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THE ONLINE MORTGAGE LENDING REPORT: How banks are striking back against Quicken Loans and other digital-first lenders in the $9 trillion US mortgage market

Sat, 09/14/2019 - 6:00pm

Despite the mortgage space representing the largest US lending market — with debt sitting at $9.2 trillion — it's been the slowest to digitize, and incumbents have had little incentive to remove friction from the customer application process.

The customer experience has been hampered by a time-consuming process that requires spending hours filling out an application and gathering documents, a lack of transparency about the status of the process, and uncertainty about what outstanding documentation could be requested later. And with no viable challengers to the status quo, incumbent lenders had little reason to overhaul this process.

But Quicken Loans turned the mortgage industry on its head with the introduction of Rocket Mortgage, an online mortgage application that takes less than 10 minutes to complete, in November 2015. Its product simplified the mortgage process by offering a clean and quick online application form, allowing online information verification, and providing conditional preapproval within minutes. And in Q4 2017, Quicken became the largest US residential mortgage originator by volume, surpassing Wells Fargo for the first time.

Rocket Mortgage helped validate the digital mortgage sector and bring a number of other alternative online mortgage lenders to the fore. We've seen players like Lenda (now Reali Loans) move into mortgage purchases around the time Rocket Mortgage was introduced and launch its online mortgage offering early in 2016, for instance.

And while big banks have seen their share of the market shrink since the 2008 financial crisis, they can now unlock the potential of advanced mortgage tech to act against the threat of nonbanks and alt lenders and claw back some of that lost market share.

And some large FIs, including Wells Fargo, JPMorgan Chase, Bank of America (BofA), SunTrust, and TD Bank, have already unveiled their own digital mortgage lending platforms that help them enhance the customer experience, shave down costs — by cutting labor expenses or reducing the possibility of fraud, for example — and drive a more significant opportunity in residential mortgages.

In this report, Business Insider Intelligence will examine the current state of the mortgage lending landscape and how technology has enabled alt lenders to transform the home loan process from application to closing. We will then explore how legacy banks are responding to the threat of digitally advanced competitors by unveiling their own online mortgage solutions and offer recommendations for FIs looking to enhance their mortgage offerings.

The companies mentioned in this report are: Ally, Bank of America, Chase,, Black Knight, blend, eOriginal, Loan Depot, Quicken Loans, Reali Loans, Roostify, SoFi, SunTrust, TD Bank, US Bank, Wells Fargo

Here are some of the key takeaways from the report:

  • Technology has enabled digitally advanced nonbanks and alt lenders to disrupt the mortgage process, transforming the application process and, to an extent, digitizing and automating underwriting and closing.
  • Banks are responding to the threat of fintechs by launching their own digital solutions, often in partnership with mortgage software and service providers.
  • Other FIs looking to enhance their mortgage offerings could leverage technology and partner with providers to tap into consumers' growing appetite for digital mortgage solutions and avoid ceding market share to the competition.  

In full, the report:

  • Examines the current state of the mortgage lending landscape.
  • Details how fintechs have transformed the home loan market.
  • Highlights technology's impact across the various stages of the mortgage lending process, including application, underwriting, and closing.
  • Examines how legacy players are responding to the threat of digitally advanced nonbanks and alt lenders.
  • Outlines what banks should do to enhance their mortgage offerings and look for new revenue growth opportunities in the space. 

Interested in getting the full report? Here are three ways to access it:

  1. Purchase & download the full report from our research store. >> Purchase & Download Now
  2. Subscribe to a Premium pass to Business Insider Intelligence and gain immediate access to this report and more than 250 other expertly researched reports. As an added bonus, you'll also gain access to all future reports and daily newsletters to ensure you stay ahead of the curve and benefit personally and professionally. >> Learn More Now
  3. Current subscribers can read the report here.

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THE EVOLUTION OF THE US NEOBANK MARKET: Why the US digital-only banking space may finally be poised for the spotlight (GS, JPM)

Sat, 09/14/2019 - 4:00pm

This is a preview of a research report from Business Insider Intelligence, Business Insider's premium research service. To learn more about Business Insider Intelligence, click here.

Neobanks, digital-only banks that aren’t saddled by traditional banking technology and costly networks of physical branches, have been working to redefine retail banking in major markets around the world.

Driven by innovation-friendly regulatory reforms, these companies have especially gained traction in Europe over the last three years. While the US is home to some of the oldest neobanks — including Simple, which set up shop in 2009, and Moven, which was founded in 2011 — the country's neobank ecosystem has lagged behind its European counterpart.

That’s largely because of an onerous regulatory regime, which has made it very difficult to obtain a banking license, and the entrenched position incumbents hold in the financial lives of US consumers. Navigating the tedious and costly scheme for obtaining a banking charter and appropriate approvals has been a major stumbling block for the country’s digital banking upstarts. However, developments over the past year suggest these startups are finally poised for the spotlight in the US. 

In this report, Business Insider Intelligence maps out the factors contributing to this shifting tide, examines how key players are positioning themselves to take advantage, and explores how incumbents can embark on their own digital transformations to stave off disruption.

The companies mentioned in this report are: Aspiration, Chime, Goldman Sachs' Marcus, JPMorgan Chase's Finn, N26, and Revolut. 

Here are some of the key takeaways from the report:

  • Despite lagging behind Europe, recent developments suggest that neobanks are finally ready for the spotlight in the US.
  • Three distinct influences are responsible for creating the fertile ground for this evolution: regulation, shifting consumer attitudes, and the activity of incumbent banks.
  • Among those driving this evolution in the US are foreign neobanks including Germany’s N26 and UK-based Revolut.
  • Meanwhile, two notable incumbent-owned outfits have deployed amid great fanfare: Marcus by Goldman Sachs and Finn by Chase. 
  • In this increasingly competitive landscape, incumbent banks have a range of strategic options at their disposal, including overhauling their entire business for the digital era.

 In full, the report:

  • Details the factors contributing to a shift in the US' neobank market.
  • Explains the different operating models neobanks in the US are deploying to roll out their services and meet consumer demands.
  • Highlights how incumbent banks are tapping into the advantages offered by stand-alone digital outfits. 
  • Discusses the key strategies established players need to deploy to remain relevant in the US' increasingly digital banking landscape.

Interested in getting the full report? Here are two ways to access it:

  1. Purchase & download the full report from our research store. >>Purchase & Download Now
  2. Subscribe to a Premium pass to Business Insider Intelligence and gain immediate access to this report and over 100 other expertly researched reports. As an added bonus, you'll also gain access to all future reports and daily newsletters to ensure you stay ahead of the curve and benefit personally and professionally. >> Learn More Now

The choice is yours. But however you decide to acquire this report, you've given yourself a powerful advantage in your understanding of the fast-moving world of Fintech.

SEE ALSO: Latest fintech industry trends, technologies and research from our ecosystem report

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The Payment Industry Ecosystem: The trend towards digital payments and key players moving markets

Sat, 09/14/2019 - 2:00pm

This is a preview of a research report from Business Insider Intelligence. Current subscribers can read the report here.

The digitization of daily life is making phones and connected devices the preferred payment tools for consumers — preferences that are causing digital payment volume to blossom worldwide.

As noncash payment volume accelerates, the power dynamics of the payments industry are shifting further in favor of digital and omnichannel providers, attracting a wide swath of providers to the space and forcing firms to diversify, collaborate, or consolidate in order to capitalize on a growing revenue opportunity.

More and more, consumers want fast and simple payments — that's opening up opportunities for providers. Rising e- and m-commerce, surges in mobile P2P, and increasing willingness among customers in developed countries to try new transaction channels, like mobile in-store payments, voice and chatbot payments, or connected device payments are all increasing transaction touchpoints for providers.

This growing access is helping payments become seamless, in turn allowing firms to boost adoption, build and strengthen relationships, offer more services, and increase usage.

But payment ubiquity and invisibility also comes with challenges. Gains in volume come with increases in per-transaction fee payouts, which is pushing consumer and merchant clients alike to seek out inexpensive solutions — a shift that limits revenue that providers use to fund critical programs and squeezes margins.

Regulatory changes and geopolitical tensions are forcing players to reevaluate their approach to scale. And fraudsters are more aggressively exploiting vulnerabilities, making data breaches feel almost inevitable and pushing providers to improve their defenses and crisis response capabilities alike.

In the latest annual edition of The Payments Ecosystem Report, Business Insider Intelligence unpacks the current digital payments ecosystem, and explores how changes will impact the industry in both the short- and long-term. The report begins by tracing the path of an in-store card payment from processing to settlement to clarify the role of key stakeholders and assess how the landscape has shifted.

It also uses forecasts, case studies, and product developments from the past year to explain how digital transformation is impacting major industry segments and evaluate the pace of change. Finally, it highlights five trends that should shape payments in the year ahead, looking at how regulatory shifts, emerging technologies, and competition could impact the payments ecosystem.

Here are some key takeaways from the report:

  • Behind the scenes, payment processes and stakeholders remain similar. But providers are forced to make payments as frictionless as possible as online shopping surges: E-commerce is poised to exceed $1 trillion — nearly a fifth of total US retail — by 2023.
  • The channels and front-end methods that consumers use to make payments are evolving. Mobile in-store payments are huge in developing markets, but approaching an inflection point in developed regions where adoption has been laggy. And the ubiquity of mobile P2P services like Venmo and Square Cash will propel digital P2P to $574 billion by 2023.
  • The competitive landscape will shift as companies pursue joint ventures to grow abroad in response to geopolitical tensions, or consolidate to achieve rapid scale amid digitization.
  • Fees, bans, steering, or regulation could impact the way consumers pay, pushing them toward emerging methods that bypass card rails, and limit key revenue sources that providers use to fund rewards and marketing initiatives.
  • Tokenization will continue to mainstream as a key way providers are preventing and responding to the omnipresent data breach threat.

The companies mentioned in the report are: CCEL, Adyen, Affirm, Afterpay, Amazon, American Express, Ant Financial, Apple, AribaPay, Authorize.Net, Bank of America, Barclays, Beem It, Billtrust, Braintree, Capital One, Cardtronics, Chase Paymentech, Citi, Discover, First Data, Flywire, Fraedom, Gemalto, GM, Google, Green Dot, Huifu, Hyundai, Ingenico, Jaguar, JPMorgan Chase, Klarna, Kroger, LianLian, Lydia, Macy’s, Mastercard, MICROS, MoneyGram, Monzo, NCR, Netflix, P97, PayPal, Paytm, Poynt, QuickBooks, Sainsbury’s, Samsung, Santander, Shell, Square, Starbucks, Stripe, Synchrony Financial, Target, TransferWise, TSYS, UnionPay, Venmo, Verifone, Visa, Vocalink, Walmart, WeChat/Tencent, Weebly, Wells Fargo, Western Union, Worldpay, WorldRemit, Xevo, Zelle, Zesty, and ZipRecruiter, among others

In full, the report:

  • Explains the factors contributing to a swell in global noncash payments
  • Examines shifts in the roles of major industry stakeholders, including issuers, card networks, acquirer-processors, POS terminal vendors, and gateways
  • Presents forecasts and highlights major trends and industry events driving digital payments growth
  • Identifies five trends that will shape the payments ecosystem in the year ahead

SEE ALSO: These are the four transformations payments providers must undergo to survive digitization

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These are the hottest fintech startups and companies in the world

Sat, 09/14/2019 - 12:30pm

It's a fascinating time for fintech.

What was once a disruptive force in the financial world has become standard practice for many industry leaders. 

Fintech industry funding has already reached new highs globally in 2018, with overall funding hitting $32.6 billion at the end of Q3.

Some new regions, including South America and Africa, are emerging on the scene.

And some fintech companies, including a number of insurtechs, have dipped into new markets to escape heightened competition.

