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Blythe Masters

lines on the record: 66
first: 2024-03-25
most recent: 2024-03-25
sittings or episodes: 1
sources: podcast

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“It's got something to do with the fact that most of the things that really annoy you about other people professionally or personally say a lot more about you than they do about them. And it takes a while to learn that. And when you do life changes.”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“It probably was when I was younger, much younger, I was still a kid, I would act in school productions. I suffered the worst terrible stage fright. And the advice I got, which had to do with managing nerves, managing fear, there's a book about it, actually. It's called How to Feel the Fear and Do It Anyway. And you'd be amazed, even though that original advice was about how to manage stage fright, you'd be amazed the number of situations where it's good advice in personal life and in professional life. It's helped me do things that are hard. It's scary because when you get asked to do something you don't know how to do or you haven't done before and you have to let go of something that you really know and love and is getting easy, it's hard to do that. Get over it and turn the fear into motivation has been actually, I think, very helpful. I think also acknowledging that fear exists, which most of the time is completely unacceptable on Wall Street, has been helpful to me because it does exist.”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, Phil Demchek has to be one of them. He is presently the CEO, what not surprisingly, is one of the most successful banks in the United States PNC. Brilliant man. I worked for him for many years at JP Morgan, and he was responsible in many ways for pressing me to do new and different things. And he constantly challenged me. He was a critical boss, but he was irritatingly usually right. He was an exceptional leader and he gathered a group of extraordinary people around him. And that drove a lot of innovation. So he was one. I would say watching Jamie at work has obviously been an interesting lesson. I want to say three because I just feel I ought to. But I would say Rob Havert, albeit that his influence has only been felt in the last five years of my career, I found a home at motive that I really love. I'm getting to do really interesting things and do stuff again in a really different way. And Rob's vision created that.”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“Probably the most annoyed I get on a regular basis is the inability quickly to get the news in an unbiased fashion. And this is true all over the world, but it used to be return on one news source and you're reasonably confident that you could get your news. But you have to really work to get unbiased news today. It drives me nuts.”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“Bought, stole, varted, goodness knows what pieces of surplus equipment, aircraft that had been abandoned by the Nazis and the Russians took those pieces of aircraft, flew them back a great danger to themselves, back and forth for many months and accumulated enough stuff to be able to build a homemade air force. And so that became Israeli 101 squadron, which my dad then fought in as a fighter pilot. He was a squadron leader. He flew with Azer Weitzman, who was the head of one-on-one squadron who subsequently became the president of Israel. And dad was a bit of a hero in the creation of what is now the Israeli state. It's not really about me. It's about my dad, but I think it's interesting.”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“As an instructor, he was prevented from participating in combat throughout the whole Second World War. He also had become aware of the Holocaust and became a very vocal opponent of the British government's foreign policy towards Palestine. And his view was that particularly in light of what had happened in the Holocaust, this was an unforgivable act by Britain. And so he volunteered as an unpaid non-Jewish Gentile who showed up approached the Israeli government who were convinced immediately that he was a spy for the British government, which he wasn't. They took him anyway, and he became part of the orchestration of a plan that helped Israel with its first Air Force defense capabilities, which was created by flying, by hook or by crook, illegally under the cover of darkness, behind the mountain, under the radar behind the Iron Curtain, the new emerging iron curtain in Europe to places like Czechoslovakia where they...”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“Is a story about my dad. My dad who's passed away many years ago now joined the Royal Air Force in Britain before the Second World War and involved an instructor of fighter pilots and trained countless.”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“A divorce person. I've been an avid pony girl since I was growing up in the pony club in England and took a few years off, but I started again after I had my daughter in my 20s and I've been riding ever since I still compete to this day. I don't practice enough riding at 1500 pound animal over four foot six pence is not particularly advisable at the best of times, but without practice is definitely not a good idea. It's a hobby that I'm passionate about. I love my horses and I live here in Florida and I have a farm in Wellington where I actually have the privilege of living on my own farm with my own horses. So I can get off a zoom and get on a horse and not even have to leave the property. It's great.”