1 00:00:00,500 --> 00:00:02,390 [SQUEAKING] 2 00:00:02,390 --> 00:00:04,302 [RUSTLING] 3 00:00:04,302 --> 00:00:06,214 [CLICKING] 4 00:00:10,530 --> 00:00:14,520 GARY GENSLER: Today we're going to dive into a topic that 5 00:00:14,520 --> 00:00:18,400 is relevant to all of us right now, is the coronavirus crisis. 6 00:00:18,400 --> 00:00:23,550 And for those watching in the future these recordings, 7 00:00:23,550 --> 00:00:27,030 we'll see how many of these predictions might come true. 8 00:00:27,030 --> 00:00:31,040 But we're going to try to sort of frame 9 00:00:31,040 --> 00:00:34,710 fintech in this crisis. 10 00:00:34,710 --> 00:00:38,750 And it's both a health care crisis and an economic crisis. 11 00:00:38,750 --> 00:00:40,820 I thought that I would spend a little bit of time 12 00:00:40,820 --> 00:00:45,020 in this class talking about some financial crises in the past. 13 00:00:45,020 --> 00:00:50,366 I'll talk about the 2008 crisis more specifically. 14 00:00:50,366 --> 00:00:53,150 We'll take a look at some of the economic forecasts 15 00:00:53,150 --> 00:00:57,662 here in May of 2020. 16 00:00:57,662 --> 00:00:59,580 And of course those looking in the future 17 00:00:59,580 --> 00:01:02,010 will sort of look back and say, aha, was it better 18 00:01:02,010 --> 00:01:02,850 or was it worse? 19 00:01:02,850 --> 00:01:04,680 I have some points of view about that, 20 00:01:04,680 --> 00:01:07,140 and I'll share those openly. 21 00:01:07,140 --> 00:01:10,920 And then we'll sort of finalize about what 22 00:01:10,920 --> 00:01:16,950 this means for fintech and some of the sectors and subsectors 23 00:01:16,950 --> 00:01:20,140 within the space. 24 00:01:20,140 --> 00:01:23,850 So with that, I am going to try to share some slides 25 00:01:23,850 --> 00:01:25,920 and get going. 26 00:01:34,220 --> 00:01:37,720 So that's the overview of what we're going to try to do. 27 00:01:37,720 --> 00:01:42,340 And looking a little bit at crises, the '08 crisis, 28 00:01:42,340 --> 00:01:45,850 as I said, grounded in what's happening today. 29 00:01:45,850 --> 00:01:50,180 I'm glad to take questions at any point in time. 30 00:01:50,180 --> 00:01:55,080 This is a little bit more relevant today, 31 00:01:55,080 --> 00:02:00,180 but it's also much broader than just fintech. 32 00:02:00,180 --> 00:02:02,880 Some of the readings were around what's 33 00:02:02,880 --> 00:02:06,420 happening in financial technology, the interviews 34 00:02:06,420 --> 00:02:11,340 that TechCrunch put out of eight top fintech VCs 35 00:02:11,340 --> 00:02:13,880 and what they were saying. 36 00:02:13,880 --> 00:02:17,250 I will also close this discussion with something 37 00:02:17,250 --> 00:02:24,250 that Boston Consulting Group just put out in May of 2020. 38 00:02:24,250 --> 00:02:26,620 So just a few questions to get going 39 00:02:26,620 --> 00:02:30,910 and see if Romain has a little fun with calling on folks. 40 00:02:30,910 --> 00:02:35,079 But how's the coronavirus crisis affecting 41 00:02:35,079 --> 00:02:37,630 the financial services world more broadly? 42 00:02:37,630 --> 00:02:42,290 Not fintech, but the financial services world more broadly. 43 00:02:42,290 --> 00:02:45,670 And though it wasn't in the readings, many of you 44 00:02:45,670 --> 00:02:48,820 are studying finance and are from the world of finance. 45 00:02:48,820 --> 00:02:51,460 So these could be just your personal opinions, of course. 46 00:02:54,304 --> 00:02:58,180 TEACHING ASSISTANT: Good morning, everyone. 47 00:02:58,180 --> 00:03:00,870 Come on, this is one of your last opportunities to shine. 48 00:03:00,870 --> 00:03:02,170 Olivia, you have the floor. 49 00:03:05,600 --> 00:03:08,990 AUDIENCE: So with the stock market 50 00:03:08,990 --> 00:03:13,050 sort of tanking in the past few months, 51 00:03:13,050 --> 00:03:19,160 that would impact any business that manages financial assets. 52 00:03:19,160 --> 00:03:26,520 So mutual funds, hedge funds, the like, 53 00:03:26,520 --> 00:03:30,210 the vast majority of them probably 54 00:03:30,210 --> 00:03:35,340 have their asset base declining in a similar way. 55 00:03:35,340 --> 00:03:39,520 They're all working remote as well. 56 00:03:39,520 --> 00:03:43,410 So you could think of ways that might impact 57 00:03:43,410 --> 00:03:47,490 other financial services companies that maybe are not 58 00:03:47,490 --> 00:03:52,410 quite as technologically savvy as other sectors. 59 00:03:52,410 --> 00:03:56,023 But basically any business-- 60 00:03:56,023 --> 00:03:56,940 it could be insurance. 61 00:03:56,940 --> 00:03:59,520 It could be banking-- 62 00:03:59,520 --> 00:04:02,820 will have to revalue the assets that they 63 00:04:02,820 --> 00:04:05,670 hold on their balance sheets. 64 00:04:05,670 --> 00:04:07,830 GARY GENSLER: So can I pause just for a second 65 00:04:07,830 --> 00:04:10,500 because you mentioned about four or five 66 00:04:10,500 --> 00:04:13,330 really important things. 67 00:04:13,330 --> 00:04:16,769 One is the volatility and that financial services really 68 00:04:16,769 --> 00:04:21,740 stands, in our economies, as managing and helping 69 00:04:21,740 --> 00:04:24,680 the economy more broadly manage risk. 70 00:04:24,680 --> 00:04:29,510 Taking in risk and transferring that risk and pricing risk. 71 00:04:29,510 --> 00:04:32,690 But the volatility itself has come along. 72 00:04:32,690 --> 00:04:34,040 Now, some firms will fail. 73 00:04:34,040 --> 00:04:35,030 Some firms won't. 74 00:04:35,030 --> 00:04:37,880 When I was at Goldman Sachs, there was a saying-- 75 00:04:37,880 --> 00:04:41,438 I didn't create the saying-- is that volatility was our friend. 