Natalie Horbachevsky
G100 Network Notebook | September 2017

The Reinvention of Public Markets?

With over $1.5 billion raised in ICOs (initial coin offerings) this year, tech startups now have a new option for fundraising. The Wall Street Journal offers a primer:

For investors, the tokens [issued in an ICO] are a bet on the issuing company’s future. Unlike buying shares in an IPO, though, this bet is made far earlier in a company’s development, meaning the potential for gain and the risk of loss are greater. That early exposure to startups used to be the privilege of venture capitalists, but now VCs are scrambling to get just a small allocation in ICOs for hot companies.

The LTSE (Long-Term Stock Exchange), a proposal from entrepreneur Eric Ries backed by investors including Marc Andreessen and Steve Case, takes a different tack in re-examining and aligning the goals of stakeholders. From The New York Times:

The new exchange aims to reimagine what it means to even be a public company. Among its changes to the ecosystem: the voting rights of investors (the longer you own, the more voting power you have), new disclosure policies (including a moratorium on “guidance”) and a complete rewrite of compensation schemes so that executives truly focus on the long term (it recommends vesting stock over as long as a decade.)

High Season for Cyber Anxiety

Equifax’s massive hack wasn’t the only cybersecurity headline this month. The US Department of Homeland Security ordered all federal agencies to remove from their systems any software from Kaspersky Lab, a Russian firm under investigation for ties to the Kremlin. More scrutiny lies ahead for Russian cybersecurity vendors that serve business, government, and law enforcement. Forbes describes one surveillance tool from Moscow-based Oxygen Forensics, whose clients include the FBI and ICE:

[The temporary root solution] allows for total control over a device, which can then be returned to its previous state when first acquired by the feds. Federov [Oxygen’s co-founder] said they can grab all data from a 64GB phone in just a few minutes, faster than anyone else, and it works on locked devices too, including certain Samsung, LG and Motorola models. This summer, it started advertising a technique to access encrypted WhatsApp communications from the iCloud.

Is Addiction a Factor in Slowed Growth?

New research from Princeton economist Alan Krueger links the rise in opioid prescriptions with declining male labor force participation. The Wall Street Journal examines his findings:

A national increase in opioid painkiller prescriptions between 1999 and 2015 may have accounted for about 20% of the decline in workforce participation among men ages 25 to 54, and roughly 25% of the drop in prime-age female workforce participation. “The opioid epidemic and labor-force participation are now intertwined,” Mr. Krueger said. “If we are to bring a large number of people back into the labor force who have left the labor force, I think it’s important that we take serious steps to address the opioid crisis.”

Innovation and the New Agora

Amazon’s hunt for a second headquarters has local leaders courting the retail giant in unexpected ways, both analog (think cactus in the mail) and digital (how many Alexa jokes can mayors post on social media?). Cities from Tuscon to Ottawa are in the race for an estimated $5 billion investment and 50,000 jobs. The decision may come down to labor pool, says The New York Times:

“Amazon has something like 9,000 engineering jobs they can’t fill. Our immigration policy is much more liberal,” said Mr. Watson, Ottawa’s mayor. “That’s where we have an advantage.”

Another possible factor for Amazon is how well a region supports innovation districts – geographic concentrations of established companies and startups. A new white paper from The Brookings Institution identifies the hallmarks of successful innovation clusters, including:

-Connectivity and proximity are the underpinnings of strong district ecosystems. …  A well-connected district is paramount to its success – transit, bike paths, sidewalks, car-sharing, and high-speed fiber.
-Social interactions between workers – essential to collaboration, learning, and inspiration – occur in concentrated “hot spots. … They may be organic, like Silicon Valley’s legendary Walker’s Wagon Wheel, or designed, like Venture Café near the MIT campus.
-Make innovation visible and public. … Daylighting innovation in public and private spaces helps inspire curiosity in aspiring innovators, start conversations between neighbors, and convey the story of an innovation district to potential recruits or investors.

Hedge Fund Performance Up for Women

Despite underrepresentation in the asset management industry, headwinds in raising capital, and limited visibility, female hedge fund managers have outperformed their male counterparts two to one this year, reports the Financial Times:

The HFRX Women index, which pulls together the performance of female hedge fund managers, has returned 9.95 percent for the first seven months of the year. This compares with 4.81 percent for the HFRI Fund Weighted Composite index, a broader gauge of hedge funds across all strategies and genders. … It also tallies with previous data that show that hedge funds run by women outperform those run by men over five years.

After the Merger, Review and a Reorganization

Nearly two years after announcing their intent to merge, Dow and DuPont completed their $130 billion transaction this month. Two weeks later, they revised their plan to split into three companies – agriculture, materials science, and specialty products, moving more units in the specialties business. DowDuPont Chairman Andrew Liveris and CEO Ed Breen spoke to CNBC about what prompted the shift:

As time went on, we just kept realizing there are so many identical end markets between MaterialCo and SpecialtyCo and if we could align them better and really put the right end markets together, the power with our customer base would be enormous. … We always intended to do a portfolio review and yes, we did have pressure from activists. But quite frankly, we had a lot of investors keep raising this issue with us – our normal long-term shareholders.

Conflict Is Key for High Performing Teams

And team cohesion might be overrated, says a new Harvard Business Review article. Studying 55 leadership teams over six years, researchers found that the ability to embrace tension – by fostering open dialogue, focusing on the customer, and holding people accountable for innovation – is the primary predictor of team performance:

For enterprise-wide teams … trust and positive team dynamics are foundational. In fact, our results were consistent with this notion, in that teams with high levels of trust, transparency, a team-first mentality, and collective pride perform better along several dimensions (e.g., overall organizational performance, employee engagement). However, in a business environment that requires a different approach to enterprise leadership, our results challenge the assumption that cohesion is the most critical. On the contrary, embracing, navigating, and living with tension is most strongly related to organizational performance.