Now that fintech has become mainstream, the next focus is on the rising stars in the industry. To that end, Business Insider Intelligence has put together the following list of 10 Up and Coming Fintechs for 2019.


Total raised: £1.9 million ($2.5 million)

What it does: Coconut is a UK-based current account and accounting platform for small- and medium-sized businesses (SMBs).

Why it's hot in 2019: Next week, Coconut will launch its first subscription service, dubbed Grow, which will bundle unlimited invoicing and end of year tax reports, for £5 ($6.51) a month. This will make it a very attractive option for SMBs, that conventionally don't have a lot of time on their hands to handle their accounting.


Total raised: $282 million

What it does: Brex is a US-based corporate credit card provider, which initially focused on serving startups.

Why it's hot in 2019: The startup gained unicorn status in 2018, only months after it launched its first product. Now, after receiving debt financing worth $100 million, Brex wants to target larger enterprises with its topic — opening it up to a whole new set of customers and helping bring the company to the next level.


Total raised: $11.8 million

What it does: UK-based TrueLayer provides financial services companies with application programming interfaces (APIs), and helps them make the most of new regulations including Open Banking.

Why it's hot in 2019: TrueLayer recently partnered with Plum to help it make the most of open banking, and expanded its API to Germany, where banks continue to struggle to comply with PSD2.


Total raised: $178 million

What it does: German savings and investment marketplace

Why it's hot in 2019: Raisin became a fintech unicorn after raising $114 million in January, and has since then formed partnerships with Commerzbank and ClearScore. Additionally, the startup partnered with Starling Bank in 2018 to launch bank accounts in the UK


Total raised: £9 million ($11.7 million)

What it does: UK-based insurtech Anorak provides advice on life insurance

Why it's hot in 2019: It graduated from Accenture's fintech innovation lab earlier this year, and is present on Starling's and Yolt's marketplace, where it will likely be able to gain more traction.


Total raised: $2 billion

What it does: US-based online personal money management startup

Why it's hot in 2019: While the company previously focused on loans, including student loans, in 2019 it has made some significant moves into the wealth management space, and launched both free ETFs and an investment product, dubbed SoFi Invest. As it becomes a more rounded financial product, SoFi will be worth watching in the next few years.

Lending Express

Total raised: $2.7 million

What it does: Lending Express is a US-based lending platform, which focuses on SMBs, and helps them gain access to more funding by providing them with advice.

Why it's hot in 2019: SMBs remain underserved globally, and while a number of alt lenders have cropped up that make capital more accessible, there are still plenty of startups that need guidance on what they have to do to be able to get access to funding.

Volt Bank

Total raised: $45 million

What it does: Volt is an Australia-based neobank

Why it's hot in 2019: In January, Volt became Australia's first fully licensed neobank. The challenger bank will first offer a suite of retail banking products, as well as budgeting and account aggregation tools, and plans to enter the SMB banking sector in 2020.


Total raised: $30 million

What it does: Hong Kong-based startup Bowtie provides consumers with life insurance.

Why it's hot in 2019: In December 2018, Bowtie became the first insurtech in Hong Kong to receive an online-only insurance license from Hong Kong's Insurance Authority (IA). Over 80% of customers in Hong Kong willing to use digital channels to interact with insurance providers, making future demand for Bowtie very likely.


Total raised: $158.5 million

What it does: German Wefox connects insurance companies to brokers that manage and consult their customers completely digital.

Why it's hot in 2019: The insurtech raised $125 million in March 2019, partnered with SBI Group earlier this year to launch in Asia. Given that Wefox partly works on a business-to-business model, it is likely that demand will be high from insurers that have to compete with a plethora of emerging insurtechs.

Want to learn more?

There's plenty more to learn about the future of fintech, payments, and the financial services industry. Business Insider Intelligence has outlined the road ahead in a FREE report called The Future of Payments. Click below to receive your copy of the report.

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With Tesla's Elon Musk and Rivian's RJ Scaringe, we have the Henry Ford and Alfred Sloan of electric vehicles (TSLA, GM, F)

Sat, 09/14/2019 - 11:08am

Regular Business Insider readers know that every weekend, I write a take on something Tesla-related. This time around, I'm going to ask for patience as I preface the effort with a short auto-industry history lesson.

The development of the car business in the 20th century followed a predictable pattern: daring innovators gave way to savvy managers. The early days were the Wild West — or Wild Midwest, and the burgeoning industry was located mostly in the middle of the US, with Detroit as its capital — but after World War II and the emergence of a vast American consumer culture, automotive startups morphed into multinational corporations.

Read more: In the battle of the Tesla Model S and the Porsche Taycan, it's really no contest

The two most important men in this story were Henry Ford, who needs no introduction, and Alfred Sloan, who does. It was Ford who laid the groundwork for the modern auto industry and pioneered both the effective moving assembly line and the idea of mass-market motorized transport with the Model T. The company that bears his name and that's still run in part by his great-grandson, board chairman Bill Ford, remains the No. 2 US car company.

Sloan, a more obscure personality, created the modern corporation in General Motors. At its peak in the 1950s, GM controlled half the US car market; it still controls about 20%. (The Germans and Japanese weren't really selling vehicles in the US during the Eisenhower administration.)

The Utopian Ford vs. the pragmatic Sloan

The key distinction between Henry Ford and Alfred Sloan was that Ford was something of a utopian (and, more troublingly, given to anti-Semitic propaganda) who harbored visionary, paternalistic attitudes toward his workforce and his customers. He believed that his workers should be paid enough to buy the cars they produced, and thereby created a virtuous circle, but he disliked credit and figured that there was no reason to sell Model T's that weren't black.

Sloan, by contrast, thought that the buyer was always right — or at least that the consumer should enjoy abundant choice, and that GM as a corporation should provide it. Some of this was expeditious: GM was created by combining brands — Chevrolet, Buick, Cadillac — so Sloan was simply managing reality as GM's president. But GM has always concentrated on the pull of consumers, rather than Ford's push to deliver singularly great products.

The symbols of the two American giants capture this distinction. Henry Ford's great achievement was the mighty River Rouge factory, where train cars loaded with iron ore pulled up to one end of the plant and finished cars rolled out the other. Sloan's work of genius was GM's organizational chart, the blueprint for American managerial capitalism.

Read more: With a US Department of Justice move against automakers, the Trump administration is now officially antibusiness

OK, history lesson over. Now let's see how history repeats itself

The two biggest names in the electric car realm are Tesla CEO Elon Musk (obviously) and a guy you probably haven't heard of, RJ Scaringe, who leads Rivian, a startup electric SUV and pickup-truck maker. In my cycles-of-history framework, Musk is Ford and Scaringe is Sloan. (There's some irony here, by the way, as Ford has invested $500 million in Rivian, while Tesla hasn't seen a major automaker take a stake since Daimler and Toyota bought equity prior to Tesla's 2010 IPO.)

The big difference between Musk and Scaringe is that Musk, the visionary, wants nothing to do with the legacy auto industry anymore, while Scaringe is running Rivian sort of like a junior OEM. When I saw the photo below, of Scaringe and Bill Ford after the Ford investment was announced, I speculated that I was looking at Ford's next CEO.

Like Henry Ford, Musk is preoccupied with the manufacturing process — Tesla's Gigafactories, in Musk's view, are more important than Tesla's cars. They're the "machine that builds the machine," and Musk would like them to become radically automated.

Why Rivian is more like a traditional automaker than Tesla

Scaringe — like Sloan, an MIT engineering grad — is creating an electric automaker that's designed to reach the consumer; he's not trying to reinvent manufacturing. To achieve that, he wants everything to do with the legacy auto industry. Where Sloan had his org chart, Scaringe has partnerships and deals, all intended to make Rivian vehicles easier to manufacture, sell, and service. His most recent investment, of $350 million from Cox Automotive, is representative. (Ford and Amazon have also kicked in, giving Rivian a $2 billion total.)

Cox owns Kelley Blue Book and Autotrader, among other properties. These entities are designed to facilitate the car buying and leasing process and are heavily organized around the consumer. By investing in Rivian, they're getting a piece of the future, the chance to integrate sales not just of EVs, but of SUVs and pickups, the most popular vehicles in the lucrative US market. Rivian is getting a huge pipeline to buyers from the deal.

In the history of the car business, Ford is seen as stubborn and idealistic while Sloan is considered adaptable and pragmatic. Of course, both Ford and GM are still around, so it's not clear that Ford's vision lost out to Sloan's technocracy. Musk likes to note that Ford and Tesla are the only two American car makers that haven't gone bankrupt.

But Ford did have to recruit a cadre of number-crunching efficiency experts after World War II — the so-called "Whiz Kids" who had brought statistical analysis to the war effort — to modernize its business. Nonetheless, Ford has often been home to outside-the-box thinkers, from the brash Lee Iacocca to the former Boeing exec Alan Mulally, who rescued Ford from insolvency before the financial crisis. GM continues to embrace the skilled manager, although in current CEO Mary Barra the company has been making tough call after tough call on issues that the pre-bankruptcy GM had endlessly postponed, such as selling the perennially money-losing European division, Opel.

See also: Apply here to attend IGNITION: Transportation, an event focused on the future of transportation, in San Francisco on October 22.

A contest of engineers

Interestingly, with Musk and Scaringe we also have a contest of engineers. Or more accurately, technologists, as Musk's background is in physics while Scaringe has a PhD in mechanical engineering. Don't interpret that as meaning Scaringe is a superior engineer; Musk likely knows more about electric-vehicle design than most people in the business. But while the auto industry is full of engineers in leadership roles, Musk likes to express engineering in a way that's wonky and unique (as well as sort of irritatingly didactic at times). Scaringe is more low-key. But in Scaringe, Musk has a potential rival who can actually out-engineer him, something he hasn't really had to deal with up to this point. 

What we don't have with Musk and Scaringe is a contest of celebrities. Musk is world-famous, the basis for the "Iron Man" Tony Stark character — a real-life billionaire and occasional playboy (Musk gets around, but he also has five kids). Scaringe is unknown outside the car business, and not even that well-known in it. I've been covering cars for over a decade and I'd never heard of him prior to about a year ago.

But obviously, even if you know nothing about cars, you're probably familiar with Henry Ford, while Alfred Sloan might ring a bell only if you live in the New York area and are aware of the Sloan Kettering medical centers or the Sloan Foundation's philanthropy.

The historical comparisons aren't perfect. Musk is a creature of Silicon Valley and its embrace of risk-taking, rapid-iteration, launch-now-and-debug-later ethos. He's been compared with Steve Jobs. The business dynamics of the tech industry in the early 21st century are not the same as the car business in the early 20th. Scaringe, meanwhile, has just begun to hit his stride, after almost a decade of developing and pivoting Rivian. He seems fresher because Rivian missed out on the EV-startup surge of the 2010s — a fortunate thing, as most of those startups, save for Tesla, have vanished. Scaringe is a creature of the next wave, which entails a lot more cooperation with Detroit and recognizes that building vehicles at scale is extremely difficult.

Prior to Scaringe, Musk's main rival was often seen as Henrik Fisker, a car designer who founded Fisker Automotive, which went out of business in 2013 (Fisker himself had resigned by then, and the automaker's decline was due to bottlenecks with its battery supplier and the unfortunate destruction of a load of cars in Hurricane Sandy). If anything, Fisker was a more flamboyant and compelling personality that Musk; I've talked to him on several occassions, and his talents as a raconteur are formidable. He's currently engaged in a wide range of projects, from building a supercar to resuscitating electric mobility with a new company, Fisker, Inc.