76 00:04:41,438 --> 00:04:43,730 Well, it was our friend if we could manage it well, not 77 00:04:43,730 --> 00:04:46,640 if we stumbled along the way. 78 00:04:46,640 --> 00:04:49,760 But financial firms are often in the business 79 00:04:49,760 --> 00:04:52,890 of managing risk, whether they're insurance companies, 80 00:04:52,890 --> 00:04:54,750 investment banks, and the like. 81 00:04:54,750 --> 00:04:57,830 So that's one thing that Olivia has mentioned. 82 00:04:57,830 --> 00:04:59,750 But she's also mentioned assets. 83 00:04:59,750 --> 00:05:02,540 And in two different ways, I just want to highlight. 84 00:05:02,540 --> 00:05:06,290 Assets under management for the wealth management or asset 85 00:05:06,290 --> 00:05:09,560 management field has shrunk a bit. 86 00:05:09,560 --> 00:05:12,020 And so to the extent that BlackRock 87 00:05:12,020 --> 00:05:14,360 used to be maybe $7 trillion of assets 88 00:05:14,360 --> 00:05:17,750 and maybe it's $6 trillion or $6 going to $5, 89 00:05:17,750 --> 00:05:19,550 that's fewer assets under management. 90 00:05:19,550 --> 00:05:21,230 But also I think the second piece 91 00:05:21,230 --> 00:05:25,070 that Olivia mentioned is really critical, is valuing 92 00:05:25,070 --> 00:05:26,840 those assets, particularly, let's say 93 00:05:26,840 --> 00:05:28,820 you were in a commercial banking field, 94 00:05:28,820 --> 00:05:32,180 or you were in a fintech field making loans. 95 00:05:32,180 --> 00:05:35,970 The actual loan side of the balance sheet, 96 00:05:35,970 --> 00:05:39,080 you're seeing that commercial bank after commercial bank 97 00:05:39,080 --> 00:05:43,310 is taking losses on those loans in anticipation 98 00:05:43,310 --> 00:05:46,080 of the delinquencies and defaults that will come. 99 00:05:46,080 --> 00:05:49,350 So that's a revaluation of their loan portfolio, 100 00:05:49,350 --> 00:05:51,980 and is likely to continue. 101 00:05:51,980 --> 00:05:55,310 I think I saw Danielle's hand up as well maybe in there. 102 00:05:55,310 --> 00:05:57,600 TEACHING ASSISTANT: Yes, and then Adam. 103 00:05:57,600 --> 00:06:00,360 AUDIENCE: Yeah, I was going to say one of the other trends 104 00:06:00,360 --> 00:06:05,148 is a change in the pace of investment into fintech firms. 105 00:06:05,148 --> 00:06:06,690 That's probably similar to what we're 106 00:06:06,690 --> 00:06:09,330 seeing across the investing portfolio, 107 00:06:09,330 --> 00:06:12,750 but people are struggling with finding places 108 00:06:12,750 --> 00:06:15,660 to invest with the new remote operations, 109 00:06:15,660 --> 00:06:18,630 as well as fintech firms pivoting and looking more 110 00:06:18,630 --> 00:06:19,950 internally. 111 00:06:19,950 --> 00:06:21,750 And within the venture capital space, 112 00:06:21,750 --> 00:06:25,310 there's been some reports of investors advising startups 113 00:06:25,310 --> 00:06:27,660 just to focus more on their core business operations, 114 00:06:27,660 --> 00:06:32,040 scale back auxiliary functions, and generally have a return 115 00:06:32,040 --> 00:06:34,450 to core business. 116 00:06:34,450 --> 00:06:36,409 GARY GENSLER: So let's just take those two. 117 00:06:36,409 --> 00:06:38,710 And we're going to dive all the way into all of these, 118 00:06:38,710 --> 00:06:45,240 but one is basically that the funding, the funding coming 119 00:06:45,240 --> 00:06:49,800 in to fintech and the venture capital firms to themselves, 120 00:06:49,800 --> 00:06:52,330 these two married points, are really 121 00:06:52,330 --> 00:06:53,580 looking at things differently. 122 00:06:53,580 --> 00:06:56,460 That the companies need to look at their operations 123 00:06:56,460 --> 00:06:58,440 and look at core operations. 124 00:06:58,440 --> 00:07:01,350 And we'll talk a lot about that, whether it's in fintech 125 00:07:01,350 --> 00:07:04,410 or more broadly in the economy, that companies 126 00:07:04,410 --> 00:07:07,410 that were being funded by the venture capital field 127 00:07:07,410 --> 00:07:11,190 generally are not yet cash flow positive. 128 00:07:11,190 --> 00:07:16,200 Some are, when they're at series C or D or even E rounds. 129 00:07:16,200 --> 00:07:19,140 But certainly early in their lives, 130 00:07:19,140 --> 00:07:22,110 they generally are cash flow negative. 131 00:07:22,110 --> 00:07:24,000 And so how much runway they have, 132 00:07:24,000 --> 00:07:27,120 how much time they have, in essence, 133 00:07:27,120 --> 00:07:31,260 to turn the corner to get cash flow positive and profitable. 134 00:07:31,260 --> 00:07:37,080 And of course the venture field itself is being more cautious, 135 00:07:37,080 --> 00:07:39,270 and so funding is slowing now. 136 00:07:39,270 --> 00:07:41,380 You said Adam was also one of-- 137 00:07:41,380 --> 00:07:44,183 TEACHING ASSISTANT: Yep, Adam. 138 00:07:44,183 --> 00:07:45,350 AUDIENCE: Hey, good morning. 139 00:07:45,350 --> 00:07:49,340 So my point, not necessarily related closely 140 00:07:49,340 --> 00:07:52,820 to fintech, but certainly an important trend 141 00:07:52,820 --> 00:07:54,170 in financial services. 142 00:07:54,170 --> 00:07:58,850 So I'm into commodities, and I'm working on a paper 143 00:07:58,850 --> 00:08:02,400 with Professor Mirkin regarding oil prices. 144 00:08:02,400 --> 00:08:04,610 GARY GENSLER: Adam, do you mind turning on your video 145 00:08:04,610 --> 00:08:06,970 so we're with you? 146 00:08:06,970 --> 00:08:09,860 AUDIENCE: The thing is I won't be able to see you then. 147 00:08:09,860 --> 00:08:10,450 That's why-- 148 00:08:10,450 --> 00:08:13,660 GARY GENSLER: Oh, all right, so let's keep going. 