Finance

Finance

Income-share agreements are a novel way to pay tuition fees

TO PAY for his professional flight degree at Purdue University in Indiana, Andrew Hoyler had two choices. He could rely on loans and scholarships. Or he could cover some of the cost with an “income-share agreement” (ISA), a contract with Purdue to pay it a percentage of his earnings for a fixed period after graduation. Salaries for new pilots are low. Mr Hoyler made $1,900 per month in his first year of work. Without the ISA, monthly loan payments would have been more than $1,300. Instead, for the next eight-and-a-half years he will pay 7.83% of his income. He thinks that, as his pay accelerates, he will end up paying $300-400 more each month than with a loan. But low early payments, and the certainty that they would stay low if his earnings did, made an ISA the better option, he says. “I’...

What Venezuelan savers can teach everyone else

ASK the chief investment officer of a fund-management firm how to spread your investments and you will be told to put so much in stocks, so much in bonds and something in hedge funds or private equity. Chances are that white-elephant buildings, eggs and long-life milk will not feature. But in Venezuela, where the inflation rate is in the tens of thousands, things that people elsewhere would shun for fear they will lose value have become stores of real wealth. That is why you can see scaffolding and other signs of a building boom dotted around Caracas, the capital of a country that has endured an economic collapse. Businesses need to park their earnings where they will not be wiped out by inflation. A smaller-scale response to galloping prices is the emerging “egg economy”. Eggs hold their ...

Google is fined €4.3bn in the biggest-ever antitrust penalty

“THE making of a big tech reckoning,” blared one typical headline earlier this year. “The case for breaking up Amazon, Apple, Facebook and Google,” touted another. Based on media coverage alone it might seem as if the tech titans are in trouble. Add in the news, on July 18th, of a record €4.3bn fine for Google by the European Commission and that impression is strengthened. But if you look hard at where the regulatory rubber is actually hitting the road, the techlash seems much less brutal. Notwithstanding this week’s fine—which amounts to just over $5bn and is the biggest antitrust penalty ever—the online giants are nowhere near being reined in. To be sure, the mood has changed. In America a survey for Axios, a news website, found that between October and March the favourability ratings of...

What really happened to EgyptAir Flight 804?

GULLIVER is not the type of person to kick up a fuss on his travels, least of all when lucky enough to be at the front of the plane. But his patience was pushed to the limit a couple of years ago, when his EgyptAir flight from Cairo to London was blighted by the near-constant stench of cigarette smoke wafting in from the cockpit. Shackled by British meekness and an unwillingness to challenge a flight crew, your asthmatic correspondent suffered the coughs and tried instead to focus on work. Conversations with Egyptian friends later revealed that on-board cigarette smoke is hardly a rarity when flying with the North African flag-carrier.  Naturally, anecdotes such as this provide only a snapshot of an airline’s safety standards. But it is a deeply disturbing snapshot given the stalled invest...

Robinhood CEO Baiju Bhatt to talk fintech at Disrupt SF

Robinhood has gone from being a little consumer-facing fintech app to an absolutely giant consumer-facing fintech app. The company, which launched in 2013, has ballooned to a $5.6 billion valuation on the heels of a $363 million Series D financing round led by DST Global. The app has also grown to 5 million users, as of today, with more than $150 billion in transaction volume. But the app, which lets people trade stocks and options for free, is also dabbling in the wondrous world of cryptocurrencies, setting the stage for a potential transition from “fun app” to legitimate financial institution. That’s why we’re absolutely thrilled to have Robinhood co-founder and CEO Baiju Bhatt join us on the Disrupt SF 2018 stage. The key to everything here is that Robinhood offered a simple consumer de...

A welcome upgrade to apprenticeships

THE Advanced Manufacturing Research Centre (AMRC) in South Yorkshire, England, looks like the very model of a modern industrial site—bright, shiny, airy and clean. In June 1984 it was the site of a traumatic moment in British history—the Battle of Orgreave, when picketing miners clashed with police as they tried to stop lorries collecting supplies from a coking plant. The incident symbolised Britain’s post-war record of industrial decline and bitter strikes. The old coking plant is long gone. In its place is a promising attempt to create jobs for a new generation of workers, and to tackle an ancient and ridiculous British class divide. An important part of this divide is that universities have long been seen as a place for academic subjects, calling for essays and equations. People who got...