Read more: The spectacular story of Ferrari's 7-decade journey from an upstart racing team to a $30 billion-dollar luxury brand

The fox and the hedgehog

To borrow a famous analysis from the philosopher Isaiah Berlin, Fisker is a fox to Scaringe's hedgehog (according to Berlin, referencing from an early distinction in ancient Greek literature, the fox knows many things, while the hedgehog concentrates on one). Musk, too, is a fox, engaged with space exploration, tunneling, and artificial intelligence.

At first glance, Henry Ford might seem hedgehog-like, but in my view, he was probably a fox, or perhaps a fox-hedgehog hybrid (as was the novelist Leo Tolstoy, by Berlin's reading). Foxes function well as entrepreneurs, even though they might be single-mindedly devoted to their companies and their missions; Ford started two failed enterprises before the Ford Motor Company  — and maybe even three, depending on how you assess his fortunes.

Sloan, meanwhile, found his glory in melding GM with the American consumer, and in a larger sense, postwar life. The definite GM quote didn't come from Sloan, but he enabled the automaker's World War II-era president, Charles Erwin Wilson, to tell Congress during his confirmation hearings to become Eisenhower's Secretary of Defense, that he could make a decision that would place GM and the US in conflict because "I thought what was good for our country was good for General Motors, and vice versa."

We're now watching this business narrative of the 20th century repeated in the 21st. Ultimately, this is important because the gestational electric-vehicle industry needs big personalities to sustain and grow it. The first decade has been a mixed bag, with Tesla stumbling through a decade of infrequent profits and serial controversies while the major automakers approach a market that's still quite weak, with halting steps. 

Ford and GM are both producing electric cars, but we really need the new Ford and new GM. In Tesla and Rivian we could have not just that, but the leaders who can do for EVs what Henry Ford and Alfred Sloan did for internal combustion. 

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NOW WATCH: Amazon invested $700M into an electric vehicle startup. Here's how Rivian is doing exactly what Tesla isn't.

White Claw, Aperol Spritz, and canned rosé have all been dubbed the 'drinks of the summer,' and it makes perfect sense with who millennials tell the world they are

Sat, 09/14/2019 - 10:47am

Millennials are thirsty, and it's not for beer or traditional hard liquor.

Instead, they've been quenching their thirst with hard seltzer — the "drink of the summer," according to Sheila Marikar for The New York Times.

Hard seltzer has taken the summer by storm, largely thanks to young millennial men who identify as "bros," reported Business Insider's Bethany Biron. "At barbecues, on beaches, and at fraternity parties, legions of men are suddenly singing the praises of hard seltzer," she wrote.

The carbonated drink is currently enjoying the same attention that other signature drinks did in previous summers. Last year, the drink of the summer was Aperol Spritz. In 2017, it was canned wine. And the summer before that, it was frosé, an evolution of 2015's drink of the summer — rosé. 

Read more: Seltzer is officially 'the drink of the summer.' Anyone who's surprised hasn't been paying attention to what millennials like.

But what do these drinks have in common, besides some brilliant marketing strategies? One word: millennials.

While these drinks have driven consumption trends across all demographics, "they may appeal more to millennials because they are non-polarizing, meaning, for instance, there was no pre-conceived stigma on who a rosé drinker was (or should be)," Brandy Rand, COO of the Americas at IWSR Drinks Market Analysis, told Business Insider.

"There are a few crossover traits as well," she added. "Aperol Spritz is colorful, has low-ABV, and [is] refreshing; hard seltzers are refreshing, low-calorie, and portable; rosé has been cited as a millennial color and canned versions are portable."

And it all says a lot about what the generation likes. 

Millennials are all about health, which means drinks with less alcohol and fewer carbs

Spiked seltzer is low in alcohol, calories, and sugar — and that's a big part of its appeal.

Over the past year, there has been 210% increase in spiked seltzer sales, reported Marikar, citing Nielsen data. Its skyrocketing popularity is related to millennials' fixation on health and wellness: They're seeking a healthier alternative to soda, and prefer to consume natural food and drink sans synthetics, she wrote.

April Gordon, director of marketing at wine and spirit importer Evaton, Inc., told Business Insider there has been a strong trend among millennials looking for a balanced lifestyle. "In the alcoholic beverage industry, we have seen this come to life with a literal 'thirst' for drinks with a lower alcohol content," she said.

Consider Aperol Spritz, the drink of summer 2018, which combines sparkling wine and soda water with low-ABV Aperol liqueur.

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Photos show the history of the Boeing 737, from the early days to the grounding of the 737 Max

Sat, 09/14/2019 - 10:27am

  • The Boeing 737 was first imagined in 1964, and made its maiden voyage in 1967.
  • In the 55 years since, more than 10 variants of the 737 have flown, and it's become the best-selling commercial airplane of all-time.
  • Following two fatal crashes of the latest model — the 737 Max, caused by a design flaw — we look back at the history of the venerable jetliner.
  • As Boeing works to get the grounded 737 Max back in the air, here's a look at the last 55 years of the 737.
  • Visit Business Insider's homepage for more stories.

The Boeing 737 has been in the news a lot lately, since two fatal crashes involving the latest model of the plane, the 737 Max. 

But even though the Max has been grounded for six months, as Boeing works to fix a dangerous flaw in the troubled jet, the sky has continued to be crisscrossed by older models of the 737.

In fact, if you've taken a domestic commercial flight in the past 50 years — including the last six months — there's a very good chance you were on a 737 of some sort.

That's because Boeing has sold a ton of them. As of August 2019, the planemaker has taken orders for 15,155 of them since 1965, when the jetliner was first unveiled. It delivered the 10,000th of these in April 2018, a (currently-grounded) 737 Max 8 to Southwest Airlines.

Despite the missteps and tragic consequences surrounding the Max's initial design, the larger 737 family has proved itself as a faithful workhorse for airlines around the world, ranging from long-haul carriers like Delta that include the plane as a small part of its fleet, to low-cost airlines like Ryanair, which uses 737s for its entire fleet.

Although the 737 looks likely to fly on for years to come, well past its 70th birthday, Boeing will need to prove to its customers that it's fixed the flawed Max and that it's learned enough from the episode to prevent it from ever happening again. The rival Airbus A320 family is nipping at its heels, with 14,789 orders through August. With Boeing failing to sell a single Max for more than five months, as customers wait to see how the company fixes the plane, the need to restore consumer confidence is urgent.

Here's a closer look at the incredible 54-year history of the Boeing 737.

SEE ALSO: The end is near for the Airbus A380 superjumbo jet. Here's how it went from airline status symbol to reject in just 10 years

Early design work began on the narrow-body 737 in 1964. Boeing was looking to design a 50-60 seat aircraft designed for trips between 50-1,000 miles. It would be about half the size of Boeing's smallest jet, the 727, which flew up to 1,700 miles.

The plane would be comparable to the Douglas DC-9 (below) and the British Airways Corporation BAC-111.

While the initial design featured a T-tail like the 727 with engines mounted on the fuselage, the lead engineer put them on the wings instead, which meant the body could be widened to seat six people across. Thus, the 737-100 was born.

That's something that's stayed consistent across every version of the 737 through today.

The 737 launched with German airline Lufthansa, which ordered 21 of the planes in 1965.

The first one was delivered toward the end of 1967.

In 1965, a few months after Lufthansa's order, US airline United ordered 40 of the jets. However, it wanted a slightly longer version, so Boeing stretched the body a little over six feet and named the longer version the 737-200. A 737-200 that Lufthansa ordered is pictured below.

While the early 737s were assembled and tested at Boeing Field — now the King County International Airport — it was moved to the company's factory in Renton, Washington, in late 1970, where it remains today.

In 1979, Boeing began development on the 737's first major revamp, seeking to increase both the range and the capacity of the jet. The 737-300 was announced at 1981's Farnborough Airshow, and first flew in 1984. It was almost 10 feet longer than the -200, and could carry up to 149 passengers.

To power the new jet, Boeing decided to switch from the original Pratt & Whitney engines to the more-powerful CFM56-3B-1 high-bypass turbofan. There was just one problem: the 737's low ground clearance and the engine's larger diameter than on the original -100 and -200 meant that the size of the fan needed to be slightly reduced, the engine had to be moved further forward on the wing, and engine accessories had to be moved to the side to accommodate the 737-300's now-iconic non-circular air intake.

Boeing announced the even-longer 737-400 in 1986. The plane, which was stretched another 10 feet, could carry up to 188 passengers. It first flew in 1988, and entered service later that year.

The 737-500 was designed as a replacement for the -200 — it carried fewer passengers, but it incorporated the improvements of the -300 and -400 to have a much longer range. It carried 140 passengers, and entered service in 1990.

While the 737-100 and -200 remained the original models, the -300, -400, and -500 would eventually come to be known as the 737 Classic series.

In 1991, Boeing began working on another modernized update to the plane. The next-generation, or "737NG" series, was prompted by European plane-maker Airbus' introduction of its A320 narrow-body family, which rivaled the 737's dominance of the market.

Although the performance of the 737NG meant it was essentially a whole new aircraft family compared to the Classic, it kept enough important commonality with the Classic that upgrading or operating mixed fleets would be easier and more cost-effective for customers. The airframe received upgrades, the wing was redesign, and the flight deck and cabin were improved.

The 737-700 was the first to launch, and first flew in February 1997. The plane could carry up to 149 passengers, and had a longer range than previous models.

The 189-seat 737-800 came next, first flying in July 1997.

The smallest of the variants, the 132-seat 737-600, had its first flight in January 1998.

The longest version, the 189-seat 737-900, first flew in 2000. An updated version, the 737-900ER (for "extended range") could carry as many as 220 people, and first entered service in 2007.

Over the years, the 737 has been used for a variety of things, whether that was launching a new low-cost airline ...

... Serving as a military transport ...

See also: Apply here to attend IGNITION: Transportation, an event focused on the future of transportation, in San Francisco on October 22.

... Or even a tactical submarine hunter like the P8 Poseidon.

It's even been used as a freighter ...

And a private business jet.

As of 2019, orders of the 737NG were still being delivered to customers.

But in the 2010s, Boeing tried to replicate the success of the 737NG with the 737 Max. But this time, it wasn't simply competing with Airbus; it was playing catch-up.

Boeing began to discuss a successor for the 737 as early as 2006, looking at both putting new, more efficient engines on an existing 737 airframe, or starting from scratch with a brand new airframe. Boeing knew that Airbus was similarly exploring an A320 replacement, but both companies were still in early stages.

It was still trying to decide in 2010, when Airbus launched the A320neo family (neo = new engine option). The jets used the original A319, A320, and A321 airframes, but used new engines that offered a 15-20% increase in fuel efficiency, consequently lowering operating costs and giving the planes longer ranges. Airbus has since released two longer-range variants of the neo family — the A321LR and A321XLR.

In July, American Airlines announced an order for 130 A320ceo and 130 A320neo jets, with an option for 365 more. It also said that it would order 100 of Boeing's not-quite-ready next-generation 737. Until that point, American Airlines had exclusively purchased from Boeing for more than a decade. Boeing knew the order was coming, and tried to quickly prepare a re-engined 737 to offer as an A320neo alternative.

In August 2011, Boeing announced the 737 Max family, consisting of four differently sized models: the 737 Max 7, Max 8, Max 9, and Max 10.

The 737 Max kept commonality with the 737NG, but used new CFM International Leap-X engines, offering improved fuel efficiency. The new engines, though, were further forward and higher up on the wings, which meant the plane could handle differently.

The first Max flight took place in January 2016, taking off from Boeing's facility at Renton. The plane was certified by the FAA in March, 2017. The first plane was delivered in May 2017. Within a year, 130 of the Max planes had been delivered, logging more than 118,000 flight hours.