149 00:08:13,660 --> 00:08:17,830 AUDIENCE: So since you can't just stop producing oil, 150 00:08:17,830 --> 00:08:19,930 like most of the valves in the US 151 00:08:19,930 --> 00:08:22,360 and across the globe, the way it's structured, 152 00:08:22,360 --> 00:08:24,730 it's not a switch that you can shut off. 153 00:08:24,730 --> 00:08:28,670 And I'm sure all of you know we don't drive as much now, 154 00:08:28,670 --> 00:08:31,630 and we don't go outside. 155 00:08:31,630 --> 00:08:34,870 Airlines obviously don't operate with the same capacity they did 156 00:08:34,870 --> 00:08:36,490 before, so we don't use oil. 157 00:08:36,490 --> 00:08:39,400 But on the other end, we still produce almost the same amount 158 00:08:39,400 --> 00:08:41,558 of oil than before. 159 00:08:41,558 --> 00:08:48,580 Oil prices took a major, major hit, forcing a lot of valves 160 00:08:48,580 --> 00:08:50,650 to shut down, probably for good, just 161 00:08:50,650 --> 00:08:53,470 because it's not necessarily possible to reopen 162 00:08:53,470 --> 00:08:54,760 smaller valves. 163 00:08:54,760 --> 00:08:58,940 And I think the whole energy sector, 164 00:08:58,940 --> 00:09:05,626 if this goes on for a bit longer, might be completely-- 165 00:09:05,626 --> 00:09:07,590 the way it was before coronavirus, 166 00:09:07,590 --> 00:09:10,440 it will be completely new after. 167 00:09:10,440 --> 00:09:14,550 Because a lot of players were forced out. 168 00:09:14,550 --> 00:09:21,703 The US's place as the biggest oil exporter might change. 169 00:09:21,703 --> 00:09:23,370 GARY GENSLER: So can we circle that back 170 00:09:23,370 --> 00:09:25,140 to financial services? 171 00:09:25,140 --> 00:09:29,680 What you're saying is the commodity field, 172 00:09:29,680 --> 00:09:31,940 the commodity sector is taking quite a hit. 173 00:09:31,940 --> 00:09:34,410 There's a demand shock. 174 00:09:34,410 --> 00:09:37,040 It's been one of the most serious demand shocks 175 00:09:37,040 --> 00:09:41,330 that we've seen in several decades, 176 00:09:41,330 --> 00:09:44,940 one might even say in a hundred years, 177 00:09:44,940 --> 00:09:51,630 on energy and on many other physical commodities 178 00:09:51,630 --> 00:09:57,120 in the energy and in the metals space, less so in agriculture. 179 00:09:57,120 --> 00:09:59,790 And so that demand shock has led to a price shock. 180 00:09:59,790 --> 00:10:03,840 We've also had a bit of a scuffle between Russia 181 00:10:03,840 --> 00:10:08,210 and Saudi Arabia in terms of oil production and the like. 182 00:10:08,210 --> 00:10:11,220 And so how does that circle back to the financial services 183 00:10:11,220 --> 00:10:14,100 field, in your mind, Adam? 184 00:10:14,100 --> 00:10:15,652 Sort of a brief-- 185 00:10:15,652 --> 00:10:19,740 AUDIENCE: I follow, as you know others look into the fields 186 00:10:19,740 --> 00:10:23,650 that they are interested in, follow a lot of funds, 187 00:10:23,650 --> 00:10:28,740 hedge funds, specialized funds in energy, commodities space. 188 00:10:28,740 --> 00:10:31,552 And a lot of these players took major hits. 189 00:10:31,552 --> 00:10:33,260 GARY GENSLER: All right, so what's your-- 190 00:10:33,260 --> 00:10:38,310 AUDIENCE: And some of the biggest companies in energy 191 00:10:38,310 --> 00:10:42,620 is Zimmer Partners, with like a 25-year track 192 00:10:42,620 --> 00:10:47,400 preferred of over 20% average return annually, 193 00:10:47,400 --> 00:10:49,860 so pretty impressive firm. 194 00:10:49,860 --> 00:10:54,180 [INAUDIBLE] reported a 55% loss in the first quarter. 195 00:10:54,180 --> 00:10:59,110 And they are among the most renowned funds in the sector. 196 00:10:59,110 --> 00:11:00,990 GARY GENSLER: So if I can bring it-- 197 00:11:00,990 --> 00:11:02,610 Adam, can I just bring it short? 198 00:11:02,610 --> 00:11:04,340 Because we don't have a lot of time. 199 00:11:04,340 --> 00:11:05,580 Let me just shorten it up. 200 00:11:05,580 --> 00:11:08,040 What you're saying is there's a commodity price shock. 201 00:11:08,040 --> 00:11:11,880 It's moving into a demand shock, a price shock, 202 00:11:11,880 --> 00:11:13,830 and it's moving into financial services 203 00:11:13,830 --> 00:11:16,380 with returns for the asset managers and hedge 204 00:11:16,380 --> 00:11:19,495 funds in the commodity space. 205 00:11:19,495 --> 00:11:20,910 Did I capture it? 206 00:11:24,100 --> 00:11:25,560 AUDIENCE: Yeah, absolutely. 207 00:11:25,560 --> 00:11:26,590 GARY GENSLER: Thank you. 208 00:11:26,590 --> 00:11:29,920 So we've talked a little bit about how it's also 209 00:11:29,920 --> 00:11:33,370 hitting towards fintech itself. 210 00:11:33,370 --> 00:11:38,230 Some of the funding side, we're going to go into that more. 211 00:11:38,230 --> 00:11:39,880 But what about the positive trends? 212 00:11:39,880 --> 00:11:43,510 Are there any positive trends likely to emerge out of this 213 00:11:43,510 --> 00:11:45,205 for financial technology firms? 214 00:11:49,660 --> 00:11:52,490 TEACHING ASSISTANT: Ivy, would you like to give it a shot? 215 00:11:52,490 --> 00:11:53,810 AUDIENCE: Yeah, sure. 216 00:11:53,810 --> 00:11:57,800 So I think there's definitely going to be 217 00:11:57,800 --> 00:11:59,300 winners and losers from here. 218 00:11:59,300 --> 00:12:01,370 So previously, as we know, there's 219 00:12:01,370 --> 00:12:04,850 been a huge emergence in terms of fintech 220 00:12:04,850 --> 00:12:06,230 across all these spaces. 221 00:12:06,230 --> 00:12:09,270 And a lot of them are not profitable. 222 00:12:09,270 --> 00:12:11,420 And so I think the positive trend 223 00:12:11,420 --> 00:12:15,740 is that firms with, I think, disciplined underwriting as 224 00:12:15,740 --> 00:12:17,540 well as actually a working business model 225 00:12:17,540 --> 00:12:21,260 will emerge from this unscathed-- not unscathed, 226 00:12:21,260 --> 00:12:24,080 but probably gaining more market share and doubling down. 227 00:12:24,080 --> 00:12:26,180 So I actually think that's a positive, 228 00:12:26,180 --> 00:12:29,060 I think, for just the general market 229 00:12:29,060 --> 00:12:31,370 because it is a little oversaturated. 