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“Are going up. And so the imperative of operating efficiently in order to generate an appropriate return on capital deployed is increasing. In a world where money was priced at zero, zero or negative interest rates, it didn't really matter that stuff was slow. It really matters that stuff is slow when there's a time value associated with money. So lots of opportunity there to really build new and interesting capabilities in and around the capital markets space. Banking and payments, the consumer payments business domestically and most of the developed world is ultra competitive, but all sorts of opportunities, especially in cross-border payments and remittances, which are still astonishingly inefficient and fragmented. Significant opportunities to improve digital identity, which has implications for KYC AML at the individual level, but also digital identity for entities and institutions. Lots of opportunity there.”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“Capital markets is an arena where the trading and execution end of the capital market space has been radically transformed over the past years. But what's interesting in capital markets is the post-trade is still a mess and also that just like I described in the Asset Well space, there aren't that many real platform businesses that are ubiquitous and that are excellent and that are cloud native and that are efficient and that are modular and that can be evolved to fit the needs of diverse and disparate customers. Instead you find in capital markets many businesses that are burdened with legacy technology often written in languages like COBOL that they don't even teach in schools any longer. Millions of lines of code that are expensive to address. And a lot of these providers are very entrenched. Their clients is very costly to move off these capabilities. But the case for doing that is increasing and increasing because the cost of operating in capital markets, especially in light of a world where capital requirements”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“Be impervious to attack my quantum computing. The scale of the transformation and the data exercised needed to convert data to being encrypted in a quantum resilient cryptographic way is very important and I think increasingly pressing areas. I like thinking about where are the sort of black swans that could come out of the woodwork and surprise us and this is definitely one of them.”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“and AI the juxtaposition of these two is super powerful the ability to ultra personalize phishing attacks just as you might ultra personalize exquisite customer service is just as possible to do bad things with it is with good with quantum computing the particular risk is the ability of computers to defeat the algorithms we use to encrypt data and the world has only just been gone to really grown up about properly encrypting data we're encrypting data using linear algorithms that are trivially defeatable with commercially viable quantum computers that should scare you because if we're not prepared for that adequately the implications could be truly pretty diabolical now the good news is that although quantum computers debatably do not yet exist at a commercially viable form the math exists to encrypt data to a degree that nonlinear encryption algorithms that”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“Of the major wealth networks, and even the smaller RIA type platforms and their aggregators suffer with fragmented technology estates. And in many cases, aging technology estates and clunky integrations or no integrations, and they're still dealing with faxes and emails and crazy things that they should not have to be dealing with. That will radically change the economics of their doing business. That's happening as we speak. One area I'm very interested in that's a risk to this vision, the cyber risk associated with an increasingly digitized world is obviously enormous. So these risks are significant. And in a world where we're more digitally interconnected, obviously the risk goes up and the risk to violation of privacy and intrusion at an individual level, but institutional and systemic risk also goes up. Now imagine a world where bad guys, individual criminals, nation states, whenever are armed with quantum computing.”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“World is just going to look very different in as little as five years' time. You're going to see advisor desktop space, which today is multiple different screens, the ops process and the email and this for public equities and that for fixed income and goodness knows what for the smorgasbord that is alternatives. That's all going to get integrated. The holy grail here is to get vastly greater productivity if your objective is to deliver investment opportunity to more of the masses, you've got to find a way to do that at lower cost. So having technology capabilities that allows someone to invest $10 or $100 or $1,000 or even $100,000 in an instrument that typically has had a $500,000 minimum or $250,000 minimum is a significant development, but it can't be done the current way. It has to be done with automated education and resource support. So I think that in wealth, you're going to see that for sure. Almost all.”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, as you start connecting the dots across your four verticals, across the themes in this one ecosystem, as you look out over three, five years, what do you see happening with the investments you're making and the nutrition technology industry?”