Specifically, it could cause the nose of the plane to pitch upward in some situations, like low-speed flight, or flight with a high angle-of-attack, when the plane is being flown manually. To compensate for that, Boeing designed an automated software called Maneuvering Control Augmentation System (MCAS), which would automatically activate to stabilize the pitch and nudge the aircraft's nose back down "so that it feels and flies like other 737s."

MCAS would only activate when the plane was being hand-flown — meaning autopilot was off — and it was flying relatively slowly, and the nose was pointing high enough — or the angle-of-attack was high enough — to be at risk of causing the plane to stall. Crucially, though, MCAS was designed to take effect when just a single sensor showed that the angle-of-attack was high. That meant that if one of the two sensors was damaged or faulty, it could activate.

In October 2018, Lion Air Flight 610, a domestic flight from Jakarta, Indonesia, to Pangkal Pinang, crashed 12 minutes after take-off, killing all 189 passengers and crew. Initial findings suggested that MCAS activated improperly, due to a faulty angle-of-attack sensor. Boeing began working on a software fix, and issued several advisories, although the plane continued to fly for airlines around the world.

Then on March 10, 2019, Ethiopian Airlines Flight 302 from Addis Ababa to Nairobi, Kenya, crashed six minutes after taking off. All 157 people were killed. An improper MCAS activation, combined with the fact that the pilots were unable to execute the recommended recovery procedures, were blamed.

Following the second crash, the 737 Max was grounded worldwide. Multiple investigations into the plane's design and its certification have been initiated, and further potential safety risks have been found.

Despite several delays, Boeing has maintained that it plans to submit its fix in September, and expects the plane to be back in the air by the fourth quarter, although some think that early 2020 is more probable. While the details are publicly unknown, the software update is expected to make MCAS use two AoA sensors instead of one, and make it easier for pilots to override the system and adjust the trim stabilizers manually should that ever be necessary.

The coming months will show how Boeing responds to the accident, and how the market treats the plane once the grounding is lifted — whether orders resume.

FREE SLIDE DECK: The Future of Fintech

Sat, 09/14/2019 - 10:00am

Digital disruption is affecting every aspect of the fintech industry. Over the past five years, fintech has established itself as a fundamental part of the global financial services ecosystem.

Fintech startups have raised, and continue to raise, billions of dollars annually. At the same time, incumbent financial institutions are getting in on the act, and using fintech to remain competitive in a rapidly evolving financial services landscape. So what's next?

Business Insider Intelligence, Business Insider's premium research service, has the answer in our brand new exclusive slide deck The Future of Fintech. In this deck, we explore what's next for fintech, how it will reach new heights, and the developments that will help it get there.

Join the conversation about this story »

A man who quit his law job at 49 says if you want to retire early, your income is only part of it

Sat, 09/14/2019 - 9:45am

  • Rob Berger, a deputy editor at Forbes, retired from his law job at age 49 after saving an amount equal to 25 times his annual expenses — the magic number for achieving financial independence.
  • Berger kept his expenses relatively low, which meant two things: he was able to save more of his income each year, and thus, he needed a smaller nest egg to leave work.
  • "We are conditioned to define financial success based on a fat paycheck. Yet Financial Freedom hinges on how much you spend, not how much you make," Berger writes in his new book "Retire Before Mom and Dad."
  • Visit Business Insider's homepage for more stories.

In his new book "Retire Before Mom and Dad," Rob Berger, a deputy editor at Forbes, says that income has much less to do with achieving financial independence than we give it credit for.

Berger, who founded the personal-finance site, retired at age 49 from his career as a lawyer. He had saved up (and invested) an amount equal to 25 years' worth of his annual expenses — the magic number for reaching financial independence, he writes.

"Level 7 is the Ultimate Financial Freedom. It's here that you can completely retire from work if you so choose," Berger writes. "Or, if you're like me, you can work on projects you love while still earning an income. The choice is yours."

But Berger says a high salary doesn't explain his ability to leave work earlier than the average person. The amount he needed to save was dependent on how much he spent each year, and he kept his expenses relatively low.

"We are conditioned to define financial success based on a fat paycheck. Yet Financial Freedom hinges on how much you spend, not how much you make," Berger writes. To be sure, increasing your income can be an incredibly valuable tool for building wealth. If your expenses remain at the same level, earning more can skyrocket your savings rate and put you on the fast track to early retirement.

Take a look at Berger's seven levels to reaching financial freedom:

  • Level 1: one month of expenses saved
  • Level 2: three months of expenses saved
  • Level 3: six months of expenses saved
  • Level 4: one year of expenses saved
  • Level 5: five years of expenses saved
  • Level 6: 10 years of expenses saved
  • Level 7: 25 years of expenses saved

The final level is predicated on the 4% "guideline," he says. The 4% guideline tells us that when we invest an amount equal to 25 times what we spend in a given year, we will be able to indefinitely withdraw 4% of that nest egg each year thereafter (assuming we earn the average rate of return on our investments).

To get your financial freedom number, you can either multiply your annual expenses by 25 (ex. $50,000 x 25 = $1,250,000) or divide your annual expenses by 4% (ex. $50,000/0.04 = $1,250,000).

"The 7 Levels are the same whether you are a teacher making $40,000 a year or LeBron James making $50 million," Berger writes. "How long it takes you to reach each level depends entirely on what percentage of your income you spend and save, not how much you make. A teacher saving 10% of her income will reach Level 7 in the exact same number of years as it would take LeBron James if he saved 10% of his salary."

Now, using Berger's above example, if James and the teacher both had expenses totaling $30,000 a year, the basketball star would reach financial freedom much sooner. But that's an unlikely scenario.

"That's not to say that income is irrelevant," Berger writes. "But Financial Freedom is first and foremost about our expenses, not our income."

More savings and retirement coverage

Join the conversation about this story »

NOW WATCH: Jeff Bezos is worth over $160 billion — here's how the world's richest man makes and spends his money

I walked through Moscow's 'Golden Mile,' one of the city's most expensive neighborhoods, and got a glimpse of what most photos don't show you: It's a mix of the old, the new, and the abandoned

Sat, 09/14/2019 - 9:11am

  • Moscow's "Golden Mile" is home to some of the city's most expensive real estate.
  • The neighborhood spans the area between Ostozhenka Street and the Moscow River in the center of the city.
  • Russian government officials, celebrities, and families with "old money" call the area home, according to Olga Novikova of Moscow Sotheby's International Realty.
  • Homes cost an average of $2 million in older buildings and $3.5 million in new construction buildings, according to Sotheby's. 
  • On a recent trip to Russia, I took a walk through the neighborhood and saw some of its high-end real estate — here's what it looked like.
  • Visit Business Insider's homepage for more stories.


Moscow's Golden Mile, a residential area between the banks of the Moscow River and Ostozhenka Street, is home to some of the city's priciest real estate.

Homes cost an average of $2 million in older buildings and $3.5 million in new construction buildings, according to Moscow Sotheby's International Real Estate, while a set of coveted townhouses start at $22 million.

Read more: In the suburbs of Moscow, 2 winding highways are home to some of Russia's most expensive real estate — and they tell very different tales of the country's wealth

Demand for the area has cooled somewhat in the last five years, Maria Bocharova, the chief marketing officer for Sotheby's International Realty, told Business Insider.

"But many people still want to live there and the popularity and prestige of this area will remain stable for a very long time," Bocharova said.

On a recent trip to Russia, I got a tour of the Golden Mile neighborhood with Olga Novikova of Moscow Sotheby's International Realty. Here's what it looked like.

SEE ALSO: What it's like to stay in the Moscow Ritz-Carlton's $18,000 presidential suite

DON'T MISS: I visited a 200-year-old Russian bathhouse in Moscow, where I paid $85 to be whacked with branches and doused in ice-cold water. It was the most memorable part of my trip.

Moscow's "Golden Mile" is home to some of the city's most expensive real estate.

Homes in the neighborhood cost an average of $2 million in older buildings and $3.5 million in new construction buildings, according to Moscow Sotheby's International Realty.

The residential area lies between Ostozhenka Street and the Moscow River in the southwestern city center.

Source: Google Maps

It's adjacent to the Moscow River, which flows through the center of the city.

At one end of Ostozhenka Street is a golden-domed Russian Orthodox church, the Cathedral of Christ the Saviour.

The cathedral, which was finished in 1997, sits on the former site of a similar church that was destroyed in 1931 on the order of Soviet leader Joseph Stalin.

As I walked through the streets of Moscow's Golden Mile on a June afternoon with Olga Novikova of Moscow Sotheby's International Realty, the streets were quiet and serene.

The area is full of luxury apartments, both new construction and historic buildings.

The neighborhood does not have any single-family homes — only condos.

In the past five years, the area has become somewhat less desirable due to economic crises and the turbulence of the Moscow real-estate market, Maria Bocharova, the chief marketing officer for Sotheby's International Realty, told me in an email.

But it's still an attractive neighborhood for many of the city's elite, including government officials, celebrities, and old money families.

"Many people still want to live there and the popularity and prestige of this area will remain stable for a very long time," Bocharova said.

One of the most prestigious places is to live is Noble Row, a set of six ultra-exclusive luxury townhouses that start at $22 million.

The interiors were designed by Ralph Lauren, and there's a private underground parking garage for residents, Novikova told me. 

Another of the most sought-out residences in the area is Nabokov, a six-story luxury condominium named after the famous Russian writer.

The 15-unit residence was built by Vesper, the largest luxury real-estate developer in the city.

I got a peek inside Nabokov, where the remaining apartments range from about $4 million to $8 million.

The penthouse sold for about $20 million.

The buyers in the building have been mainly wealthy Russian businesspeople and celebrities, according to Sotheby's.

The developer touts Nabokov's limestone facade as "a graphic design with a velvety texture," but I found the gray, boxy structure to be rather dreary-looking.

It seemed to be a stark juxtaposition with the rest of the neighborhood's historic architecture. 

The Golden Mile has a mix of architectural styles, from opulent Art Nouveau buildings to modern, glassy buildings.

High-end buyers in Moscow today tend to gravitate more toward highly functional apartments rather than older construction, Bocharova told me. 

Ostozhenka Street is the place for "see-and-be-seen dining" at high-end Russian and Georgian restaurants, according to Mansion Global.

The area is also home to some art galleries, although luxury shopping is mainly found in other parts of the city, Oleg Konovalov of Moscow Sotheby's International Realty told the publication in 2016.

Residents of the neighborhood can exercise at the Golden Mile Fitness Club, a luxury gym in the neighborhood, where it costs about $10,000 per year to be a member, according to Novikova.

According to its website, the Golden Mile gym has an "aqua zone" with an 82-foot swimming pool, a snow room, a Jacuzzi, a hammam, a Finnish sauna, a Turkish sauna, an aromatic sauna, an ice fountain, and a solarium.

The fitness center does not, however, list its prices on its website, and the gym didn't immediately respond to my email about their prices.

While parts of the neighborhood are certainly beautiful, I found it that it seemed to be a neighborhood in flux.

Many areas were under construction, which perhaps had to do with the time of year I visited.

And several buildings I passed appeared to be abandoned.

Right across the street from the Noble Row townhouses that cost upwards of $22 million was a small park that seemed, frankly, a bit neglected.

The paint on the flower beds was chipping, and the grass was patchy.

That's not to say it wasn't a pleasant park, but it was a contrast to other ultra-wealthy parts of Russia I visited, such as a luxury gated community outside of Moscow, where such green space was immaculate.

While some of the neighborhood's side streets were lined with stately luxury condominiums, other streets had average-looking homes with peeling paint.

After hearing so much about the exclusivity and status of the neighborhood, I have to admit I was somewhat underwhelmed by the Golden Mile.

I can see the appeal of the neighborhood's quiet streets and its proximity to the Moscow River, but it didn't quite measure up to the pure opulence that I saw in some of the ultra-wealthy suburbs of the city.