230 00:12:31,370 --> 00:12:34,070 GARY GENSLER: So Ivy's highlighted 231 00:12:34,070 --> 00:12:36,260 it's a highly saturated field. 232 00:12:36,260 --> 00:12:39,980 But for those who have a truly viable business model, 233 00:12:39,980 --> 00:12:42,290 that may play to their advantage. 234 00:12:42,290 --> 00:12:46,130 We're also going to talk about various sectors that might play 235 00:12:46,130 --> 00:12:47,840 to their advantage as well. 236 00:12:47,840 --> 00:12:51,280 And I think there is another hand up. 237 00:12:51,280 --> 00:12:53,750 TEACHING ASSISTANT: Hassan? 238 00:12:53,750 --> 00:12:56,630 AUDIENCE: Yeah, so, for instance, 239 00:12:56,630 --> 00:13:00,310 I can talk about my country, Bahrain. 240 00:13:00,310 --> 00:13:06,830 With this pandemic, I've noticed that people who are not 241 00:13:06,830 --> 00:13:12,070 used to fintech technologies have not gotten used to it, 242 00:13:12,070 --> 00:13:16,440 and they're taking advantage of these kind of services. 243 00:13:16,440 --> 00:13:23,990 So I think that even after this pandemic is over, 244 00:13:23,990 --> 00:13:26,070 behavior has changed forever. 245 00:13:26,070 --> 00:13:27,270 So this is my take on it. 246 00:13:27,270 --> 00:13:28,062 GARY GENSLER: Yeah. 247 00:13:28,062 --> 00:13:29,960 So it accentuates trends. 248 00:13:29,960 --> 00:13:34,570 We've already been over the last three-ish, four decades 249 00:13:34,570 --> 00:13:39,350 digitizing the economies, but not uniformly around the globe. 250 00:13:39,350 --> 00:13:43,790 And so this accentuates that trend to digitization, 251 00:13:43,790 --> 00:13:48,950 and it accentuates a trend towards online commerce. 252 00:13:48,950 --> 00:13:52,230 And in both of those trends, they were happening already. 253 00:13:52,230 --> 00:13:55,610 But I think Hassan's raised a really important point. 254 00:13:55,610 --> 00:13:57,950 It accelerates some of those trends. 255 00:13:57,950 --> 00:14:01,490 And those will create opportunities and challenges, 256 00:14:01,490 --> 00:14:04,580 and there will be winners and losers, as we talked about. 257 00:14:04,580 --> 00:14:08,030 So I'm going to sort of dive in. 258 00:14:08,030 --> 00:14:11,950 Financial sector crises are not new. 259 00:14:11,950 --> 00:14:16,420 This is just sort of a sampling of a list. 260 00:14:16,420 --> 00:14:20,360 And even in 2008, we were followed by European debt 261 00:14:20,360 --> 00:14:23,660 crisis in 2009 and 2012. 262 00:14:23,660 --> 00:14:29,600 And so the question will be is not just this crisis, 2020. 263 00:14:29,600 --> 00:14:31,070 Is it to '21? 264 00:14:31,070 --> 00:14:33,620 Is it to 2022? 265 00:14:33,620 --> 00:14:35,900 Does it have aftershocks beyond that? 266 00:14:35,900 --> 00:14:39,200 I'm here to say it's not just the 2020 crisis. 267 00:14:39,200 --> 00:14:42,720 But I think you all knew that already. 268 00:14:42,720 --> 00:14:47,960 But I'm also going to say that finance, by its very nature, 269 00:14:47,960 --> 00:14:52,740 tends to have crises every five, 10, 15 years. 270 00:14:52,740 --> 00:14:56,270 And each time, people will have some conversation 271 00:14:56,270 --> 00:14:59,960 about this is the worst crisis in 50 or 100 years. 272 00:14:59,960 --> 00:15:03,650 So it seems like we get the once-in-a-50-year crisis every 273 00:15:03,650 --> 00:15:05,990 5 to 15 years. 274 00:15:05,990 --> 00:15:12,240 And in your careers, you will probably see five or six more. 275 00:15:12,240 --> 00:15:16,140 Now, God willing, they won't be driven by a pandemic, 276 00:15:16,140 --> 00:15:19,740 and there won't be millions of people or hundreds 277 00:15:19,740 --> 00:15:24,090 of millions of people put out of work through a lockdown 278 00:15:24,090 --> 00:15:27,510 to protect ourselves against a virus. 279 00:15:27,510 --> 00:15:32,020 But you will see other financial crises along the way. 280 00:15:32,020 --> 00:15:32,650 I have. 281 00:15:32,650 --> 00:15:37,410 I didn't work in the 1970s, but from the 1980s on. 282 00:15:37,410 --> 00:15:41,810 And some were more severe than others, of course. 283 00:15:41,810 --> 00:15:44,680 The financial crisis in '08-- just to remind you. 284 00:15:44,680 --> 00:15:46,750 We're not going to dive in deeply-- 285 00:15:46,750 --> 00:15:50,260 weak underwriting, a lot of easy credit, 286 00:15:50,260 --> 00:15:54,490 poor risk management, and then multiple failures around. 287 00:15:54,490 --> 00:15:58,300 This is what was called systemic risk. 288 00:15:58,300 --> 00:16:03,390 Emanating first out of the US and the housing markets, 289 00:16:03,390 --> 00:16:08,460 and the housing markets had an asset bubble. 290 00:16:08,460 --> 00:16:10,260 But it was also true in Spain. 291 00:16:10,260 --> 00:16:12,450 It was also true in other European countries. 292 00:16:12,450 --> 00:16:15,880 It was not only isolated to the US. 293 00:16:15,880 --> 00:16:18,670 But in a financial sense-- not in a health care sense, 294 00:16:18,670 --> 00:16:20,500 but in a financial sense-- 295 00:16:20,500 --> 00:16:23,500 we Americans and a couple other markets like Spain 296 00:16:23,500 --> 00:16:26,320 and elsewhere sort of propagated out 297 00:16:26,320 --> 00:16:32,200 to other markets a contagion, if you wish, a financial contagion 298 00:16:32,200 --> 00:16:33,800 to the rest of the world. 299 00:16:33,800 --> 00:16:37,990 Now, some countries like China, Australia, Canada sort of 300 00:16:37,990 --> 00:16:40,330 weathered the financial storm well, 301 00:16:40,330 --> 00:16:43,570 but they were still hit with an economic shock. 