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“Good example is another of our portfolio companies Forge Global who operates a market infrastructure for secondary private equity securities. It's developed an index product Wilshire is economist with index products. It's an investable index product related to private equity securities that can now be allocated as part of a target portfolio allocation by an outsourced CIO.”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“People part of that business is super important, but supplementing it with the ability to perform sophisticated analytics to use data to inform investment strategy, to create interfaces that allow for straight through processing and communication, and that enable the institutional client to spend less time on the operations and more on the content or the substance. These are things that technology can help with, even in a human capital intensive business, the ability to connect new product into that ecosystem as the sort of traditional portfolio allocation model is being ripped up and thought about. The 60-40 thing isn't going to fly any longer. What is it going to look like? We're not totally sure yet, but it's certainly not going to be as simple as 60-40, but to have ways to deliver alternative investments and information about alternative investments through a wheelshire to their customer base, very important.”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“When you walk across those different examples of portfolio companies in the space, it's reasonable to think of how technology is going to apply as you're in the earlier stages. And then you mentioned something like Wilshire. And whether it's that particular company or you think of investment consulting, it's not synonymous with technology forward business. So, I'm curious just in an example like that how do you apply that lens to a people-based, more state business?”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“Help them integrate and provide services to each other, and the youngest companies who are doing things at the cutting edge are keeping the older companies informed and sometimes being tucked into those older companies to help renovate and drive forward an innovation agenda. What's really interesting, Rob Haver, our managing partner, likes to call this ecosystem economics. And that's exactly what it is. It's that this cross-sell opportunity, there's synergies that we're able to deliver once you have a really well thought out thesis. It causes you to buy things that rhyme with each other and that have real opportunity to be better together.”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“Allocations are 20 to 30 percent, that's going to shift, but the cost of delivering that, executing that, it's not viable with the way that this business is done today. So the use of digital distribution channels, which will also become digital asset origination channels. So think you sell a fund through a digital platform to someone, a wealth group, and they want leverage against that fund position, which you can now provide. And now that's a source of private credit origination from the same platform. The ability to use AI to personalize and to help with education, which is a big issue for alternatives and new products will evolve as well too, that offer different liquidity profiles, retail needs better liquidity than a seven-year private equity fund. So all of this is all being technology enabled. And what motive sort of ecosystem of investments in that space is building is an end-to-end capability where we can drive ultra-personalization, we can drive lower cost of execution, we can provide end-to-end straight-through processing. It doesn't mean we're going to merge every single one of our companies together, but it'll mean”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“Blockchain and its uses, and I shouldn't leave out quads and computing. So all of these technologies together are going to drive the enablement of enormous platform businesses that create significant value by eliminating inefficiencies, by developing the capability to deliver ultra-personalized service all the way to the level of the end investor at much lower cost than is possible today with much lighter touch so that As new asset classes evolve and become opened up, such as the alternative space, it will take the process and the pain out of opening up access to these instruments, which have traditionally been the private domain of institutional investors and ultra-ultra ultra high net worth investors, retail and just merely high net worth as a segment very underallocated to alternatives. A typical allocation will be in the very low single digits less than 3% institutional.”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“To conduct their business using those platforms, they generate enormous amounts of data as an exhaust which has value in its own right. And they've revolutionized everything from supply chain to last mile delivery to advertising the way you position businesses. It's extraordinary that hasn't happened to the same degree in the asset wealth management space. It's extraordinary that we're being driven around to date in an autonomous vehicles on the streets. And yet we still haven't cracked T plus less than two settlements. Our view is that there's an absolutely extraordinary opportunity that is being fueled by this confluence of different technologies that are coming of age now simultaneously. But cloud computing would radically reduce the cost of data storage and compute how APIs and microservices, smart contracts that auto-execute, the development of platform businesses that are foundational for third-party business, obviously big data, AI, generative AI.”