more deals… just not from Morgan Stanley, which is tapped out.

“We’re not doing more acquisitions,” Gorman said on an analyst call. “We’ve made our bed, we’re going to lie in it.”

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Snippets
  • In light of Disney+’s success, Disney is separating content and distribution functions to ensure “the whole company is a beneficiary of its content efforts.”
  • Meet Nuvemshop, the Latin American competitor to Shopify that just raised $30m.
  • The US has way too many roads, and new road and highway projects are growing faster than actual population numbers.
  • San Diego poured ~$30m into a smart streetlight program, but now the city is deactivating the streetlights over privacy concerns.
  • Machu Picchu reopened this week — all for a single Japanese tourist who has been stranded in Peru since March.
  • Bonus: The greatest deals ever that netted $1B or more.
Q&A

‘I want to create a sound that provides the strong feeling of presence, as if the musician is in your room’

Along with most social events, live music has taken a hit during quarantine.

Enter Oda, a startup that makes speakers specifically to bring live performances to your home. Here’s how it works:

  • Buy a pair of highly engineered wood-panel speakers ($299; ships by 2021)
  • Pay for a season membership (3 months) of one-off live music performances exclusive to the speakers ($79)

We spoke with Oda’s founder, Nick Dangerfield, to find out more:

What inspired you to create Oda?

The story starts in 2016. Artist Phil Elverum (The Microphones, Mount Erie) announced that he would stop touring for personal reasons.

I was a fan of Phil’s work and offered to build him 50 speakers that would be directly connected to an app on his smartphone. Whenever he had time, Phil could do a live performance into the homes of those speaker owners.

How do Oda’s speakers mimic the live experience?

I worked with Perry Branston — an expert in audio equipment (and kind of a crazy man) — to create a sound that provides the strong feeling of presence, as if the musician is in your room.

In essence, it’s just a piece of (finely tuned) wood that vibrates and radiates the sound in a similar way as it would happen if the artist was in your room.

Has the pandemic changed your vision for Oda?

The pandemic has created a live music void that has laid bare how unfairly we’re treating artists. In addition, it has added urgency to our wish to work with older artists, as we have lost a few that we wanted to work with to the pandemic.

A lot of older artists don’t have the digital dexterity to perform on an Instagram Live. For many, they may never perform physically live again.

We are sending sound engineers and equipment to these artists and giving them an opportunity to perform live through Oda. That’s a priority for us.

(Read the full Q&A here)

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Protect Ya Wallet

Venmo and Cash App are a scammer’s paradise

The darknet loves Venmo and Cash App — and no, it’s not because the criminal underworld is obsessed with the ease of paying back friends for that round of mai tais.

The same features that have made the payment apps so convenient to the rest of us are also a huge boon to cybercriminals.

Apps like Venmo and Cash App have 3x to 4x the fraud rate of credit or debit cards. And Cash App has been mentioned 10k+ on the dark net in August, up 450% from last year.

You can blame some of this on marketing

In 2017, the app launched a “Cash App Fridays” promotion: Share your username, and the company might send you some extra dough.

Only problem? Fraudsters are collecting those usernames, too. And they will hit you with all sorts of bogus charges in the hopes of collecting money from unsuspecting users.

Now they’re targeting people who are already struggling financially.

OK, but how do Cash App scams work?

One single mother, Ashley Tolley, received a series of charge requests from accounts that looked real — minus a slight letter change.

Scammers made off with $560. That was equal to a month of child support payments.

Is any payment app safe?

Zelle — the payment service backed by Bank of America, Chase, JPMorgan, and others — is one of the few to have extra verification steps. You have to register through your bank, for instance.

And it seems to work. On the darknet, according to the Times, fraudsters mention Zelle way less than other payments apps.

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That WFH Life

Tech can’t quit remote work: Microsoft edition

Last week, Microsoft rolled out a hybrid remote work policy, meaning a large portion of its 150k employees may be able to WFH in perpetuity.

Microsoft is the latest in a long line of WFH warriors

Other leading companies that have extended their remote work policies in the face of COVID-19 include Indeed, Google, American Express, Airbnb, and Twitter.

Chris Herd — the CEO of remote work startup Firstbase HQ — interviewed ~1k firms over the past 6 months on their WFH plans. The results are eye-opening:

  • ~30% said they plan to cut commercial offices completely
  • Cost savings are significant ($20k/employee in the office vs. $2k/employee WFH)

Microsoft is drawing product inspiration from the new reality…

… and has taken some big swings on remote features for Teams and Outlook:

  • An integration with Headspace for mental health
  • Protect Time allows you to block off time for deep work
  • A dashboard that managers can use to see which employees may be at risk of burnout

Finally — as a microcosm for how insane 2020 is — Microsoft is rolling out a virtual solution for what could literally kill you in Before Times: commuting.

Microsoft’s “virtual commute” feature is meant to create work-life boundaries the same way that physical commutes used to. #2020

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Editing by: Zachary “Rowing captain” Crockett, Norman Vincent Pealeout (Sales Motivation Coach).

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