302 00:16:43,570 --> 00:16:45,970 You couldn't avoid it, in a sense, 303 00:16:45,970 --> 00:16:50,230 because we're so interconnected economically around the globe. 304 00:16:50,230 --> 00:16:53,860 And what was the result after that crisis, just for a moment? 305 00:16:53,860 --> 00:16:55,720 There was financial reform. 306 00:16:55,720 --> 00:16:59,950 Around the globe, primarily in Europe, Canada, Australia, 307 00:16:59,950 --> 00:17:03,760 the US, Japan had to put in place 308 00:17:03,760 --> 00:17:07,180 a stronger set of regulations. 309 00:17:07,180 --> 00:17:11,829 It didn't change the fundamental basic regulatory environment, 310 00:17:11,829 --> 00:17:15,490 but more capital, more shock absorbers within the banking 311 00:17:15,490 --> 00:17:18,880 sector, more transparency in the derivatives 312 00:17:18,880 --> 00:17:21,117 markets, and the like. 313 00:17:21,117 --> 00:17:23,160 TEACHING ASSISTANT: Gary, I think I recognize you 314 00:17:23,160 --> 00:17:24,608 on this picture, no? 315 00:17:24,608 --> 00:17:26,026 GARY GENSLER: All right, so where? 316 00:17:26,026 --> 00:17:28,098 Where, Romain?] 317 00:17:28,098 --> 00:17:30,450 TEACHING ASSISTANT: In the front row? 318 00:17:30,450 --> 00:17:35,070 GARY GENSLER: Oh, you mean the center, bald head? 319 00:17:35,070 --> 00:17:36,860 No, it's just a little light hearted. 320 00:17:36,860 --> 00:17:38,990 We could have done a poll and asked how many people 321 00:17:38,990 --> 00:17:39,920 think that's me? 322 00:17:39,920 --> 00:17:41,720 But I'm sorry to let you down. 323 00:17:41,720 --> 00:17:43,310 That's Ben Bernanke, the chairman 324 00:17:43,310 --> 00:17:45,830 of the Federal Reserve. 325 00:17:45,830 --> 00:17:50,400 I think I am in the bottom right-hand corner. 326 00:17:50,400 --> 00:17:53,992 So I think I'm sort of not in the front row with the chairman 327 00:17:53,992 --> 00:17:54,950 of the Federal Reserve. 328 00:17:54,950 --> 00:17:59,180 I think I was in about the third row, as my memory serves me. 329 00:17:59,180 --> 00:18:01,605 But thank you. 330 00:18:01,605 --> 00:18:02,480 For those who don't-- 331 00:18:02,480 --> 00:18:05,540 I was honored to be chair of the Commodity Futures Trading 332 00:18:05,540 --> 00:18:07,790 Commission at the time. 333 00:18:07,790 --> 00:18:09,680 That set of reforms-- 334 00:18:09,680 --> 00:18:13,970 that set of reforms, I give you here a four-year-old chart 335 00:18:13,970 --> 00:18:15,930 out of a law firm, Davis Polk, that 336 00:18:15,930 --> 00:18:18,050 kept track of these things. 337 00:18:18,050 --> 00:18:22,490 But those Dodd-Frank reforms were around transparency 338 00:18:22,490 --> 00:18:26,830 in the derivatives markets, asset-backed securitizations, 339 00:18:26,830 --> 00:18:30,740 the sort of resiliency of banking itself, 340 00:18:30,740 --> 00:18:35,740 and a lot about consumer protection, mortgage market 341 00:18:35,740 --> 00:18:40,280 reforms, and the like, and systemic risk. 342 00:18:40,280 --> 00:18:41,740 And so this just gives you a sense 343 00:18:41,740 --> 00:18:43,930 of all the different slip streams 344 00:18:43,930 --> 00:18:46,210 that came out of that reform. 345 00:18:46,210 --> 00:18:52,330 Many people would say that that crisis started 346 00:18:52,330 --> 00:18:53,740 in the financial sector. 347 00:18:53,740 --> 00:18:54,960 It's not quite true. 348 00:18:54,960 --> 00:18:57,280 It was the housing sector and asset 349 00:18:57,280 --> 00:19:00,520 bubble in the housing sector, easy credit, 350 00:19:00,520 --> 00:19:04,360 and certainly the financial sector was at the center of it. 351 00:19:04,360 --> 00:19:08,560 But it's the mix of housing, finance, and frankly 352 00:19:08,560 --> 00:19:12,850 a failure in Washington and in London 353 00:19:12,850 --> 00:19:17,600 and elsewhere to stay abreast and help regulate the market. 354 00:19:17,600 --> 00:19:19,660 So a failure in the capital markets 355 00:19:19,660 --> 00:19:23,440 and in finance, but also a failure in public policy 356 00:19:23,440 --> 00:19:29,650 that got behind and loosened relation to finance. 357 00:19:29,650 --> 00:19:33,720 We're living in a different set of crises now, I would say. 358 00:19:33,720 --> 00:19:36,460 Fintech, fertile ground. 359 00:19:36,460 --> 00:19:41,530 We've talked about this for the whole 10 classes we've had. 360 00:19:41,530 --> 00:19:44,800 But in the midst of the corona crisis, 361 00:19:44,800 --> 00:19:49,090 I think four of the fertile grounds that we've already 362 00:19:49,090 --> 00:19:51,760 talked about are accentuated. 363 00:19:51,760 --> 00:19:55,230 Digitization of money. 364 00:19:55,230 --> 00:19:57,810 We still have paper money. 365 00:19:57,810 --> 00:20:01,860 I think we're going to move even faster on this. 366 00:20:01,860 --> 00:20:05,460 What's an interesting thing in the last seven weeks, 367 00:20:05,460 --> 00:20:07,320 the US Federal Reserve has actually 368 00:20:07,320 --> 00:20:09,780 continued to issue paper money. 369 00:20:09,780 --> 00:20:13,170 Paper money has grown not significantly, 370 00:20:13,170 --> 00:20:18,290 but it's grown close to 4% or 5% in outstanding. 371 00:20:18,290 --> 00:20:20,020 Now, that might be a flight to quality. 372 00:20:20,020 --> 00:20:22,630 It might even be drug runners who want paper money. 373 00:20:25,190 --> 00:20:27,050 Wide acceptance of new tech. 374 00:20:27,050 --> 00:20:30,620 I think that we already were realistically 375 00:20:30,620 --> 00:20:37,070 in a mobile phone, mobile delivery user interface. 376 00:20:37,070 --> 00:20:39,320 But I think that's accentuated. 