How a GOP bill could cause the next financial crisis – Bruce Grohsgal and Simon Johnson

MIT Sloan Professor Simon Johnson

From Politico

Wall Street’s gambles and risky borrowing directly led to the financial crisis, causing the collapse and near-collapse of megabanks and greatly harming millions of Americans. But thanks to government bailouts, those megabanks recovered quickly and top executives lost little.

In response, Congress passed the Dodd-Frank regulatory law to ensure thatno failing bank ever receive such special treatment again. But legislation that favors very large banks

Professor Bruce Grohsgal

and undermines those reforms is in the works again. The bill is called the Financial Institution Bankruptcy Act, or FIBA. The measure already has been passed by the House, and the Senate may take it up soon.

In theory, the bill attempts to solve a major issue in the Bankruptcy Code that prevents failing megabanks from restructuring through traditional Chapter 11 bankruptcy protection. In effect, though, FIBA offers banks an escape route, creating a subchapter in the Bankruptcy Code through which the Wall Street players who enter into these risky transactions will get paid in full while ordinary investors are on the hook for billions of losses. Not only is that deeply unfair, but it will encourage Wall Street to gamble on the very same risky financial instruments that caused the recent crisis.

Under Chapter 11, a failing company can get a reorganization plan approved to keep its business operating while paying its creditors over time. It then can emerge from bankruptcy as a viable business. During Chapter 11 bankruptcy protection, creditors are prohibited from suing the debtor to collect on their debt, a key provision that ensures all creditors are treated fairly and enables the business to reorganize. This is known as an “automatic stay.”

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The US can’t beat China’s robots but it can win by building the machines that make them – Matt Beane

MIT Sloan Ph.D. Student Matt Beane

MIT Sloan Ph.D. Student Matt Beane

From Quartz

As a US presidential candidate, Donald Trump made keeping manufacturing jobs in the country a key economic issue. He promised to bring back jobs from China, Mexico, Japan, and elsewhere; he pledged to force companies from Ford to Apple to Nabisco to open or re-open factories on American shores; and he vowed to revive the coal and steelmaking industries. His promise to create industrial jobs was key to his electoral victory.

Still, many were—and remain—deeply skeptical of Trump’s plans. Mark Cuban, internet entrepreneur and frequent thorn in the side of the president, says that bringing back manufacturing will backfire and lead to overall job losses. Instead, he says, the US ought to invest in robotics to compete with China. “We have to win the robotics race,” he says. “We are not even close right now.” (For what it’s worth, Trump’s labor secretary Steven Mnuchin recently disagreed, saying robots aren’t even “on my radar screen.”)

Cuban is on the right track, but the fact is that it’s too late to go head-to-head with China on building robots alone. We can’t compete with China’s robot revolution. But we can complement it.

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What your credit-card offers say about you–Antoinette Schoar

MIT Sloan Professor Antoinette Schoar

From The Wall Street Journal 

Do the credit-card offers you receive in the mail have photos of enticing holiday destinations and reward miles? If so, you should be flattered, since this means that credit-

card issuers believe you to be highly educated and financially sophisticated. But if you are receiving card offers with low teaser rates for introductory APR, you might take offense, since card issuers most likely do not view you as savvy.

As more and more personal data becomes available, businesses are now able to target customers in a personalized and sophisticated way.  On the bright side, that means you can get products and services that are tailored to your needs. As a result, you are much less likely to get catalogs featuring dresses your grandmother might wear. But, according to our research, the downside is that companies can also more effectively target your behavioral weaknesses, self-control issues or lack of attention to the fine print. We find that credit-card companies tend to offer those customers who are least able to manage the complexity of credit-card contracts, the most complex features and hidden charges.

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Why tech firms can’t ignore seniors–Dennis Lally

From Fortune Insiders

When it comes to technology, the mass market for the most part ignores senior citizens. This is a mistake. Despite the common misconception, today’s senior citizens have a greater familiarity with technology and own more devices than ever before.

With over 46 million people aged 65 or older in the U.S. as of 2014, seniors comprise nearly 15% of the total population. According to a study conducted by the Pew Research Center, as of 2013, 59% of seniors reported using the Internet, while 47% had broadband access in their homes. And the senior technology market is expected to exceed $42 billion by 2020.

Despite this rapidly growing and untapped market opportunity, building technology products for older adults isn’t easy. Companies face design and monetization challenges. But if they can overcome these obstacles and start targeting tech products and services to seniors, it will be worth the effort.

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Tech could soon take over all of the sports you watch – Ben Shields

MIT Sloan Lecturer Ben Shields

From Fortune

The sports industry is engaged in a grand digital experiment with technology platforms. The latest test was announced last week, when the National Football League (NFL) sold its 10-game Thursday Night Football digital package to Amazon. As when Twitter held it last year, the games will be simulcast on network (CBS or NBC) and cable (NFL Network) television. However, unlike the free access Twitter offered, only Amazon Prime members will be able to watch Thursday night games this year. Given Prime’s non-exclusivity and pay wall, if Thursday Night Football on Amazon leads to increases in year-over-year viewership and contributes to the growth of Prime subscribers, the NFL and Amazon executives could call it a win.

As encouraging as that result would be, this experiment is really about the early 2020s, which is when the NFL will be making major decisions about distributors for its most valuable rights packages. How can tech companies like Amazon, Facebook, Google, Apple, Netflix, and Twitter become big rights winners at that point? And what can traditional broadcasters do now to avoid being left behind? This long-term sports rights game will be won through reach and revenue.

When sports leagues sell their live distribution rights, they want to maximize both reach and revenue. If technology companies can help leagues achieve these goals more effectively than their existing television partners, the sports media landscape will look dramatically different a decade from now.

Tech firms must prove their reach

There’s never been any doubt as to whether technology companies have the resources to invest in sports rights. The question has been whether such moves made long-term strategic sense for both parties. As technology platforms launch and grow competitive video businesses, they are beginning to put to rest concerns about their suitability as distribution partners, as they now have clear incentives to make rights deals successful over the long term.

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