In this presentation, Mike Palumbo argues that directly disrupting major banks is far more difficult than disrupting other industries, and therefore many fintech entrepreneurs should focus on building supplemental solutions that partner with or become acquisition targets for large banks. He illustrates how fintech job growth will follow the broader expansion of technology across sectors such as food delivery, healthcare, and payments, and asserts that demand for fintech will remain strong regardless of future shifts in banking structures or currency systems. Palumbo then addresses audience questions, stating that Amazon appears the most over‑valued among the big tech giants due to lofty market expectations, that a true market bubble is unlikely in the near term because investors are now actively watching for bubbles, and that valuing employee equity combines gut intuition about individual impact with quantitative performance metrics. He concludes by encouraging listeners to consider licensing or acquisition strategies for fintech ventures and promotes his book and social media channels.
Questions this video answers
Amazon, because the market expects near‑perfect performance and its valuation multiples are higher than peers like Apple.
I don’t see a true bubble coming soon; bubbles arise when investors stop watching for them, and today many are actively monitoring for bubbles.
Combine gut feeling about an individual’s impact with quantitative metrics such as sales performance; the most valuable employees are those who generate new revenue.
Chapters
Directly taking on the banks will certainly be harder than disrupting something like the cab industry or another lesser adversary. It will be very difficult. So what else could win in this space? Well, there's a whole other group of companies that are not disruptors of the banks, but are looking to work directly with the large banks with the goal of being acquired or licensing their software to the larger banks. The latter group is basically supplemental to the existing structure And there will always be a place for this group going forward. Growth in this industry will continue to increase as technological innovation speeds up. These are tech companies that just happen to work in the financial space, doing things such as creating software that allows a bank to use a customer's mobile device habits to authenticate purchases from that device. This is no different from the increasing demand for tech jobs in every industry. Once technology allowed it, Domino's Pizza needed engineers to create software which tracks pizza orders from inception to delivery. And they needed software which allows you to order a pizza by tweeting an emoji to their account. Once tablets became feasible, hospitals needed software for the tablets which could place a patient's vitals, medical history, and current drug regimen at a doctor's fingertips. The future for fintech solutions is very bright, just like Domino's proves the future for foodtech is bright and the future for healthtech is bright. These supplemental fintech firms in the latter group currently work in a world where people still have accounts with big banks like JPMorgan and Goldman, and people are starting to use their phones to make transactions and check their stock portfolio. There are many startups right now which are trying to create solutions for this environment, but demand for these firms is not dependent on current conditions. If in 25 years we live in a world where big banks as we know them have been destroyed by competition or laws, these supplemental firms can still create software solutions for whatever companies take over from the Goldmans and the JP Morgans. It's just like how Goodyear used to sell tires to Oldsmobile. Now they sell tires to Toyota. If in 25 years we are no longer using dollars and we're fully on cryptocurrency, there will still be demand for technology that services the new cryptocurrency, like how companies used to fill the demand for typewriter ribbon. And then when that was gone, they filled the demand for printer ink cartridges instead. A massive shift in technology would probably be bad for many of the existing supplemental firms. But the point is that others will fill the space, and overall jobs in fintech will track the high growth of technology as a whole. When we shift from phone payments at a cash register to biopayments using fingerprint or retina scans, the firm that currently licenses the software which allows your phone to debit your account will be in trouble. But we will need a new firm to create the biopayment software, a new firm to create the security software for the biohardware, and a new firm to create the software which links your bio hardware to your bank account. So looking at fintech from the literal definitional point of view of companies that operate in the finance world by incorporating new technology into finance leads you to an obvious answer: the future of fintech is very strong because the future of tech companies in every industry is very strong. So to summarize, I don't think many of the disruptors will make it. because the changing regulatory environment will be difficult, and because directly competing with big banks is easier said than done. That being said, if you do make it in this space, the payoff is going to be huge. You'll have valuations well north of $10 billion. But the demand for fintech as a whole has never been greater and will continue to grow. It may be easier and more profitable to work on projects in tandem with the big banks, or develop a product or service that may be a good target to be bought by one of the banks. So it's been a pleasure to speak with you guys today. If you're interested in my book, please go to the website calculatedriskbook.com to order it. And also you can follow me on Twitter @MikePal10. I also have a Facebook page for the book as well. So now I just want to open it up to any questions you guys might have. Hi, Mike. Yes, sir. From the current tech giants, which one do you think is overvalued? Wow, that's a great question. So here you go. The tech giants, the big ones, obviously Facebook, Apple, Google, okay, Amazon. Those are, those are the ones that people talk about. They have different valuations in that their PE multiples. So you guys familiar with PE multiples? So some of them have much higher ones because they're expected to grow faster. So you have Google, which has a pretty high one. You have firms like Tesla, which have very high ones, and Amazon that has a high one, whereas Apple's PE is low because Apple is viewed in, in currently in, in the cycle of being done with the high growth and now more of just steady growth because they don't— the market doesn't see Apple as being an innovator as much as they used to be. So the innovators, like what is considered Google and Amazon, get a higher valuation. So what is overall most overvalued? I'm going to say Amazon. And the reason why is that they are really expecting Amazon The expectations are so high. The bar is so high for Amazon that it will be difficult for them to continue, even if they perform well and execute perfectly, to make the market happy. The market expects perfection from them. The market doesn't expect perfection from Apple. That's why they're valued lower. So if I had to pick one, I'd say Amazon. When do you think the bubble point happens? Here's what I will tell you about bubbles, and we had one in 2008. That's what caused the whole crisis, a bubble in real estate that then basically trickled down and affected everyone's lives. But because we had it so recently, a bubble is so unlikely to happen now. You know why? Because everyone is looking for a bubble. When everyone is looking for a bubble, there's probably not going to be any bubbles. It's when people are not looking for bubbles, that's when they happen. And in 2007, 2008, people thought real estate prices could go to the moon, that there's no, there's no top in them. So that's why the bubble happened, because we took our eye off the wheel. But now you have entire, you know, you have thousands and thousands of people around the world that are looking for bubbles. And so my feeling is there will not be any true bubbles, which means things that are just so overpriced that they can fall half of their value or a third of their value in the span of a month or two. That type of thing won't happen. Can things get overpriced? Can they have corrections of 10%? Certainly, that happens all the time. But that's not a bubble. A bubble is where something is completely overvalued and that in retrospect, it was probably twice what it should be. And that's what happened in the real So to answer your question, I would say that I don't see any bubbles coming. And it's just because, by definition, a bubble only happens when people aren't watching for bubbles. Anyone else? Yes. A lot of companies pay their coworkers in shares. How do you think the best way to define how much equity a company has? What do you think a person is worth in the company? That obviously depends on their value in the company. So, you know, you, you could have a person that maybe isn't a senior-level guy, but because he's so bright and so innovative and she is so intelligent and such a driver in that company, whether it's on the sales side or the innovation side, that that person is worth more. It's up to you to value what each individual person is worth So that's all gut feeling? It is gut feeling. But, you know what, okay, it's not all gut feeling. The numbers tell the story, right? So in sales, who's your best salesman? Who goes out there and brings, drives the most sales out of nothing? It's not sales that you already have that they're just renewing. It's guys that can, and girls that can go out there and generate new sales. new sales, because those are the ones that are most valuable. You want to grow. Yes, you want to maintain the relationships you have, but you want to grow. So those would be the people that would be most valuable. So yeah, there's— it's gut feeling in some ways in evaluating talent, and hopefully, you know, you'll be good at that. I'm sure you will be. But it's also looking at numbers too. Okay.