Extroverted, but not neurotic: Here's how the ultra-wealthy score on personality tests

Sat, 09/14/2019 - 9:07am

  • German researcher Rainer Zitelmann had 43 people with net worths above $11 million take the Big Five personality test as a part of his psychological analysis of the ultra-wealthy for his book "The Wealth Elite."
  • According to the Five-Factor Theory of Personality developed by National Institute on Aging personality psychologists Paul Costa and Robert McCrae, someone's personality is determined by their levels of neuroticism, conscientiousness, extroversion, openness to experience, and agreeableness. 
  • Ultra-wealthy entrepreneurs tend to be optimistic, but not agreeable, Zitelmann found.
  • Visit Business Insider's homepage for more stories.

The ultra-wealthy may have a reputation for having strange habits, but they don't tend to be very neurotic, a psychological study of 43 high-net worth individuals from across the globe found.

German researcher Rainer Zitelmann asked 43 entrepreneurs and investors with net worths of at least $11 million each to take a 50-question personality test based on the "Five-Factor Theory of Personality" and analyzed their results for his book "The Wealth Elite."

Read more: Billionaires tend to make riskier investment choices than millionaires, and it helps explain why ultra high net worth individuals lost so much of their money in 2018

According to the Five-Factor Theory of Personality developed by National Institute on Aging personality psychologists Paul Costa and Robert McCrae, someone's personality is determined by five key factors: their levels of neuroticism, conscientiousness, extroversion, openness to experience, and agreeableness.

Zitelmann chose this model, commonly known as "The Big Five," because of its widespread acceptance among psychologists of different schools of thought, he told Business Insider. 

"To sum this up, you can say that rich people are less neurotic and less agreeable, but have a higher degree of conscientiousness, are more open to new experience, and more extroverted than the population as a whole," Zitelmann said. 

The results Zitelmann's rich subjects got bore a striking resemblance to those of entrepreneurs of all net worths, which didn't surprise the researcher.

Keep reading to learn more about the common personality traits of the ultra-wealthy.

1. The ultra-wealthy aren't very neurotic

Ultra-high net worth individuals have "exceptionally high levels of mental stability," Zitelmann wrote in the "The Wealth Elite."

All 43 of the high-net worth individuals interviewed received neuroticism scores below 19 on a scale of 0 to 40, with 40 being the most neurotic. Their survey responses revealed high self-confidence and high tolerances for frustration, Zitelmann found.

2. Conscientiousness is the ultra-wealthy's most dominant personality trait

Conscientious people tend to be detail-oriented and very thorough when completing tasks, Zitelmann found.

The ultra-wealthy tend to be goal-oriented, Zitelmann's research found. The vast majority of the interviewees said they always keep their promises, a trait that has helped them gain the trust of their business partners and investors.

3. Many of the rich people interviewed were extroverted

Of the 43 ultra-wealthy people interviewed, 29 are extremely extroverted, according to Zitelmann's analysis of their test responses.

Being extroverted also allows them to feel comfortable doing something different from others and standing by decisions that others disagree with. 

4. The wealthy are very open to new experiences

Twenty-eight of the test subjects could be classified as very open to new experiences, according to Zitelmann. Their responses indicate that they enjoy thinking about how new ideas could work and believe that people should constantly broaden their knowledge base.

5. Agreeableness is the second-weakest personality trait among the ultra-wealthy

Neuroticism is the only trait that is more obscure in the ultra-wealthy than agreeableness, Zitelmann found.

The test revealed that agreeableness is a weak character trait for nine of the subjects and a medium strength trait for 13. Zitelmann said he expected even more of the high-net worth individuals interviewed to fall into those categories, as other studies have concluded that antagonism is correlated with entrepreneurial success. 

SEE ALSO: The billionaire CEO of Uniqlo — and the richest person in Japan — says a woman would be the best person to take over his job

DON'T MISS: The Chobani billionaire who turned a $3,000 loan into a yogurt empire calls himself an 'anti-CEO' and thinks other CEOs should do the same

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NOW WATCH: Jeff Bezos is worth over $160 billion — here's how the world's richest man makes and spends his money

Too much success can kill a startup. Meet Menlo Ventures' new 'inflection stage' fund that helps young startups dealing with late-stage problems.

Sat, 09/14/2019 - 9:00am

The massive funding rounds going to startups aren't just squeezing out early-stage investors. They're forcing companies to grow at all costs, whether or not the founders are ready for it.

Menlo Ventures has created a fund dedicated solely to these founders called an "inflection fund." Instead of trying to beat mega-funds to the seed funding punch, Menlo is banking on its track record and expertise to offer founders a guiding light around a Series B or Series C stage. And in August, the firm brought on former growth equity investor Jean-Paul Sanday to lead the charge.

"Our average check at the fund I worked on at Summit was $30 [million], $35 [million], or $40 million. Now it's $130 million," Sanday told Business Insider. "The businesses are just different businesses, but they still need help no sooner or no later than before."

Read More: An early employee of Twitter and Stripe is joining Accel to hunt for the next generation of first-time founders

Having been on both the investing and startup side, Sanday is a prime candidate to help Menlo Ventures' portfolio companies navigate what he calls the "rocky" inflection point in growth. According to Sanday, a startup has hit the inflection point once the recruiting team starts receiving resumes unsolicited, customer growth is outpacing what would be expected based on the team's marketing budget, and customer experience plummets.

In the past, this stage was reserved for a company that had been around for several years, Sanday explained. But with the sudden influx of funding, immature founders are finding themselves with ballooning costs, teams, and issues without understanding how to actually address any of them.

"The businesses can grow up really fast or get a lot of traction in the headline numbers really quickly," Sanday said. "They have a lot of employees, a lot of revenue, but their maturity is no different, right? Most of the entrepreneurial journey is knowing how to do that." 

An insider's growth mindset

Sanday came to Silicon Valley like many other investors-to-be: he enrolled at Stanford, and eventually started a mobile ads company with a classmate while he was finishing business school. 

"We decided not to raise money for it because it was a mobile ads network and, at the time, that was like the Wild West and there's all kinds of messy in that industry," Sanday said. 

Still intrigued by the burgeoning mobile industry, Sanday moved over to a mobile gaming startup to run the young company's growth operation. He said during his tenure, the company went from being "five people working out of a garage" to over 250 employees in "an actual office." Although he's written plenty of hefty investment checks during two runs at private equity firm Summit Partners, Sanday says his most valuable experience was experiencing that inflection point first hand.

"At this stage there's so much more uncertainty," Sanday said. "You can have a differentiating perspective, a different angle, certainly in the way you can help them,but I also think there's room for you to lean in more."

Sanday will be doling out checks ranging from $20 million to $40 million, with room for follow on investments, through the inflection fund. Having just returned from paternity leave, he has not personally invested just yet.  

"My bones speak to me and sometimes there are just things that I can just know about or empathize with just simply as a party to the founder," Sanday said. "It's hard when you're writing a $100 million checks to empathize like that. Some of the entrepreneurs haven't done this before, so they don't know what those companies look like."

SEE ALSO: Automation is coming for venture capital, and one young VC firm is betting its homegrown tech gives it an edge over Sand Hill Road's slow-to-adapt legacy investors

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NOW WATCH: 7 lesser-known benefits of Amazon Prime

A hedge fund meltdown, a collapse for WeWork, and Goldman partner buyouts

Sat, 09/14/2019 - 7:36am


Hello readers,

This is Meredith filling in for Olivia. We had an action-filled week as we dug into two meltdowns: one that took place on the public markets, and another that could cast a chill over unicorns that are still grazing on heaps of private funding. 

August was not a kind month for hedge funds, who had to position around a Fed rate cut, an Argentine election upset and various other geopolitical woes. Insiders told us about the carnage, and it may not be over yet — a massive unwind from long positions in high-flying momentum stocks could continue to play out for months, according to a memo that we saw from Morgan Stanley's sales desk. 

If you aren't yet a subscriber to Wall Street Insider, you can sign up here.

That could also weigh on equity trading revenues at big banks, as sharp market moves drive clients to the sidelines. Morgan Stanley CFO Jonathan Pruzan told analysts at a conference this week that the bank's equities business was running below 2018 for the third quarter, adding that there's "a lot a lot of uncertainty around what's going to happen next."

Meanwhile, WeWork has been forced to take an axe to its eye-popping, SoftBank-rolled $47 billion valuation. It's still to be seen where the money-losing coworking company officially winds up, but recent reports suggest it may have to go as low as a $10 billion valuation to pull off the IPO.

We covered the drama unfolding around the coworking company, and examined the wider implications of such a massive valuation meltdown. We had touched on the topic this summer, when we wrote this now-prescient story about the dangers of startups growing too large (and in some cases, too freewheeling) outside of public scrutiny.

This week, we talked with private wealth execs and UBS and JPMorgan, who explained why they're doing more lending to provide liquidity for "Silicon Valley guys" as big startups stay private longer.  We also took a look inside the massive Dock 72 project in Brooklyn where WeWork will be a top tenant. The office has everything: self-driving cars, themed murals, and some 30,000 square feet of amenities. But as WeWork's valuation crumbles, the project that has been in the works for years could stand as a monument to an age of coworking excess.  

And on Friday, we had a pair of scoops that touched on big changes rocking entry-level banking jobs and the most elite ranks on Wall Street.

At Goldman Sachs, CEO David Solomon is offering buyouts to cull the bank's herd of partners. And on the other side of the career spectrum, analysts at investment banks that started only weeks ago are already being interviewed by private equity firms looking to fill their 2021 associate class. 

Finally, I'd like to welcome Shannen Balogh, who joined the BI finance team this week. She'll be covering payments, credit cards and consumer banking. She's already hit the ground running with a story about how MoneyGram is playing catch-up with Venmo. 

Have a great weekend, 


Apollo is behind a $600 million loan to a public company, and it's the latest sign that it's serious about taking on big banks in the lending business

When public companies want massive loans to finance their operations, they typically go to a group of large banks that can lend hundreds of millions of dollars by banding together pools of money.

But lately, a big private-equity firm has been taking their place.

Apollo Global Management said on Wednesday that it would provide $600 million as the sole lender to YRC Worldwide in a refinancing of the $2 billion shipping company.

It's just the latest deal that illustrates how Apollo and other large private-equity firms are increasingly becoming lenders, even in some rare instances, to big public companies. Apollo in particular has been doubling down on its lending push. 


D.E. Shaw is going to trial over the sale of a litigation finance portfolio company, shining a light on a side-pocket deal at the secretive hedge fund firm

A new lawsuit between D.E. Shaw and a former portfolio company CEO unveils both the complicated dealmaking that has come to be a part of many large-scale hedge funds and the difficulties in valuing private companies (as shown recently through scrutiny around WeWork's value).

The suit alleges that the $50 billion hedge fund sold off a litigation finance unit at a discount and that the unit's founder did not receive the same payout as other equity holders.


Here's exactly what it takes to get a job as a banker at Goldman Sachs, according to Wall Street recruiters, current and former employees, and the head of HR

Goldman Sachs is the most prestigious investment bank.

Goldman receives 1 million applications for midlevel jobs each year. About 0.5% of those hopefuls — just 5,000 people — get hired. That makes the bank nearly 10 times as selective as Harvard.

We asked its head of human resources and career experts how to land a job as a midlevel investment banker.


UBS is upping the ante on its workplace wealth-tech tools. That comes months after Morgan Stanley's $900 million Solium deal.

UBS' wealth management unit is rolling out changes to its equity compensation plan's servicesand digital offerings, a move that comes months after Morgan Stanley's deal to buy cloud-powered equity administrative platform Solium Capital.

The move to enhance the service highlights several key themes underpinning the wealth industry's evolution: technology used by advisers and customers alike is improving rapidly, and fees are falling across many wealth management platforms.

