Business & Money

I have a question for you: would you want to invest in the following company:

Fintech company revolutionizing the banking space (customers include Apple, Stash, Uber, and many others)

Recurring revenue model

Growing the topline (sales) at roughly 15% compounded over the last 5 years.

Growing the bottom line (profit) at an even higher rate of 25% compounded over the last 5 years.

I bet you’d guess this company was trading and pretty lofty valuation and was on everyone’s radar. But you’d be wrong. I’m talking about a company called Green Dot (GDOT) and I bet you’ve never heard of it.

One of the things I do whenever I make an investment is write a short blurb about my investment thesis. The idea is that I can come back to this document periodically to ensure that my thesis remains true, despite fluctuations in the price of the stock. This is that thesis regarding Green Dot.

I’ve had the company on my watch list for quite some time, but only recently made the investment. That’s because the stock is down 70% from its November high. And that’s despite the fact that the underlying business is doing incredibly well. The reason for the drop is because they recently lowered profit and EPS guidance for the full year. But that, in and of itself is not important. The question is ‘WHY did they lower guidance?’ They lowered guidance because they are making substantial investments in the business. They’ve set aside an additional $60 million to double down on the fastest growing segment of the business, namely the platform side of the business where the company enjoys a recurring revenue model. More on that in a moment.

So why do I like Green Dot so much?

They started the business over 20 years ago as a prepaid debit card business (now they are the world’s largest company in this space). You know those prepaid cards you can buy in a Walmart or CVS? Those are powered by Green Dot. But that’s not that interesting.

What is interesting is their “bank as a service” platform. This allows other companies to offer banking products, without becoming a bank themselves. Have you heard of Uber Cash? You can deposit money into Uber Cash, which basically acts as a bank account within your Uber app. So when you request a ride or order a meal via Uber Eats, you can pay with Uber Cash and receive discounts and other benefits. Or perhaps you’ve heard of Apple Pay Cash. That’s Apple’s answer to Venmo. People can send money to one another via Apple Cash, or you can pay with Apple Cash when you use Apple Pay in stores. Both are powered by Green Dot.

This second side of the business is what you call a “platform business.” That means that other companies can build products and services on top of the platform. Apple and Uber can offer banking services, without getting a bank charter or dealing with all of the other headaches involved in financial services. The reason I love platform businesses is because you don’t have to pick winners. I don’t know who will win the digital banking business, and I really don’t care. But I do feel rather confident that many more companies will move to offer digital banking services over the coming years. And I feel comfortable investing in the company building the underlying tools and infrastructure to power those services.

And platform businesses often come with recurring revenue, which is the best kind of revenue. When merchants build web stores on top of Shopify (you know how much I love SHOP), they pay Shopify a recurring fee and it becomes increasingly difficult to replace Shopify over time. Same goes for WordPress and Amazon Web Services. It’s really difficult to change the plumbing and foundation after you’ve built the house.

Another thing I love about the business in that they are making investments in areas where they are uniquely positioned to succeed. All of those prepaid debit cards and bank accounts means they have a ton of data about how people save and spend. As such, they are in the perfect position to role out a savings account with a 3% yield. And not only does this account have a 3% yield, it also comes with a debit card that gives you 3% cashback. You heard that right. a DEBIT CARD that offers cashback rewards. We’ve all heard about credit cards with cashback, but never a debit card. That’s 🍌🍌🍌!! It might even seem insane to some. But Green Dot might be the only company where this actually makes a ton of sense. Their unique history allows them to make unique investments and offer products that no one else can.

Finally, I love the underlying economics of the business. So many “growth” companies are allergic to profits. But not Green Dot. They are profitable and have been for a long time. And that’s not at the expense of reinvesting in the business. They continue to innovate and reinvest, but do so in a financially responsible manner. So refreshing!

Human Progress

I recently went to the doctor for a well-overdue checkup. Hana was tired of me putting it off forever so she scheduled it on my behalf (thanks babe 😍).

Everything seemed in order, with one exception. The doctor said that it sounds like I possibly have a slight heart murmur 😨. She reassured me that it sounded minor (1 out of every 6 beats) and that it 99% of cases, there’s nothing to worry about. That said, hearing that something sounds irregular regarding your heart is never a fun thing.

Later that night at home, I was telling Hana about my visit. As you might expect, she became a bit worried and started asking tons of questions. “What’s a heart murmur? What causes it? When are you going to the cardiologist? Should I schedule the appointment for you?” I did my best to recount everything the doctor said, but it was difficult to remember all of the details and nuances.

A couple of days later, I remembered that I had read a blog post about a company trying to solve this exact problem. The company is called Abridge and they’ve created a simple yet elegant app that records your visits with healthcare professionals.

You just open the app, let the doctor know that you will be recording, and click the giant pink record button.

A few moments after your recording, the app uses machine learning to produce a written transcript that calls out important medical terms in bold. Here’s a test recording I just made.

The thing I love so much is that it shifts power to the edge of the healthcare system, namely patients. And I think this might be one of the only ways to bring about a change in an industry that’s ripe with red tape and bureaucracy. You have payers over here, providers over there, hospital systems somewhere in the middle, and we haven’t even mentioned EMR companies, pharmacy benefit managers, and many other constituents. Patients are usually an afterthought, given that they aren’t the ones coughing up much money.

Hopefully, apps like Abridge might help to stem this tide by giving people better access to their health data.

Philosophy

Have you ever heard of lucid dreaming? It’s the ability to “wake up” within a dream, without actually waking up in real life. With this ability, you gain the ability to control what happens in the dream and are only limited by the confines of your imagination.

I’ve experimented with lucid dreaming over the years at different times. And as meditation has become a bigger part of my life, lucid dreaming has become easier to do. I can’t do it on a nightly basis, or even pick the nights it works, but I can do so with some regularity (perhaps once every couple months).

For some reason, whenever I am able to take control of my dreams, the first thing I often do is fly. Flying is an incredible feeling. To simply leap off the earth and woosh through the air is a feeling like no other (at least I imagine it to be).

The other day, while I was walking the dog, I found myself thinking about why I like to fly in my dreams. The thing about flying is that you can immediately escape any situation or circumstance. You can go anywhere and see anything. Frustrating things like traffic and crowds are no longer an issue.

And what’s interesting is that you might think of meditation as bringing this same ability to everyday life. Or more accurately, meditation brings greater awareness of what’s happening in each moment. And that awareness brings more volition into how you choose to respond to various stimuli.

In other words, as you meditate more regularly, you gain far better control of your emotions and reactions. And in this way, you gain an ability to escape emotional and psychological circumstances the same way that flying might allow you to escape physical circumstances in the real world.

So, you might see that meditation = flight.

My Latest Discovery

This weekend I rode a Revel electric moped for the first time. It was so much fun! And it’s so easy! You just open the app on your phone to locate a moped via the small blue icons.

When you get to the right spot, the scooter is there waiting for you.

You just take the helmet out of the container on the back, hop on, and you’re on your way. It cost me $7 for an 18-minute ride from Long Island City to Williamsburg. Not bad if you ask me!