Front Book, Back Book: A Framework for Understanding Financial Companies
Plus: Infinite Games and Wirecard, European Bank Consolidation, Chinese State Council
| 11 |
Issue #5 of Net Interest, my newsletter on financial sector themes, and I am overwhelmed with the response. Jamie Dimon of JPMorgan likes it, Nick Maggiulli of FinTwit likes it and scores of top investment managers like it. If you're reading this but you're not subscribed, you can join them by signing up here. You’ll receive Net Interest direct to your inbox every Friday.
Front Book, Back Book: A Framework for Understanding Financial Companies
Big banks and insurance companies are a thing of the past.
Not in the way that fintech founders think (that’s a topic for another note). Rather, their balance sheets reflect decisions that were taken long ago, sometimes a very long time ago.
Warren Buffett has often spoken about the ‘long tail’ business that Berkshire Hathaway writes — policies generating claims that often take many years to resolve. In his 1985 shareholder letter he told how an advertisement placed in an insurance weekly had garnered US$50 million of premiums. But he warned: “Hold…