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“Have heard of some of them are very prominent indeed even household names. So for example, we own Wiltshire, we own Case who operate a marketplace and technology platform for alternative investments. We own InvestCloud, which is a fully integrated end-to-end technology platform for wealth that handles everything from advisor to customer interaction all the way through to post-trade processing and SMAs and UMAs. We own Beta Next. It's not a household name, but you would notice if it broke, it provides the technology that runs self-clearing software for a very large part of the industry. Our thesis around wealth is the analogy to it is what happens in the world of advertising and search with the advent of Google and what happened in the world of e-commerce and then cloud computing with the advent of Amazon. These are massive platforms that enable other people.”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“We operate in four verticals and then loosely horizontal. So the verticals are insurance technology, banking and payments, capital markets, and wealth management. And then the horizontal that cuts across some or all of those often is data and analytics, including obviously AI. To answer your question, the asset management and wealth technology space, which is an area where we have a very concretely defined and strong view. There are some mega trends afoot in that space that are being driven by demographics and technology and opening of architecture and all sorts of interesting things. So that has led us to be particularly active in recent years across all stages. We have, I think, 19 or 20 maybe now investments in businesses that are in the asset and wealth management technology space. Some of them are babies that you won't.”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“To run that company or be part of the C suite somehow. Other cases, they're board members and operating from the outside in. But in all cases, they're very much a part of the company and they're part of the way that we produce our product. Of course, our product being returns for investors. So I would say that we use the much more extensively and intensively than would be customary.”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think it's how we use those skills. My perception, never having been an operating partner elsewhere, is that operating partners tend to be somewhat passive until a specific opportunity comes up. And then they're brought in with that in mind. Our industry partners are responsible for driving industry and sector thesis work, so developing our views on what's going on in asset wealth management, banking payments and so on. They are responsible for originating transactions through their networks all the way from venture to later stage opportunities. They're involved in working directly with the investment team and motive create on the due diligence and transaction evaluation process. And then they're part of the team that manages the portfolio company. And in some cases, that extends to being placed as a senior executive.”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“When you look at the operations, the OPs and the operating partners you have, what is it about financial services that feels a little bit different from an operating partner in another private equity fund”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“Generating opportunity as well as cost avoidance, then we in many cases help execute that or help the company build the market. Or we just work on a project basis.”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“The talent there from the top on down, so we help people source great resources. We supplement that with our own where desired and appropriate so people actually pay motive to execute for them. And the difference between paying motive to do that versus another consultant or integrator is two things. One is we charge modestly because we love our portfolio companies. More importantly, we have skin in the game. And so that's very appealing to many CEOs. And then there are companies that are in the advanced stages of growth that are wildly successful going like rocket ships, their rule of 70 companies, the sum of their growth and EBITDA margins are 70% and they don't necessarily need any help at all from a technology point of view. Then along will come something like generative AI. When something like that comes along, we assess the risks and opportunities for every one of our portfolio companies. And then once that assessment is done, then it usually throws up revenue.”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“Good question. The answer is it's obviously not a one size fits all. And we do have a playbook that is outlined for companies of different stages, but we don't stick entirely narrowly to those playbooks. Quite heavily depends on the nature of the company that you've bought. A microscopic startup very often doesn't have the resources to be paying third parties to do anything for it. There we tend to provide much more input around fundraising. go to market, customer acquisition. strategic partnerships with other bigger companies and enterprise customers, many of whom are already in our network or our portfolios. Then if you buy something at the much more evolved end of the spectrum that is, say, an unloved older, non-core, non-strategic asset that we carve out from a bigger company that has potentially a significant body of tech debt, there, the company will typically have its in-house technology capability. You need to be able to evaluate.”