All the while, players from traditional wealth managers to new robo-adviser entrants like Betterment and Wealthfront are competing in an increasingly crowded ecosystem, and workplace wealth offerings are gaining steam at big banks.


Meet the 8 Blackstone dealmakers who insiders say are the firm's future

Blackstone, with $545 billion of assets under management, has its hands in everything from real estate, to private equity, credit, and hedge funds.

Business Insider spoke with industry insiders, including recruiters, bankers, and competitors to compile a list of rising dealmakers at the private equity giant.


Now WeWork wants to be a manufacturer: the coworking company is opening a 200,000-square-foot New Jersey plant to make its signature aluminum and glass walls

WeWork is hiring at least 50 people in Edison, New Jersey, to work at a new 200,000-square-foot manufacturing facility, according to job postings.

The jobs appear aimed at creating a manufacturing operation from the ground up, including roles in technical operations, supply chain management, quality assurance, human resources, and finance.

In a departure from its focus on technology, the company will make modular glass and aluminum systems.

WeWork has been preparing to go public, which turned into a rocky process as the company's lofty valuation and corporate governance comes under fire.


Wall Street move of the week:

Izzy Englander landed a quant team that was managing hundreds of millions for billionaire Michael Platt. 

In markets:

In tech news:

Other good stories from around the newsroom:

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Private equity firms are already interviewing 22-year-old bankers who will start in two years. Their earliest-ever hiring kickoff shows how crazy the battle for talent has gotten.

Sat, 09/14/2019 - 7:36am

  • Private equity firms are already interviewing first-year investment banking analysts for 2021 associate positions, marking the earliest ever they've started recruiting for those roles, sources told Business Insider.
  • These bankers are typically 22-year-olds who have just graduated from college this past spring and only have a few weeks of work experience under their belts. 
  • That highlights the escalating war for talent as more jobs go to big tech and banks have become increasingly pitted against PE firms for junior hires. 
  • Academic advisors, recruiters and private equity executives said firms across the industry are  interviewing, including TPG, Warburg and KKR. 
  • Visit BI Prime for more stories.

Private equity firms are already interviewing first-year investment banking analysts to fill 2021 associate positions, marking the earliest-ever kickoff to recruiting for those roles, sources told Business Insider. 

That highlights the escalating war for talent in the financial sector as more jobs go to big tech and banks have become increasingly pitted against private equity firms for junior hires. 

PE firms have been racing to lock down talent to hire associates, pushing up the timeline of extending offers to investment banking analysts earlier and earlier. Last year, firms started interviewing in late October, recruiters said. This year, the PE firms are already moving in after analysts — typically 22-year -olds that just graduated from college this past spring — who have only a few weeks of work experience under their belts. 

Sources including academic advisers, recruiters, and insiders at PE firms, told Business Insider that the activity is widespread, including firms such as Thoma Bravo and TA Associates who were early movers last year, but also some of the largest firms including Warburg Pincus, TPG and KKR. 

Representatives from those firms either did not respond to requests for comment or declined to comment. 

Read more: PE firms are hiring more undergrads and casting a wider net -- here's the new schools where top shops like KKR and Blackstone are scouting future stars

It could not be determined which firm may have sparked  the September frenzy, but one source familiar with the matter pointed at TA Associates as the first mover. Analysts are now expected to do rounds of interviews with private equity firms over the weekend and then decide on whether they will accept offers as early as next week. 

One academic adviser said students who recently graduated from his class were contacted by recruiters in the first week of August and now they are interviewing with private equity firms.

"I got several inbounds from [firms] about how irritated they were about it," he said. 

Private equity firms have pushed up the recruiting timeline over the last several years, despite how difficult it is to assess bankers so early on in their careers. Still, they feel the need to remain competitive and get first dibs on the best talent. 

Read more: KKR has quietly started hiring college seniors. Here's what it says about how private equity is battling banks to fill 6-figure jobs

On Friday morning, Andrew Reed, an executive at Sequoia Capital, tweeted that private equity associate recruiting "apparently started last night," citing the social media account Litquidity Capital, a financial meme account on Twitter and Instagram, posting information about the process.


'The bond market is screaming at us': A Wall Street expert says investors are focused on the wrong recession signal — and warns a meltdown may come sooner than expected

Sat, 09/14/2019 - 6:05am

  • Raoul Pal, the former hedge fund manager who founded Real Vision, says popular metrics used to dispel the notion of an imminent recession are too backward-looking to be effective.
  • He instead points to the following evidence that a meltdown is coming soon than most think: a worsening Purchasing Managers Index, impending turmoil in corporate debt markets, and bond-market activity signaling extreme investor nervousness.
  • Click here for more BI Prime stories.

It's not everyday that behavior in a specific asset class makes a compelling case that a recession is on the way. 

But according to Raoul Pal — former hedge fund manager and founder of Real Vision — that's exactly what's happening in the bond market. And he says few few people seem to be listening to it.

"The bond market is screaming at us," Pal said during a recent appearance on The Meb Faber show, an investing podcast.

Yields have fallen off a cliff since the beginning of the year as investors scared of a slowdown have poured into bonds. And yet equities are up double digits, seemingly immune to the risk aversion pervading the fixed-income market.

And Pal is someone worth listening to. He used to manage GLG Partners' global macro fund, and has over 27 years of experience in financial markets. Due to his success, he retired from managing the fund at age 36. 

Pal says that investors are electing to overlook the ominous price action in credit markets — which are signaling an imminent economic downturn — and instead focusing on US consumers and the labor market. Conventional wisdom suggests both are signaling continued strength amidst the turmoil.

Bullish investors have highlighted these metrics, saying calls for an economic contraction are overblown. They point to an unemployment rate that's close to its lowest in 50 years, as well as consumer sentiment and spending that remains strong.

But Pal isn't buying it.

"The problem is, all of those data points are pointing to things that happened 18 months ago," Pal said on the podcast. "Everybody's looking at the wrong thing."

He notes that employment and consumption figures are backward-looking — and according to Pal's assessment, the economic landscape is vastly different today than what these metrics are currently conveying.

To demonstrate the incongruousness of this idea, he points to the Purchasing Managers Index, which is a metric he prefers. He views it as an important, forward-looking variable that paints a contrasting picture of the economic landscape.

"Oddly enough, it maps very, very well indeed to GDP," he said. 

The monthly PMI survey is designed to encompass the business outlook for over 400 companies, signaling whether it's improving, declining, or staying the same. And it just contracted for the first time in 10 years, echoing the nerves we're seeing in the bond market.

Pal says this is a clear warning sign worth heeding immediately, since the variable shares a close relationship with real-time economic growth.

Problems in the corporate debt market

To further his recession argument, Pal reiterates the nefarious action he's seeing in corporate debt. A phenomenon he refers to as a "doom loop" — and one he thinks has the power to seize up the entire fixed-income market in one fell swoop.

The graph below depicts the gargantuan increase in corporate issuance.

Pal believes that if economic conditions continue to deteriorate, pension funds — which own a great deal of this debt — will be forced to sell as rating agencies downgrade a significant portion of it to junk. This would result in a deluge of supply, and limited buyers to sop it up. It's a situation that could result in catastrophe.

Due to these factors, Pal now believes that the US economy is now at a "tipping point" — and if the data continues to deteriorate, a massive unwind will be set in motion.

But not all hope is lost. He's identified 4 trades that will make a killing if his thesis comes to fruition.

"The best trade in the world is Eurodollar futures, because the Fed are going to have to cut to zero and through it" he said. "If you don't really understand those — 2-year bond futures, they're fine."

Pal continued: "If you don't understand that, TLT ETFs, even that's easy. And if you're feeling a little bit racy — and you don't mind a bit more speculation — then just buy some puts on the HYG, because the HYG is basically high yield, and high-yield is basically going to get obliterated if that BBB thing works."

SEE ALSO: Nobel laureate Robert Shiller breaks down the psychological forces that will determine the severity of the next recession — and says Great Depression parallels are still alive and well

Join the conversation about this story »

NOW WATCH: This is the shortest route for a road trip across the US to see 50 national landmarks

WeWork is doing increasing amounts of business with SoftBank, which is also its biggest investor

Fri, 09/13/2019 - 10:18pm

  • WeWork is seeing a growing amount of revenue from SoftBank, which is also its biggest investor.
  • SoftBank accounted for 2% of WeWork's revenue in the first six months of this year, up from nearly 0% in 2017.
  • WeWork has drawn criticism for its extensive series of deals involving so-called related parties — employees, executives, investors, and their family members.
  • For a number of factors — including these types of transactions — the company has been struggling to pull in investors for its planned initial public offering.
  • Read all of Business Insider's WeWork coverage here.

SoftBank, which is WeWork's biggest backer, has also become an increasingly important customer of the commercial real-estate company.

The Japanese conglomerate accounted for 2% of WeWork's revenue in the first 6 months of this year, according to documents the latter filed in preparation for its planned public offering. That portion was up from just 1% for all of last year and nearly 0% in 2017.

The company also counts Rhône Group, another one of its investors, as a customer. But Rhône accounted for a much smaller portion of WeWork's revenue.

"We have entered into membership agreements and/or other agreements relating to the provision of Powered by We solutions with SoftBank entities and affiliates of the Rhône Group," WeWork said in its IPO paperwork. "We believe that all such arrangements have been entered into in the ordinary course of business and have been conducted on an arm's-length basis."

WeWork's Powered by We service involves building out and managing office space that other companies own or have leased.

SoftBank declined to comment. Representatives of WeWork did not respond to an email seeking comment. Rhône Group did not immediately respond to an email seeking comment.

WeWork is seeing more revenue from SoftBank

In the first six months of this year, SoftBank paid WeWork $28.2 million for leases and other services, according to WeWork's IPO filing. For all of last year, the Japanese company paid WeWork $18.8 million for such services, according to the filing. In 2017 and 2016, SoftBank paid the real estate company about $200,000 and $100,000, respectively.

The ramp-up in WeWork's SoftBank revenue followed SoftBank's investment in the company. SoftBank took its first stake in WeWork in an August 2017 funding round, according to PitchBook. It has invested $10.65 billion in total in WeWork and is reportedly planning on buying another $750 million worth of its stock in the IPO.

Read this: Venture investors still aren't sure what to make of SoftBank's $100 billion Vision Fund. Depending on who you ask, they're either rooting for it, or gleeful that it's struggling with WeWork and Uber.

Ron Fisher, SoftBank's vice chairman, sits on WeWork's board of directors.

Meanwhile, Rhône Group paid WeWork $1.3 million in all of 2018 and $1.1 million in the first half of this year for leases and other services.

Rhône is a partner with WeWork in a real estate venture designed to acquire buildings that WeWork will lease out to customers. Its cofounder, Steven Langman, is a WeWork director.

WeWork has come under fire for its long list of so-called related-party transactions, which are deals involving employees, executives, investors, or other people that could create conflicts of interest. The company has hired relatives of CEO Adam Neumann, given Neuman numerous large loans, and rented space in buildings he partially owned. WeWork also reportedly struck deals with the family members of other top executives, including hiring the parents of Vice Chair Michael Goss as real-estate brokers for a lease in Miami.

The coworking giant has struggled to line up investors for its public offering. Potential investors are reportedly worried about these related-party transactions, its valuation, business model, and potential resilience in an economic downturn.

WeWork is reportedly considering going public with a market capitalization of $10 billion. SoftBank valued the company at $47 billion in January when it made its most recent investment in WeWork.

Got a tip about SoftBank or WeWork? Contact this reporter via email at, message him on Twitter @troywolv, or send him a secure message through Signal at 415.515.5594. You can also contact Business Insider securely via SecureDrop.