377 00:20:39,320 --> 00:20:41,360 I think we've accentuated these trends 378 00:20:41,360 --> 00:20:43,970 about large pools of data and the value 379 00:20:43,970 --> 00:20:46,150 of those pools of data. 380 00:20:46,150 --> 00:20:50,340 So what do we see in terms of fintech incumbents 381 00:20:50,340 --> 00:20:51,600 and the big tech? 382 00:20:51,600 --> 00:20:53,850 Well, big finance we've talked about. 383 00:20:53,850 --> 00:20:56,730 Huge volumes in the capital markets, government debt 384 00:20:56,730 --> 00:20:57,840 markets. 385 00:20:57,840 --> 00:21:01,800 They're working on these stimulus loan programs. 386 00:21:01,800 --> 00:21:03,980 And they've also boosted their allocations 387 00:21:03,980 --> 00:21:05,430 of loan loss reserves. 388 00:21:05,430 --> 00:21:10,020 I think we're still six to 18 months away 389 00:21:10,020 --> 00:21:11,790 from significant delinquencies. 390 00:21:11,790 --> 00:21:14,920 In the corporate sector and the leveraged loan marketplace, 391 00:21:14,920 --> 00:21:16,590 we'll see some of those earlier. 392 00:21:16,590 --> 00:21:20,730 The high-yield debt market, small business loan market, 393 00:21:20,730 --> 00:21:22,680 we'll see those in 2020. 394 00:21:22,680 --> 00:21:27,970 I think in the household sector, we'll peak in 2021. 395 00:21:27,970 --> 00:21:29,170 I could be wrong. 396 00:21:29,170 --> 00:21:31,420 And when people are listening to this in the future, 397 00:21:31,420 --> 00:21:34,440 they're going to look back and say, boy, he took some risks. 398 00:21:34,440 --> 00:21:36,190 But I'm willing to take some risks where I 399 00:21:36,190 --> 00:21:38,570 think there's some challenges. 400 00:21:38,570 --> 00:21:42,100 I think also big finance is very reliant on connectivity. 401 00:21:42,100 --> 00:21:45,730 These trading floors-- if you went into a trading floor 402 00:21:45,730 --> 00:21:48,610 in London or New York, you would see hundreds 403 00:21:48,610 --> 00:21:50,770 of people on a trading floor. 404 00:21:50,770 --> 00:21:52,870 And now they're dispersed. 405 00:21:52,870 --> 00:21:56,950 And the New York Stock Exchange went to electronic trading. 406 00:21:56,950 --> 00:22:01,480 Will they ever even come back with physical market makers 407 00:22:01,480 --> 00:22:04,450 on a floor of a New York Stock Exchange? 408 00:22:04,450 --> 00:22:06,770 Maybe not. 409 00:22:06,770 --> 00:22:08,950 I'll be willing to make that prediction. 410 00:22:08,950 --> 00:22:13,500 But big reliance on connectivity. 411 00:22:13,500 --> 00:22:17,340 Big tech, significant online growth. 412 00:22:17,340 --> 00:22:19,130 And you have different parts of big tech. 413 00:22:19,130 --> 00:22:20,510 You have the ones that are really 414 00:22:20,510 --> 00:22:25,300 focused on data and analytics, like Google and Baidu. 415 00:22:25,300 --> 00:22:30,570 They're being called more into the fray 416 00:22:30,570 --> 00:22:34,670 to use that data to help protect the public through something 417 00:22:34,670 --> 00:22:37,200 called contact tracing and the like. 418 00:22:37,200 --> 00:22:42,360 You have the online market shops like Alibaba and Amazon, 419 00:22:42,360 --> 00:22:45,380 huge growth, of course. 420 00:22:45,380 --> 00:22:49,540 So significant online growth. 421 00:22:49,540 --> 00:22:52,740 And then we go to the fintech startups. 422 00:22:52,740 --> 00:22:54,840 And I'd say the real focus on the fintech 423 00:22:54,840 --> 00:22:58,130 startups is this number one point, what's your runway? 424 00:22:58,130 --> 00:23:00,240 A term that we haven't talked about in this class, 425 00:23:00,240 --> 00:23:02,530 but runway is what's your burn rate? 426 00:23:02,530 --> 00:23:06,570 See, early startups-- not just in financial technology-- 427 00:23:06,570 --> 00:23:08,790 early startups usually are spending more 428 00:23:08,790 --> 00:23:10,230 than their revenues. 429 00:23:10,230 --> 00:23:13,500 And they're trying to work to that sweet spot 430 00:23:13,500 --> 00:23:17,420 when they can get to a place and be really successful, where, 431 00:23:17,420 --> 00:23:19,450 of course, revenues are more than costs, 432 00:23:19,450 --> 00:23:21,730 but also they've built a platform. 433 00:23:21,730 --> 00:23:25,590 They've built and start to commercialize the network 434 00:23:25,590 --> 00:23:26,820 economics. 435 00:23:26,820 --> 00:23:30,170 And by network economics or platform economics, 436 00:23:30,170 --> 00:23:33,170 it's bringing two sides of a marketplace 437 00:23:33,170 --> 00:23:37,320 together and building a platform in between it. 438 00:23:37,320 --> 00:23:40,950 But there's a big focus on revenue models and adoption. 439 00:23:40,950 --> 00:23:43,290 And if you've recently raised money, 440 00:23:43,290 --> 00:23:46,240 you're in better shape then if you haven't. 441 00:23:46,240 --> 00:23:50,950 So it's not about whether you're at the seed round or a series C 442 00:23:50,950 --> 00:23:55,930 or D, meaning you've done three or four rounds of funding. 443 00:23:55,930 --> 00:23:58,490 It's really, how much cash do you have? 444 00:23:58,490 --> 00:24:00,490 What's your burn rate? 445 00:24:00,490 --> 00:24:02,400 And hunkering down. 446 00:24:02,400 --> 00:24:04,840 IPOs, Initial Public Offerings, probably 447 00:24:04,840 --> 00:24:10,040 off the table for the rest of 2020, and maybe well into '21. 448 00:24:10,040 --> 00:24:13,940 Venture capitalists will talk, as you saw in these readings, 449 00:24:13,940 --> 00:24:16,070 that they are investing, but they're 450 00:24:16,070 --> 00:24:18,140 going to be slow and cautious. 