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“Love to break down the I, O, and I. Maybe it will start with the innovation and tech piece. When you have that many people and you're deploying across many different stages, how do you differentiate the technical expertise your team has from supporting a company that needs to live on the railway?”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“Are not so true today. The buying cheap thing, yes, maybe. Some great companies are much cheaper than they were two years ago, but others are cheap for a reason. And there's a lot of dry powder chasing the good companies. So they're often not that cheap. Cutting costs for a living, most people have figured that out in a world where there's this much innovation going on. You're not going to cut costs to greatness any longer. That's not the reality. Cheap and free money, not true anymore. And then wide open public equity markets embracing youthful or improved companies not so much. Yes, there are green shoots and a few IPOs are happening now, but that has not been the case. So in that context, you have to have a differentiated playbook. And thus, the case for specialization is greater and the case for having operational shops and technology chops and having the ability to create value the hard way, which is by actually creating value is what's needed. So that's what we try to do.”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“You know what it takes to fix it, it means that you have confidence in deploying new technologies defensively or offensively, and that edge that comes from that is what's unique in the motive space. And for me, I thought that was genuinely properly differentiated from anything I'd ever heard from the private equity industry that I knew well because of years dealing with them at JP Morgan. Unbelievably incredible creators of value. But the playbook that was developed in private equity originally used to be by cheap deploy the maximum amount of leverage that you conceivably can tolerate at apparently almost no cost until recently cut a lot of costs out of a poorly managed company to cut it to the bone and then flip it into the wide open public equity markets that will embrace this with a couple of turns, multiple expansion and you're not that is a playbook which I think I listed four items. I would say debatably all four of those things.”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“Cloud deployment microservices APIs go to market strategy, blockchain and cryptocurrencies and digital assets, ultra-personalization of services and AI, which is probably the biggest one, this extraordinary resource that not only do we use for underwriting and doing due diligence when we make an initial investment, but then actually ideating and executing in some cases value creation plans that are all technology driven. This adds tremendous edge. It actually means that both investing at early stage because with stage agnostic, we do everything from incubation, venture, growth, and buyout all the way from the very beginning to the grown-up phase of a company's life, having your finger on the pulse of technology innovation to a level that you're able to actually do it or prescribe doing it or help with doing it is incredibly powerful for the entrepreneur that you're interacting with. And for us, it creates our edge. It means that fixer-ruppers are less scary. Tech debt is less scary if you”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“Steve Daffron, who ran Interactive Data Corp and then Dun in Bradstreet, and now Beta Next, Richard Lum, who is the head of financial services for Accenture for many years, Bridget von Kralingen, who was the number two at IBM. I could go on, but you get the picture of people with real operating shops who aren't just called in every now and again to ask for their opinion on such and such an investment. They're actually part of the origination process, part of the investment process, part of the portfolio management process. And in many cases go into the portfolio companies to act as executives. So Jeff is now the CEO of InvestCloud, Steve Daffron is running Beta Next, having previously run Dunham Bradstreet for us and so on. And what we find is that combined with extensive in-house technology capabilities where we have about 170-ish full-time motive people that are technologists that are deeply knowledgeable in everything from”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“Secondly, Rob's vision, and it was more at that stage a vision, and it's now a reality to give him credit what's been built at Motive is actually delivered on this, but was to bring a new operating model to the way of doing private investing. And that was what we've come to now term the IOI model. It's just shorthand for investor, operator, innovator. And in essence, that's what we do at Motive. We pursue thematically driven investments in our space. and we create value in those investments by deploying investment skills, of course, because those are table stakes. Added to that deep and deeper than customary in-house operating experience and very extensive in-house technology and innovation capabilities. So we have many people who have been like myself decades of operations in the financial service or fintech space. Jeff Yubuki, our chairman, who was the chairman and chief executive of FISA for 15 years.”