Apparently, history isn’t a good enough reason for India’s central bank to base its actions on. A remote company in the US is headed to the public markets at a US$16 billion valuation, can you guess which company is this?
Got some financial knowledge to share and hoping to make some money at the same time? Welcome to the era of “finfluencer”.
To raise interest rates or not to raise interest rates, that is the central bank’s question
Latin America is seeing higher inflation and a quick rebound in growth. So, Brazil, Mexico, Chile, and Peru, have all begun to hike policy rates and end the pandemic-era easing.
In Europe, the Czech Republic and Hungary have hiked their interest rates while the rest of the European Union still waits.
Northern America, the US in particular, believes that inflation is transitory. So rate hikes are still some way away.
India too seems to be following in the US’ footsteps. Its central bank has, on numerous occasions, said that it’s batting for growth and that inflation isn’t something that concerns them greatly. At least for now. Which means that interest rates may not be heading upwards anytime soon.
I’m pointing all this out because it’s usually fairly easy for central banks to slash interest rates when they know that a recession is on the horizon. But typically, the exit plan is either based on a time-based approach or a state-based approach. Which just means that either the central bank waits for a certain time to pass before reversing its approach or it watches what the economy is saying and makes its decision accordingly.
And central banking plans can get messy. Increasingly so in a world that has become addicted to ultra loose policy measures and easy money. But, it’s not a new problem.
It all just depends on the prevailing economic thought of that period.
Post the 2008 global financial crisis, interest rates were slashed by central banks to historic lows. But growth did not appear and inflation remained weak. The central banks started buying bonds to pump money into the economy. But, the sellers of bonds decided to save the money.
As you can see, central banking unfortunately isn’t pulling one lever to get something to work anymore. It’s way more complicated. And that exit plan is what India might need to get ahead of today. It’s something that Ira Dugal of BloombergQuint points out.
Let me pause here. Is the expectation in some way that people will behave as they did in Europe—the money is available but the ‘holders’ of this liquidity won’t spend and will just park it with the central bank? So, what about growth?
Anyway, liquidity is high, growth is tepid. And stock markets are booming with the cheap money.
And while the rest of the world is hiking rates, or even just talking about normalisation of rates—the US included—the Reserve Bank of India seems to be in no hurry.
(Sometimes) central bankers just don’t learn.
Remote company Gitlab finds a home on the Nasdaq
The tech IPO train has long left the station in 2021. That means there’s a veritable selection of newly arriving stocks for those who seek to back the next disruptive company early on, perhaps inspired by Zoom or others.
But there are two unique things about one particular upcoming offer: Gitlab—which is preparing to go public at a valuation of US$16 billion on the Nasdaq.
Gitlab is a fascinating option for those who believe in digital services and, well, coding itself. Its platform is used by companies to store, tweak, and develop the code bases that define and power digital services. It claims 30 million registered users and over one million active users who pay to license its product, but it is not the market leader. That distinction belongs to Github, which Microsoft acquired for US$7.5 billion in 2018.
That leaves Gitlab as the pure exposure to the coder economy. And it certainly is a bet. While Gitlab has managed to build market share—thanks also to its position as an independent—it posted an annual net loss of US$40 million despite revenue jumping 69% to US$58.1 million.
Away from the number analysis and potential Microsoft hedge, the stock is a major bet on the remote economy.
What’s that you say?
Simply, the ability for anyone, anywhere in the world to be able to do a job. That’s not just ingrained into Gitlab’s business as a coding repository service, it talks the talk. Its 1,350 person workforce is distributed across 65 countries worldwide, which it sees as a “key competitive advantage.”
“Operating remotely allows us access to a global talent pool that enables us to hire talented team members, regardless of location,” it wrote in its IPO prospectus.
Gitlab’s remote working processes are meticulous. It has a head of remote—former Engadget editor Darren Murph—and it publishes its own handbook, which candidly details how it handles running a software company remotely at scale.
It may seem easy to dismiss this as a gimmick. Many businesses, after all, ‘went remote’ during the pandemic. Gitlab has done this since it was founded in 2014 and with ambition—it missed its November 2020 IPO target (it’s in the handbook) on account of Covid-19.
But Gitlab is no fly-by-night operation. It’s raised over US$400 million from investments that include Khosla, Goldman Sachs, and PE firm Coatue. Those rounds laid the foundations for what remote teams could do. An IPO will push the boundaries further still, regardless of the numbers.
Everyone’s a content creator
You have got to love a story that begins with some mystery:
Anyway, here are the possible explanations as to why such large single day signups might happen:
- One of Betterment’s older articles suddenly gained traction because of something the US President said
- Betterment sponsored a newsletter. And that particular edition of the newsletter went viral
- Someone recommended Betterment’s services
What do you think?
Well, #3 it is.
Hankwitz wasn’t really doing a sponsored plug for Betterment. He was talking about Betterment because he actually believed in the product and he didn’t need to get paid to do that.
But, it actually got Betterment to hire him to plug its services across his social media.
How much does he make per year? Over US$500,000 now.
And the reason why companies sign up these content creators? Because they tell the story better than the brand itself can. Now that’s something.
Hankwitz isn’t the only one who has quit his finance job to turn into a content creator. Junior investment bankers have been getting out of the corporate rat race into the content creation rat race.
But explaining how to break into Goldman Sachs isn’t going to get GS to sponsor him or hire him to tell their story. There’s probably someone sitting around at the GS HR office thinking, “We’ll never hire this kid back.” Which is why ‘explainers’ on the markets are crucial if one wants to become a “finfluencer” or a financial influencer.
Because that’s where the money lies.
It’s not hard to imagine why more kids these days want a career as a YouTuber than an astronaut.
PS: In case you were wondering if this is a new thing, here’s a question posed on WallStreetOasis, a popular online forum for investment banking related discussions, 3 years ago.
That’s it for today.
Don’t forget to write in with your thoughts and observations on the reshaping of businesses, societies, and economies. We will be back tomorrow.