451 00:24:18,140 --> 00:24:23,390 And valuations, just like the public market's down. 452 00:24:23,390 --> 00:24:26,170 But if you don't have an IPO takeout, 453 00:24:26,170 --> 00:24:28,910 if you can't exit in the public markets, 454 00:24:28,910 --> 00:24:31,730 if you can't readily convince your venture 455 00:24:31,730 --> 00:24:34,430 capitalists about your revenue models, 456 00:24:34,430 --> 00:24:38,060 your valuations are coming off. 457 00:24:38,060 --> 00:24:41,390 I think consolidation increases. 458 00:24:41,390 --> 00:24:44,230 I think that the sectors matter, and there's going 459 00:24:44,230 --> 00:24:45,920 to be winners versus losers. 460 00:24:45,920 --> 00:24:51,100 I think anybody that's deeply reliant on transaction fees, 461 00:24:51,100 --> 00:24:53,230 particularly in the payment space, that's 462 00:24:53,230 --> 00:24:55,430 a challenge right now. 463 00:24:55,430 --> 00:24:58,540 Some businesses, the sector matters even more, 464 00:24:58,540 --> 00:25:02,530 like if you were Toast servicing the restaurant field, 465 00:25:02,530 --> 00:25:05,480 I have not talked to them since this crisis started, 466 00:25:05,480 --> 00:25:07,110 but I think that's a challenging thing. 467 00:25:07,110 --> 00:25:10,030 You could be a transaction-based business 468 00:25:10,030 --> 00:25:13,060 and have been in great shape in January 469 00:25:13,060 --> 00:25:16,550 and really pretty lousy shape right now. 470 00:25:16,550 --> 00:25:20,210 So some areas like retail, travel, events, obviously. 471 00:25:20,210 --> 00:25:24,730 Mobile trading-- mobile trading, on the other hand, might be up, 472 00:25:24,730 --> 00:25:28,550 the Robinhood numbers and others like them. 473 00:25:28,550 --> 00:25:30,260 Wealth management like Betterment 474 00:25:30,260 --> 00:25:31,910 that we talked about, maybe. 475 00:25:31,910 --> 00:25:35,030 But if you're like Root Insurance, 476 00:25:35,030 --> 00:25:39,560 if you're an auto insurance tech and people aren't driving, 477 00:25:39,560 --> 00:25:40,940 it might be the other way. 478 00:25:40,940 --> 00:25:43,830 So sector matters a lot. 479 00:25:43,830 --> 00:25:46,740 Compliance up. 480 00:25:46,740 --> 00:25:51,120 International cross-border remittances, I believe likely 481 00:25:51,120 --> 00:25:52,470 has some possibility. 482 00:25:52,470 --> 00:25:57,570 But I still think runway matters and consolidation increases. 483 00:25:57,570 --> 00:25:59,250 And so a couple other thoughts. 484 00:25:59,250 --> 00:26:01,590 Additional opportunities. 485 00:26:01,590 --> 00:26:03,480 I think there's additional opportunities 486 00:26:03,480 --> 00:26:06,870 if you're serving those tapping into the fiscal stimulus 487 00:26:06,870 --> 00:26:08,470 and loan programs. 488 00:26:08,470 --> 00:26:10,080 So what you've seen around the globe, 489 00:26:10,080 --> 00:26:14,730 whether it was PayPal, SoFi, others saying, 490 00:26:14,730 --> 00:26:16,950 we will help a small business. 491 00:26:16,950 --> 00:26:20,550 Revolut in Europe, we will help a small business fill out 492 00:26:20,550 --> 00:26:23,640 their forms, apply for the programs 493 00:26:23,640 --> 00:26:26,360 here in the US, programs in Europe. 494 00:26:26,360 --> 00:26:29,250 And that's an opportunity to actually build 495 00:26:29,250 --> 00:26:31,230 customer relations. 496 00:26:31,230 --> 00:26:34,750 Numerous amongst the fintech startups here in the US 497 00:26:34,750 --> 00:26:36,960 have raised their hand and said to the Small Business 498 00:26:36,960 --> 00:26:39,840 Administration, can we be basically part 499 00:26:39,840 --> 00:26:42,330 of the PPP program? 500 00:26:42,330 --> 00:26:44,490 I don't mean receive a forgivable loan. 501 00:26:44,490 --> 00:26:48,610 I mean help issue forgivable loans. 502 00:26:48,610 --> 00:26:50,910 Romain I want to pause because I see there is activity 503 00:26:50,910 --> 00:26:53,520 in the chat room and just see if there's-- 504 00:26:53,520 --> 00:26:56,110 TEACHING ASSISTANT: So we have a general question from Rosanna 505 00:26:56,110 --> 00:26:58,810 on whether there is a chance that this crisis will impact 506 00:26:58,810 --> 00:27:02,280 the stability of the US dollar. 507 00:27:02,280 --> 00:27:05,020 GARY GENSLER: I think, great question. 508 00:27:05,020 --> 00:27:08,700 When you say stability, I think of volatility. 509 00:27:08,700 --> 00:27:12,900 But Rosanna, do you mean that, or do you mean its centrality 510 00:27:12,900 --> 00:27:15,120 in the world trading system? 511 00:27:15,120 --> 00:27:18,090 AUDIENCE: I think centrality in the world trade system. 512 00:27:18,090 --> 00:27:18,800 GARY GENSLER: OK. 513 00:27:18,800 --> 00:27:23,480 So I think that crises like this usually-- 514 00:27:23,480 --> 00:27:26,090 and history shows this time and again-- 515 00:27:26,090 --> 00:27:27,720 it's flight to quality. 516 00:27:27,720 --> 00:27:33,160 And so right now, the US dollar is that quality asset. 517 00:27:33,160 --> 00:27:37,280 Our economy has got huge challenges. 518 00:27:37,280 --> 00:27:40,220 But I'm saying as a fiat currency 519 00:27:40,220 --> 00:27:42,440 compared to other fiat currencies, 520 00:27:42,440 --> 00:27:43,940 I think you've still seen the flight 521 00:27:43,940 --> 00:27:46,670 to quality in the US dollar. 522 00:27:46,670 --> 00:27:54,610 I do think that if you go out multiple decades, our handling, 523 00:27:54,610 --> 00:27:57,430 as a public policy matter, people will be looking, 524 00:27:57,430 --> 00:27:59,080 how did our government respond? 525 00:27:59,080 --> 00:28:03,200 How did we respond to the health care crisis? 526 00:28:03,200 --> 00:28:04,550 And I don't mean in the middle-- 527 00:28:04,550 --> 00:28:06,550 right now, there's going to be all those debates 528 00:28:06,550 --> 00:28:08,980 and they'll influence all sorts of things like the November 529 00:28:08,980 --> 00:28:09,480 election. 