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“This was the thing that is fintech. And I developed a point of view that this was somewhere on the spectrum between scary and very exciting depending on where you sat, and that it was underappreciated by my industry. And that and the urge to do something more entrepreneurial is what led me to move. That led to digital asset, which was a very early mover in the enterprise blockchain space. Before that became a thing. I had watched with interest and some skepticism, I might add, the cryptocurrency movement, if you want to call it that, but was very interested in the technology behind Bitcoin and its potential for revolutionizing the way that banking and other business involving multi-party processing could get conducted. And that I did for four years from ground zero, no revenue, no pitchbook, no clients, no capital through several rounds of funding. And our first customers contracted.”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“Different at that time. And also, I had developed a point of view that was the bank and every bank necessarily had been very inwardly focused in the period from 2008, 9 onwards, and it had to do with regulatory reform and the many scandals and big settlements that had to be worked through. And it was really a period of existential crisis for banking. And meanwhile, the same year that began, this little thing called the smartphone came to the world and that spawned an unbelievable explosion of innovation that was largely ignored by the banking sector for a few years got to the point where, okay, maybe there were mobile banking apps being deployed. I wasn't really on the ball. So what was going on was the development of new technologies fueled a new category of people that were chipping away at the competitiveness of the banking sector with non-bank charters, in many cases completely unregulated, all leveraging technology to do it.”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, if you think about what I did at JP Morgan over the years, I didn't stay in any one spot for that long, maybe three years was probably the longest, and kudos to the firm that they took young executives and deliberately tried to stretch them with new assignments and opening horizons. And so I did a lot of different things at JPMorgan that involved building new capabilities. So when it came to time to leave JPMorgan, which I did because we sold the physical commodities business that I was then running, I didn't wish to travel with the business. I could have stayed with the firm, but I realized if I did, I was going to be a lifer. And I had an itch entrepreneurially that I wanted to scratch. I also had a suspicion that even though I thought of myself as an innovator within the fabric of JP Morgan, innovating with such an enormous safety blanket around you and a whole legion of people who are there to make sure you don't screw it up doesn't necessarily count as being really entrepreneurial. So that's what led me to open my mind to doing something.”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“It was integrating JPMorgan Chase. That really matters, and that has cultural dimensions, people dimensions, it's making tough decisions, not leaving every business with a co-head because you're too timid to make the tough decision, making difficult infrastructure decisions so that you don't end up with a fragmented estate technology-wise. All banks that have grown via acquisitions have legacy tech debt problems that are significant, and very often those derived from not taking the tough decisions sooner. And then you just create a sort of spaghetti junction string and sell a tape, hold the whole thing together. And that ends up causing cost inflation over time, inability to eliminate cost over time. So there's a big technology component to doing acquisitions. But really making an acquired business feel welcome and integrated and getting the knowledge centers flowing through the organization, which is what needs to client success is the hardest thing.”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“Many things is the answer. And I did a lot of MA, both acquisitions and divestitures that I was responsible for. But I was also the subject of a few of them. So when Chase acquired JPMorgan, I was on the JPMorgan side and so on. So I've seen it from the inside as well. I think what I would say I've learned is that it is almost without exception. It's all about the execution. And that matters almost more than what it is that you're buying and why it is you're buying because something that is a great business that you're buying for all the right reasons can fail if the integration isn't done right. And I remember an interview that I think Jamie did actually journalist asking, so what was the hardest thing about the bank one JPMorgan Chase merger? And Jamie said, without missing a beat, the JPMorgan Chase merger. And the guy goes, no, I was asking about the bank one. And Jamie goes, no, it was the JPMorgan Chase merger because it wasn't finished. Four years on, it wasn't done. His first job wasn't integrating Bank 1 and JP Morgan.”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“Be seen whether the overall effect on capacity of the system to provide the engines of growth in capital markets, whether the equilibrium that we end up with is one that is healthy for growth in the long run.”