SEE ALSO: Why WeWork's $47 billion private valuation could be a key stumbling block for its IPO — and might even derail it completely

Join the conversation about this story »

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Why are Apple Pay, Starbucks’ app, and Samsung Pay so much more successful than other wallet providers?

Fri, 09/13/2019 - 10:00pm

This is a preview of a research report from Business Insider Intelligence, Business Insider's premium research service. To learn more about Business Insider Intelligence, click here.

In the US, the in-store mobile wallet space is becoming increasingly crowded. Most customers have an option provided by their smartphone vendor, like Apple, Android, or Samsung Pay. But those are often supplemented by a myriad of options from other players, ranging from tech firms like PayPal, to banks and card issuers, to major retailers and restaurants.

With that proliferation of options, one would expect to see a surge in adoption. But that’s not the case — though Business Insider Intelligence projects that US in-store mobile payments volume will quintuple in the next five years, usage is consistently lagging below expectations, with estimates for 2019 falling far below what we expected just two years ago. 

As such, despite promising factors driving gains, including the normalization of NFC technology and improved incentive programs to encourage adoption and engagement, it’s important for wallet providers and groups trying to break into the space to address the problems still holding mobile wallets back. These issues include customer satisfaction with current payment methods, limited repeat purchasing, and consumer confusion stemming from fragmentation. But several wallets, like Apple Pay, Starbucks’ app, and Samsung Pay, are outperforming their peers, and by delving into why, firms can begin to develop best practices and see better results.

A new report from Business Insider Intelligence addresses how in-store mobile payments volume will grow through 2021, why that’s below past expectations, and what successful cases can teach other players in the space. It also issues actionable recommendations that various providers can take to improve their performance and better compete.

Here are some of the key takeaways:

  • US in-store mobile payments will advance steadily at a 40% compound annual growth rate (CAGR) to hit $128 billion in 2021. That’s suppressed by major headwinds, though — this is the second year running that Business Insider Intelligence has halved its projected growth rate.
  • To power ahead, US wallets should look at pockets of success. Banks, merchants, and tech providers could each benefit from implementing strategies that have worked for early leaders, including eliminating fragmentation, improving the purchase journey, and building repeat purchasing.
  • Building multiple layers of value is key to getting ahead. Adding value to the user experience and making wallets as simple and frictionless as possible are critical to encouraging adoption and keeping consumers engaged. 

In full, the report:

  • Sizes the US in-store mobile payments market and examines growth drivers.
  • Analyzes headwinds that have suppressed adoption.
  • Identifies three strategic changes providers can make to improve their results.
  • Evaluates pockets of success in the market.
  • Provides actionable insights that providers can implement to improve results.
Subscribe to an All-Access membership to Business Insider Intelligence and gain immediate access to: This report and more than 250 other expertly researched reports Access to all future reports and daily newsletters Forecasts of new and emerging technologies in your industry And more! Learn More

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Tesla airbags didn't inflate when a family's Model 3 crashed into a guardrail, and claim the company isn't cooperating with the investigation, victims' lawyer says (TSLA)

Fri, 09/13/2019 - 8:35pm

  • A Tesla Model 3's airbags didn't inflate in a devastating highway accident earlier this year, the victims' attorney said.
  • The family's lawyer said he sent a routine "preservation letter" to the company but hasn't heard back in the month since. 
  • "Tesla has the ability to monitor their vehicles out on the roadway. Who owns that data? Is it our client? Is it Tesla?" the attorney said. 
  • Visit Business Insider's homepage for more stories.

When a Tesla Model 3 carrying Kristian Henderson and her family slammed into a guardrail on the Interstate 95 median in suburban Maryland this summer, the vehicle's side airbags didn't deploy, according to the victims' attorney.

The George Washington University professor was rendered comatose by the impact, causing her serious brain damage, while her son in the back seat also suffered severe injuries, their lawyer, Ted Leopold of Cohen Milstein, said.

Many of those injuries could have been prevented if the airbag had functioned as designed, Leopold said, alleging that Tesla hasn't made the investigation any easier. The attorney sent a routine preservation letter to Tesla in August, but he said the company has yet to get back to him. The family is considering filing a lawsuit if the electric-car maker doesn't respond, he said. 

"This case will be, to my knowledge, the first case like this against Tesla," Leopold said in an interview. "They certainly have promoted their expertise in the IT area, and I'll be curious from a safety perspective how strong they are and how their development in that area has been."

"These are routine cases for Ford, General Motors, and others," he said. 

A Tesla representative said the company did, in fact, respond and was waiting for more information from the victim's lawyer. 

Leopold also pointed to documents revealed last month by PlainSite that showed that the National Highway Transportation Safety Administration had warned Tesla to tone down its language with regard to safety. The agency sent a cease-and-desist letter in October after CEO Elon Musk said there was "no safer car in the world" than a Tesla, according to the documents. 

"The fact that they self-promote that it's safe when the government told them they can't do that, first-blush indication is that on this vehicle, the safety mechanisms failed," Leopold said. 

A Tesla representative declined to comment on the record for this story but said airbags weren't necessarily designed to fire in all circumstances, depending on the crash, according to NHTSA. The representative also pointed to Tesla's five-star crash rating and a blog post saying that the company's vehicles were "engineered to be the safest cars in the world."

Leopold said that marketing effort was exactly why getting ahold of the crash data should be easy. 

"Tesla has the ability to monitor their vehicles out on the roadway. Unlike Ford or General Motors or Toyota, Tesla seems to have that ability. Who owns that data? Is it our client? Is it Tesla? Certainly we're going to seek it, and they should voluntarily provide it to us," he said.

Join the conversation about this story »

NOW WATCH: Why Apple's Mac Pro 'trash can' was a colossal failure

The definitive story of how a controversial Florida businessman blew up MoviePass and burned hundreds of millions

Fri, 09/13/2019 - 5:47pm

  • A four-month investigation by Business Insider chronicles the rise and fall of the movie-ticket-subscription startup MoviePass.
  • We tell the story of cofounder Stacy Spikes, who sought to shake up the tired movie-theater business by starting a subscription service.
  • Enter Florida businessman Ted Farnsworth, who injected much-needed cash into the company and introduced the risky idea of lowering the monthly subscription price to an impossibly low $9.95 a month.
  • The price change helped MoviePass become a sensation, but it also led to the ousting of Spikes — and the use of questionable tactics to keep the company afloat.
  • This story was published on August 6. Subsequently, MoviePass' parent company announced the service would shut down on September 14.
  • Visit Business Insider's homepage for more stories.

As the sun set on June 14, 2018, John Travolta stood outside Manhattan's SVA Theatre. He'd arrived for the premiere of "Gotti," a biopic of infamous Mafia kingpin John Gotti in which Travolta played the starring role.

Greeting Travolta on the red carpet were Ted Farnsworth and Mitch Lowe, two businessmen who'd made the release possible after they'd taken an equity stake in the film months earlier.

But if Travolta knew who they were, his blank expression in the photos he took with them didn't show it. In fact, if the actor knew more about them, he'd likely have wondered why they were grinning ear to ear.

Farnsworth was the CEO of Helios & Matheson Analytics, the parent company of MoviePass, the buzzy movie-ticket-subscription service with ambitions of becoming the next Netflix. Lowe was the CEO of MoviePass. And "Gotti" represented their next big move: moviemaking.

But MoviePass was burning through millions of dollars to keep up with subscriber demand. Lowe and Farnsworth, meanwhile, were blocking subscribers out of their accounts and misleading investors, according to multiple former employees — desperate measures designed to keep the company alive.

There was one conspicuous absence at the premiere: Stacy Spikes, the entrepreneur who founded MoviePass in 2011.

This spring when I met with Spikes, 51, he still had the slim figure, thin-framed glasses, and big smile he had back when he was hustling to put MoviePass on the map. His dream: a service that allowed you to see everything from summer blockbusters to art-house fare at any time for a monthly fee.

For a while, amid numerous fits and starts and funding crises, it worked. Then, in January 2018, just as MoviePass added its millionth subscriber, Farnsworth and Lowe fired him.

Surprisingly, Spikes wasn't bitter. "How we got there was messy, but innovation is always messy," he said.

Now, 18 months after Spikes' departure, the once high-flying company is practically dead after losing millions of subscribers in less than two years. Since July 4, MoviePass has been shut down to resolve "technical problems."

Secrecy hangs over what remains of MoviePass, a company that misled both subscribers and investors, and, according to multiple former employees, made many employees extremely uncomfortable. Hundreds of pages of SEC documents show, in clinical detail, the gobs of money the company spent trying to keep the lights on, and just how little it was generating.

Through interviews with over a dozen sources who worked at the company or had a close association with it — many of whom spoke on condition of anonymity because of the nondisclosure agreements they signed — I learned how an idealistic founder's desperate search for cash to keep his company alive led to its swift downfall.

Aggressive marketing and questionable practices

Stacy Spikes always loved movies. As a high-school kid growing up in Houston, Texas, he worked at a video store. In his 20s, he helped market film soundtracks at Sony. By 1994 he was vice president of marketing at Miramax. In 1997 he founded the Urbanworld Film Festival, which featured the work of diverse filmmakers, including future stars like Ava DuVernay and Malcolm D. Lee.

The festival's success got Spikes and executives with Loews Cineplex, one of the big movie chains at the time, thinking. "You could see Netflix, Spotify, Pandora, Hulu — this whole subscription wave was on the horizon," Spikes said. "So it was, like, why not make a subscription for moviegoing?"

MoviePass began with Spikes, a team of five scrappy 20-something developers, and a phone.

In 2005, they created an SMS-based prototype for purchasing tickets, but they couldn't get a major chain to give it a try. Things seemed to turn around after Spikes brought on Hamet Watt as a cofounder. Together they raised a combined $1 million from AOL and True Ventures, a San Francisco venture-capital firm.

But when a launch on July 4, 2011, was scrapped because of lack of interest from theaters, Spikes had to start over.

First Spikes and his team had to find a way around the big chains. To do that they devised a prepaid credit card. Using the app, subscribers would find a theater, select a movie and screening time, then go to the kiosk and order the ticket using the prepaid card. Essentially, the company paid back the theaters the full ticket price for the movies that its subscribers were seeing.

The MoviePass team also still needed to perfect its tech to match the user with the right theaters. So the developers built a geo-location system from scratch, plugging in the longitude and latitude of the front door of every movie theater in America.

The 90-day effort nearly bankrupted the company. But in February 2011, an impressed True Ventures greenlighted $1.5 million in funding. Subscription numbers jumped from 5,000 in 2012 to 10,000 by 2015. But even then, the company continued to sputter after a deal with AMC fell through in 2016.

Desperate for cash, MoviePass held a series of meetings in New York in the summer of 2017 with prospective investors. Ted Farnsworth attended one of the meetings.

A tad under 6 feet tall, Farnsworth resembles an economics professor more than a cutting-edge entrepreneur. He's balding, wears stylish thick-rimmed glasses, and often dresses in business-casual attire with the sleeves rolled up to his elbows.

"He comes off as a bumbling, lovable, sort of optimistic guy," one former MoviePass employee said. "He wants to be your best friend. He's always on."

Another former staffer put it differently: "The first conversation I had with Ted I left thinking, 'This guy is a con artist.'"

Read more: Bitter enemies MoviePass and AMC once worked together. Here's a look inside the relationship's epic collapse.

Over the past three decades, Farnsworth has registered more than 50 companies in Florida, including a psychic hotline started in 1998. Fronted by La Toya Jackson, the company's name, the "Psychic Discovery Network," appeared in a notice from the Federal Communications Commission of pay-per-call services that had received more than 50 complaints.

Numerous companies that went public while Farnsworth was at the helm were valued at less than $1 a share within three years. Only four of his companies remain in operation today. Farnsworth himself has been cited 11 times for failing to pay federal income taxes on time.