530 00:28:09,480 --> 00:28:11,830 I'm talking about longer term. 531 00:28:11,830 --> 00:28:14,530 Longer term, how did we as a society, 532 00:28:14,530 --> 00:28:18,530 how did we as a government handle this crisis? 533 00:28:18,530 --> 00:28:20,530 And I think this story is not written yet, 534 00:28:20,530 --> 00:28:24,370 even though right now there's a lot of reasons 535 00:28:24,370 --> 00:28:26,920 to think we didn't handle things well in January and February 536 00:28:26,920 --> 00:28:28,510 and March. 537 00:28:28,510 --> 00:28:31,270 But we don't know about the reopening yet. 538 00:28:31,270 --> 00:28:36,370 But the US dollar, which is probably over half-- 539 00:28:36,370 --> 00:28:37,930 depending upon what statistic you 540 00:28:37,930 --> 00:28:41,590 want to pick, between half and 2/3 of trade, 541 00:28:41,590 --> 00:28:45,700 the foreign currency markets, the central bank reserves 542 00:28:45,700 --> 00:28:49,940 around the globe are on the US dollar. 543 00:28:49,940 --> 00:28:51,400 I think you raise a great question. 544 00:28:51,400 --> 00:28:54,970 Will it change the US dollar as the world's sort 545 00:28:54,970 --> 00:28:58,150 of leading currency? 546 00:28:58,150 --> 00:29:00,370 My guess is, probably not. 547 00:29:00,370 --> 00:29:02,920 I think we're still multiple decades away. 548 00:29:02,920 --> 00:29:05,470 I think if China wants to take that role 549 00:29:05,470 --> 00:29:09,980 at some point in time, probably late in the 21st century 550 00:29:09,980 --> 00:29:12,910 sometime, they have to really adjust themselves 551 00:29:12,910 --> 00:29:15,920 to having a more open capital market. 552 00:29:15,920 --> 00:29:21,550 The US took the role from the British 553 00:29:21,550 --> 00:29:25,010 just about the same time as the last big pandemic, 554 00:29:25,010 --> 00:29:27,800 the one a hundred years ago, the Spanish flu. 555 00:29:27,800 --> 00:29:32,230 It's a coincidence, maybe, so you're right to raise it. 556 00:29:32,230 --> 00:29:35,060 But I don't think China is in the position. 557 00:29:35,060 --> 00:29:37,310 They don't have free and open capital markets. 558 00:29:37,310 --> 00:29:39,280 The US had free and open capital markets. 559 00:29:39,280 --> 00:29:43,190 They don't, frankly, have the same legal systems that we had. 560 00:29:43,190 --> 00:29:48,400 And so the UK was in relative decline to the US already. 561 00:29:48,400 --> 00:29:51,330 I don't think it was the Spanish flu that gave us the chance 562 00:29:51,330 --> 00:29:52,180 to take over. 563 00:29:52,180 --> 00:29:56,010 World War I did give us a chance to take over. 564 00:29:56,010 --> 00:29:59,470 And so you're right, some future crisis might be that moment, 565 00:29:59,470 --> 00:30:01,430 but I don't think this is that moment. 566 00:30:01,430 --> 00:30:02,710 That's a good question. 567 00:30:02,710 --> 00:30:03,550 AUDIENCE: Thank you. 568 00:30:03,550 --> 00:30:05,110 What about the volatility, though? 569 00:30:05,110 --> 00:30:07,300 Do you think also that's-- 570 00:30:07,300 --> 00:30:10,480 GARY GENSLER: I've got three minutes to finish up, 571 00:30:10,480 --> 00:30:12,100 so can we do this offline? 572 00:30:12,100 --> 00:30:16,060 But there's also additional challenges 573 00:30:16,060 --> 00:30:17,620 on delinquencies and defaults. 574 00:30:17,620 --> 00:30:19,360 I think for fintech companies, they 575 00:30:19,360 --> 00:30:22,330 have to be very aware, especially 576 00:30:22,330 --> 00:30:26,500 if you're in consumer or small business lending, 577 00:30:26,500 --> 00:30:30,130 that delinquencies and defaults will go up. 578 00:30:30,130 --> 00:30:32,470 I just think-- and if you have a business 579 00:30:32,470 --> 00:30:36,020 model related to float because interest rates went down. 580 00:30:36,020 --> 00:30:38,050 So this is where I'm going to close 581 00:30:38,050 --> 00:30:42,170 is this chart from the Boston Consulting Group breaks 582 00:30:42,170 --> 00:30:43,750 subsectors. 583 00:30:43,750 --> 00:30:46,890 And again, in this class, I constantly 584 00:30:46,890 --> 00:30:49,960 am focused on granularity. 585 00:30:49,960 --> 00:30:52,540 You can be strategic, but you have to be tactical. 586 00:30:52,540 --> 00:30:55,690 You've got to get down to each sector. 587 00:30:55,690 --> 00:31:01,220 In payments, trade finance is probably at high risk. 588 00:31:01,220 --> 00:31:04,160 But other areas might be OK. 589 00:31:04,160 --> 00:31:06,830 Account to account, person to a person 590 00:31:06,830 --> 00:31:11,270 like Venmo, Paypal's Venmo, might be in a good place. 591 00:31:11,270 --> 00:31:15,330 In lending, unsecured personal lending, 592 00:31:15,330 --> 00:31:17,700 Boston Consulting Group says a problem. 593 00:31:17,700 --> 00:31:20,550 But their other parts, like lending on infrastructure, 594 00:31:20,550 --> 00:31:21,810 might be OK. 595 00:31:21,810 --> 00:31:23,430 So you've got to get granular. 596 00:31:23,430 --> 00:31:27,240 You've got to think about each sector individually. 597 00:31:27,240 --> 00:31:30,330 Insurance, I also think it will be 598 00:31:30,330 --> 00:31:33,030 interesting to see what happens to some of the auto insurers 599 00:31:33,030 --> 00:31:35,230 that BCG hasn't put on this chart. 600 00:31:35,230 --> 00:31:37,230 Everybody's going to have their different chart. 601 00:31:37,230 --> 00:31:40,080 This is not to say this is the accurate chart. 602 00:31:40,080 --> 00:31:42,120 I raised this Boston Consulting Group 603 00:31:42,120 --> 00:31:47,160 chart because I want to always remind, it's granularity. 604 00:31:47,160 --> 00:31:49,810 You need both strategy and tactics 605 00:31:49,810 --> 00:31:55,280 and to get into where the cracks are in the system.