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“What's changed very significantly over the last period since the Great Financial Crisis is the amount of capital that is required to. Declined, relatively speaking, and what has moved into that space are alternative credit providers. So broadly speaking, it's known as the shadow banking system, but the big private credit and equity funds and hedge funds and insurers and others who are increasingly directly providing capital markets capacity to what was traditionally the world of banking clients. The objective of the bank regulators in doing this is that they wanted to reduce the leverage in the banking system because of the lessons learned from the financial crisis and they're effectively purposefully pushing that capacity out of the system without having necessarily satisfied themselves or everyone that there's sufficient alternative capacity to make up for that. And there's a concern that this is raising the cost of access to both credit and liquidity for everyone really remains to be.”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“And how does that change the market activity? So if you're thinking about running that credit business, the people who are taking risk or have risk on their balance sheet are owning the same instruments that a real money owner will have.”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“Much less leverage, and obviously certain parts of the spectrum within a submergment, the hedge fund space do deploy leverage to varying degrees, but it's a very different construct, and they typically stay much more liquid. Or they tie the instrument by the investor to the tenor of the activity or the liquidity horizon of the activity that they're undertaking. So in private equity, you put your money in, you don't expect to get it back tomorrow morning. And if you do, that's going to be painful. It's a long-term investment. And as part of a diversified portfolio, that makes sense. That's the basic difference, just one word. It's leverage, really.”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's interesting that so many of the world's great banks have diversified into asset management and wealth management, which is a similar type of business in terms of return on equity it can generate. The difference is that an asset management business, you're not deploying leverage in your company typically. Or if you are, it's very well prescribed and defined within the parameters of a particular instrument or product or fund. Banks are leveraged institutions and you can never forget that. And that's why this concept of fortress balance sheet matters. Because if you inject leverage into the equation and your deposits, for example, can disappear for a reason, as we saw in the regional banking crisis last year. And you have assets that are not short-term and liquid, then you can create a mismatch there, maturity mismatch, a liquidity mismatch. But even if the underlying performance of the assets is okay, which was the case during the recent banking crisis, you have a problem with just managing the liquidity there. In an asset management business, you don't have that. It's typically a real money business. And very often,”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“If you were to compare a bank of financial services company, the balance sheet shareholder value added to a simpler asset management structure, think of an asset manager, a hedge fund who's generating returns, how would someone who's used to the asset management business think about what the rates of return the bank is trying to generate”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“That customer, and those were the metrics that we introduced and are still used, and I'm sure have been evolved immeasurably.”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“Are consumed by any given activity. And then we got very rigorous about evaluating what is the client value proposition. We always know how a client values the business we provide to them. But how does the bank need to value the business a client brings to us? And if a client is very concentrated in a single product line and that being unsecured lending, for example, very hard to achieve the return on equity that is appropriate to not destroy shareholder value at a bank. And that was true then and it's true multiple fold today because capital requirements have increased. The idea is you need to create the incentive to have customers become customers of multiple product lines and you need to track all of that and hold your people that are responsible for those client relationships from really understanding what a client P&L means and a capital risk adjusted client P&L really means what is the return on customer capital that has been consumed.”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source
“A good question. There's explaining the strategy, and then there's giving people the tools to execute the strategy. Both are equally important. It's very clear to have a strategic orientation in your business, especially if you're not in a steady state. So you're evolving in a direction, which in 2001, JP Morgan absolutely was not a top-tier investment bank. It had certain areas of excellence, but it had a long way to go to become what it became through the course of the financial crisis. What we did in terms of giving people the tools, we got a lot more granular and specific in terms of transfer pricing and pricing of risk in particular. So we dropped concepts of revenue targets or growth targets or volume targets or market share targets. You have to pay attention to those. But we introduced the notion of capital consumption, SVA, shareholder value added, and models to estimate what are the resources of the bank.”
2024-03-25 · Capital Allocators · Blythe Masters - Fintech Innovation at Motive Partners (EP.376) · IDENTIFIED FROM THE TRANSCRIPT · source