Yet Farnsworth never seemed to have a problem failing up. In 2017, he became the CEO of data company Helios & Matheson Analytics. According to its website, the company specializes in "insights into social phenomena." But, like Farnsworth, it too had a troubled past. In 2016, its India-based former parent company was accused of defrauding thousands of investors.

Farnsworth's pitch to MoviePass: $25 million for 51% of the company, two seats on the five-member board, and a promise to drop the monthly subscription price, temporarily, from $50 to $9.95, with the goal of hitting 100,000 subscribers. If all went well, the next step would be taking MoviePass public.

But Farnsworth's plan worried Spikes; to him, $10 a month was too low. At that price MoviePass would start losing money when a subscriber used the service more than once a month.

Why Farnsworth settled on $10 is unclear. Several people told me he wanted a price that would grab headlines. Some simple arithmetic should have dissuaded him.

In the US, the average price for a movie ticket is about $9; if a customer ordered a ticket every day for a month (the maximum the MoviePass plan allowed), it would cost MoviePass about $270, of which the subscriber's fee would cover just $10.

But in July 2017, the MoviePass board agreed to the deal. And on August 15, the price drop went into effect. Thanks to word-of-mouth buzz and press attention, within two days subscriptions jumped from about 20,000 to 100,000. MoviePass had transformed from a scrappy startup trying to keep the lights on to a disrupter in the making.

Farnsworth and Lowe, who came on as MoviePass' CEO in 2016, became the faces of the company. They often made key decisions inside Helios & Matheson's Empire State Building office without Spikes, who by then had become chief operating officer. The staff ballooned, quadrupling from 10 to 40 by the end of 2017.

To celebrate, Farnsworth hosted a company event in November at his midtown apartment. He gave an impassioned speech with one clear message, according to those in attendance: They were part of something big.

But Spikes saw a looming disaster.

The company was overwhelmed by its overnight success and couldn't keep up with demand. A quarter-million new subscribers were signing up every month, and MoviePass customer-service lines were flooded with complaints from people who had been waiting weeks for their cards. MoviePass had lowballed the number of cards it would need after the price drop. It got to a point where the vendor making the MoviePass cards didn't have enough plastic and had to call on its competitors to fulfill all the card orders.

"We all knew we were selling something we couldn't deliver on," one former staffer said.

Spikes couldn't stay quiet. He'd often beg Lowe in private to convince Farnsworth that the $10 plan would doom them.

To no one's surprise, in late December, Spikes and cofounder Watt were voted off the board. Helios was now in full control of MoviePass.

On January 9, 2018, Spikes received an email from Lowe. It explained that MoviePass, the company he'd built from scratch, no longer needed his services.

"An email," a former staffer said. "All those years getting the company off the ground, and that's how he's treated?"

The same day MoviePass reached 1 million subscribers, a milestone it hit faster than Netflix and Hulu. A press release to mark the occasion included a picture of a smiling Farnsworth and Lowe, standing before the AMC marquee in New York's Times Square, holding MoviePass cards — a dig at the biggest movie chain in the world, which had previously tried and failed to ban the service from its theaters.

As one source close to the company put it, "From then on, it became the Mitch and Ted show."

The company falls into 'substantial doubt'

On the night of April 14, 2018, in Palm Springs, California, Farnsworth sat in his hotel room, banging out a furious email. It was addressed to MoviePass staffers who had come to the annual Coachella Valley Music and Arts Festival to work a promotional event the company would host with iHeartRadio.

Already, the company had made an impression on the festival. A MoviePass banner flew high above the festivities. Scantily clad Instagram influencers posted pictures with MoviePass swag. Former basketball star and amateur diplomat Dennis Rodman had shown up in a helicopter bearing the company's logo with members of Jerry Media, an online advertising company known best for its @f--kjerry Instagram account and for running social media for the doomed Fyre Festival. Now, it counted MoviePass among its clients.

Flying High

Here is a list of the largest banks in the United States by assets (JPM, BAC, C, WFC, GS, MS, USB, PNC, TD, COF)

Fri, 09/13/2019 - 5:32pm
  • Business Insider Intelligence is launching its brand new Banking coverage in early September.
  • To obtain a free preview of our Banking Briefing, please click here.

The Federal Reserve has rolled out a list of top US banks by assets, and we've broken down exactly how these banking giants manage to stay ahead of the competition. For decades banks have been merging, partnering, and expanding — so much so that the top four banks now account for 50% of all US banking assets.

Here are the top 10 banks in the US by assets, with key insights as to how they got there, where they plan to go in the future, and how smaller banks can compete in the industry. 

1. JPMorgan Chase - $2.74 Trillion

By targeting digitally-savvy consumers and introducing artificial intelligence to its offerings, JPMorgan Chase has been able to outperform its competitors. JPMorgan is playing the long-game by acquiring millennials through digital channels — and hopes to convert them to higher-value customers later on.

Additionally, JPMorgan is investing heavily in banking technology, and boasts the biggest tech budget of all banks in 2019 with $11.4 billion. A key focus of these funds is identifying use cases to implement artificial intelligence, such as enabling investment banking clients to access analyst reports and stock information through voice assistants.

2. Bank of America - $2.38 Trillion

Bank of America has been able to cut costs and appeal to young users by adapting strategies for the digital age. The bank's digitized branches – which allow customers to access contactless ATMs and connect with call centers via video-conference technology – experienced half the traffic of nearby branches only five months after launching in 2017. 

Bank of America's digital-only services Zelle and Erica have also re-defined what the company offers its retail banking customers. Zelle allows users to digitally send real-time payments to friends and family, and by integrating this feature into its mobile app, Bank of America has opened the door for increased consumer engagement.

Bank of America has also seen success with its voice-enabled assistant, Erica, which provides customers the ability to conduct peer-to-peer payments as well as bill payments. Since officially launching in 2017, Erica has surpassed a massive 7 million users per year.

3. Citigroup - $1.96 Trillion

For three years in a row, Citibank has been named the "Best Bank for High-Net-Worth Families" by Kiplinger's Personal Finance. For customers that maintain $200,000 in deposit, retirement, and investment accounts, the bank grants them access to its Citigold Package. 

Business Insider Intelligence's Mobile Banking Competitive Edge Study also shows that Citi took the top spot for mobile banking features, as rated by consumers. Citi saw a massive increase in digital banking users in 2019 – up 11.3% year-over-year – and its mobile users grew twice as fast at 22.4% YoY. This growth, combined with the company's electronic client statements surging to 50%, demonstrates that Citi has secured its spot as one of the best banks in US.

4. Wells Fargo & Co. - $1.89 Trillion

Wells Fargo is following the lead of top competitors by targeting millennials through mobile banking services. Pay with Wells Fargo is a mobile service where users can access their most used payment features before signing into the app. Additionally, Wells Fargo's app Greenhouse helps customers simplify their bills and track spending. 

Joining the contactless payment market has also bolstered Wells Fargo's position as a leading bank. With 78% of the top 100 US merchants accepting contactless transactions, providing contactless credit and debit cards helps attract users who prefer digital banking methods — and according to Business Insider Intelligence, 44% of US consumers prefer contactless payments.

5. Goldman Sachs -  $925 Billion

Since launching Marcus, an online bank that offers customers fixed-rate, fee-free unsecured loans and high-yield savings accounts, Goldman Sachs has become one of the largest banks in the US. The banking giant has made several acquisitions for Marcus, including personal finance management app Clarity Money.

Clarity Money was an early step Goldman took to breaking into the digital-only banking industry, and allows users to open a Marcus savings account directly through their mobile device.

The firm also partnered with Apple to develop their co-brand Apple Card – giving users who have an associated iPhone access to rewards, money management features, and the ability to choose either a digital or physical card.

Acquiring and investing in startups and other businesses, combined with the decision to explore new ways to integrate technology with existing banking services, has allowed Goldman Sachs to become one of the largest banks in the US.

6. Morgan Stanley -  $875 Billion

After acquiring Solium Capital, a global provider of Software-as-a-Service for stock administration, financial reporting, and compliance, Morgan Stanley gained access to new technology and millennial employees who propelled the company into the digital banking market. 

By 2030, it is projected that millenials in North America will control $20 trillion of global assets, and Morgan Stanley is looking at Solium's young clients as its future affluent customers. 

Additionally, Morgan Stanley partnered with Box,a cloud content management service, to launch a "Digital Vault," an encrypted, cloud-based platform that allows Morgan Stanley's wealth management clients to easily share financial documents. The firm's wealth management business already contributes 44% of its revenue, and the "Digital Vault" is expected to accelerate this segment even further. 

7. U.S. Bancorp -  $475 Billion

U.S. Bancorp, the parent company of U.S. Bank National Association, earned a spot on the list of top US banks due to its commitment to competing with tech giants making their way into the banking industry.  

With Facebook, Amazon, Apple, and Google all announcing their desire to launch banking services, U.S. Bancorp decided to improve its own technology. According to Business Insider Intelligence, Terry Dolan –chief financial officer of U.S. Bancorp – said that the bank plans to partner with fintechs inorder to maintain competitive banking technology. 

8. PNC Financial Services -  $392 Billion

PNC Bank is known as a top bank in the US because it offers specialized perks and services to customers while developing original products. In 2017 PNC began offering mobile payment options to corporate clients who hold Visa commercial cards — allowing them to leverage popular mobile wallets like Apple Pay.

Additionally, in 2019 PNC piloted credit cards with card verification values that periodically refresh, in the hopes of combating fraud. Fraudsters are able to guess three-digit CVV codes relatively easily due to the limited number of permutations; but periodically changing CVVs makes stolen data less valuable. 

9. TD Bank -  $384 Billion

In addition to having extensive influence abroad, TD Bank has become one of the largest banks in the US due to its integration of artificial intelligence and utilization of digital technology. 

TD Bank partnered with to launch Clari, an AI-powered chatbot, in Canada. Clari answers customers' questions via text message and notifies them when credit card payments are due or how much they spent at a certain store. Chatbots cut down on call volume, and Clari's success in Canada will likely influence TD Bank to develop a chatbot for its US branches. 

In another partnership, TD Bank teamed up with fintech provider Amount to leverage its digital lending technology, which comes with a suite of tools including fraud detection and account verification. 

10. Capital One -  $373 Billion

Despite its recent data breach, Capital One still managed to make the list of top US banks, likely due to its ongoing commitment to digital transformation.

Capital One increased its technology staff from 2,500 in 2011 to 9,000 in 2019, launched Eno – its AI-powered chatbot, similar to Bank of America's Erica – and is in the midst of a multi-year migration of its back-end software development tools to the cloud

Capital One also acquired fintech United Income in 2019, a digital platform that offers wealth management services for people moving into retirement. The fintech combines both technological capabilities with human facets, like providing access to a team of wealth managers — making it attractive for consumers who still desire human interaction. 

How can small banks compete?

Breaking into the digital banking industry is key for smaller firms looking to become major US banks. Neobanks – digital-only banks that aren't tied to traditional banking technology or expensive physical branches – are gaining steam in the US and secured a record $2.5 billion globally in funding for the first half of 2019.

Chime, a San Francisco-based neobank, took about four years to reach one million users in 2018. It has since acquired over 4 million users — quadrupling its user base in just one year. The competition put forward by digital-only banks will eventually force traditional banking leaders to revamp their banking practices and offerings due to the increasing digital demands of consumers.

Banking Industry Analysis

The banking industry is constantly undergoing change in the digital age, and it's important for its biggest decision-makers to stay informed of how the leading US banks continue to garner success.

That's why Business Insider Intelligence is launching Banking, our newest coverage area, to keep you up to date on strategies and tactics  of the largest banks in the US.

Click here to obtain an exclusive FREE preview of Banking!

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