Life as you know it is IPOver

DEAR chief executive. First, congratulations. You have decided to float your firm’s shares on the stockmarket. After years of toil behind the scenes, it’s time for the big stage. You probably feel pretty good right now, especially after those insightful bankers from Goldman Sachs said that your firm is one of the most impressive that they have ever seen in their careers and that they are generously going to give you a discount on their normal fee and charge you only 4% of the IPO proceeds. Unfortunately, though, things will now get much worse before they get better. An IPO is like having children: months of waiting, an agonising delivery and afterwards your world is never the same again. At least you are not alone. American IPO volumes are at their highest level for three years. In New Yor...

Development-impact bonds are costly, cumbersome—and good

IF A girl in a poor country goes to school, she will probably have a more comfortable life than if she stays at home. She will be less likely to marry while still a child, and therefore less likely to die in childbirth. So, not surprisingly, there is an Indian charity that tries to get girls into school and ensure they learn something, and there are Western philanthropists willing to pay for its work. What is noteworthy is how they have gone about this transaction. On July 13th the Brookings Institution, a think-tank, presents the results of the world’s first large development-impact bond, which paid for girls’ education in the northern Indian state of Rajasthan. In this novel way of funding charitable work, a financial institution gives money to a charity, which tries to achieve various s...

Donald Trump insists on trade reciprocity. But what kind?

IN THE sixth episode of “The Apprentice”, a reality-television show first broadcast in 2004, Donald Trump, as always, fired a contestant vying for a job in his company. She was, he said, the worst negotiator. And she had failed to fight back when belittled by her teammate. The episode was entitled “Tit For Tat”. That same principle of reciprocity guides Mr Trump’s trade policy as president. And it is animating his tariff war with China. On July 6th America imposed 25% duties on Chinese imports worth about $34bn. (Another $16bn-worth will be hit in due course.) China responded by slapping tariffs on a similar amount of American goods (including a cargo of soyabeans aboard the Peak Pegasus that arrived at the port of Dalian mere hours later). Get our daily newsletter Upgrade your inbox and g...

Is North Korea the next Vietnam? Don’t count on it

AS AMERICA presses North Korea to abandon nuclear weapons, it has pointed to Vietnam as an example of the prosperity that awaits the isolated state. “It can be your miracle in North Korea as well,” Mike Pompeo (pictured), the secretary of state, said on July 8th, on a visit to Hanoi. It is not the first time Vietnam has been held up as a model for North Korea. Over the years, officials from the two countries have discussed lessons from Vietnam’s reforms. North Korea sees Vietnam as less threatening than China and more of a peer, making it a more welcome mentor. But North Korea’s economic path is likely to be more fraught. Yes, there are similarities. Like North Korea’s economy today, Vietnam’s used to be largely collectivised. The Vietnamese Communist party’s ability to retain power at the...

A Chinese music-video app is making WeChat sweat

A PUBLIC spat between two warring and wildly popular Chinese apps has had the feel of a teenage dance-off. “Sorry, Douyin Fans”, ran an article from the short-video app on its WeChat account, in which it accused the mobile-messaging service of disabling links to Douyin’s most popular videos. “All hail Douyin the drama queen,” retorted Tencent, WeChat’s parent, which said it had acted because the content was “inappropriate”. Get our daily newsletter Upgrade your inbox and get our Daily Dispatch and Editor’s Picks. On June 1st Tencent sued Douyin’s parent company, Bytedance, for 1 yuan (15 cents) and demanded it apologise for its accusations—on its own platforms (and presumably without the snark). Tencent also alleged unfair competition. Within hours Douyin counter-sued for 90m yuan. B...

Law firms climb aboard the AI wagon

LONG hours have been the bane of the legal profession for ages; few of them involve thrilling courtroom antics. As a junior corporate lawyer at Davis Polk & Wardwell, a law firm in New York, John Bick remembers spending most of his waking hours poring over contracts looking for clauses that could complicate or kill off a deal. Even once he became a partner he still had to pitch in on due diligence for large transactions. In 2015 nearly a third of British lawyers were looking to leave the profession, according to the job searches of more than 1,000 of them by Life Productions, a career-change consultancy, perhaps because of the drudgery. Such dissatisfaction may recede in future. Now on his firm’s management committee, Mr Bick is drafting in artificial intelligence (AI) to do the gruntw...