Financial services for consumers and small businesses is likely the next big market for Apple (see my posts here and here). In October, Apple announced a new savings account product. And today, Apple announced that the product is live and paying a competitive 4.15% APY. Given the Silicon Valley Bank failure and the changing banking landscape, Apple may have decided to use challenges that traditional banks are encountering to its advantage.

I think the banking industry is prime for disruption. Banking has been slow to evolve, which frustrates consumers and small businesses. I can’t wait to see how consumers and the banking industry respond to Apple’s latest foray into financial services.

Looks like we’re one step closer to iBank.

I’ve thought for a few years that financial services is the next big market for Apple (see my posts). It’s a massive market that the iPhone puts the company in prime position to disrupt.

Today I watched a Wall Street Journal video about the competition between Apple and traditional banks. The gist was that Apple’s digital wallet is gaining market share for consumer payments. That is, consumers are using this digital wallet to make more of their purchases. Banks have taken notice and worked together to create a competing wallet called Paze. Paze is young and there isn’t a ton of information about it out yet, but I’m curious to see how banks plan to convince consumers to adopt Paze. Distribution (getting the solution in the hands of users) matters, and it’s not clear to me how Paze will compete with the distribution Apple offers via the iPhone.

The stakes are high, and it will be interesting to see how this war plays out. Regardless, I like the fact that Apple’s presence is forcing banks to innovate and offer better solutions to consumers and small businesses.

I had a conversation today about negotiations—something everyone will encounter in their life. They can be as complicated as working out deal terms for a large investment in a company or as simple as a child trying to convince their parents they should have a later bedtime. The most common example I heard people talk about today was negotiating salary with an employer.

Books and strategies on negotiating abound. I don’t think there’s a right or wrong approach, only what’s ideal for the personality of the person doing the negotiating. (Note: there are some things everyone should avoid!)

Understanding the person you’re negotiating with is important. Understanding their negotiating style can inform how you negotiate. But it isn’t always easy to understand someone’s style. One of the people I chatted with shared a straightforward approach to quickly understanding someone’s style: at the beginning of the conversation, ask them: “What’s your negotiating style?” In his experience, most people will be caught off guard. Either they’ll tell you how they negotiate, or their response will give you clues about their style. For example, someone will say they’re a straight shooter. Someone else, to keep from showing their hand, won’t give you clear answers. Either way, you’ve learned something about their negotiating style that’s useful.

I like this direct approach and plan to use it when I negotiate with someone for the first time.

Earlier this week, I shared a takeaway from an interview with the founder of Carlyle Group, David Rubenstein. I enjoyed that interview and had many more takeaways. Some of them were presented casually as simple, common-knowledge concepts that nevertheless take some people a lifetime to figure out. Understanding the power of some of the concepts David shared, and implementing them, can change your trajectory. Here’s another trajectory-changing takeaway: you can create your own luck.

When David was starting Carlyle, he didn’t want to build a firm that was all white males. He approached Gracia Martore, a female executive of Latino descent. She declined to join the firm but suggested he talk to Bill Conway Jr., who was transitioning out of a telecommunications CFO role. David had never heard of Bill, but he called him. They connected, and Bill became a cofounder of Carlyle.

The big takeaway from this story is that you can create your own luck. Luck is about the probability of a favorable outcome. You can increase the probability of good things happening, and create your own luck, by taking certain actions. In David’s example, he networked and chatted with people, which led to opportunities. Not the opportunity he was aiming for (Gracia), but a great one nonetheless (Bill).

If you want to achieve outsize success, you can increase the chances of it happening by creating your own luck.

Take a listen to David’s comments on creating your own luck here.

I’ve been sharing my views about Apple’s push into financial services since 2021. I believe digital distribution will disrupt banking. I also believe the iPhone has positioned Apple perfectly to benefit from this change and become the financial services partner consumers and small businesses trust. Here are some of the moves I’ve noticed:

• Buy now, pay later in Canada
• Tap to Pay announced
• Apple high-yield savings account
• Pay Later loan product announced

Yesterday it was reported that Apple has expanded testing of its Apple Pay Later service to its employees. This is a big step that shows the company’s getting closer to launching this product widely.

Markets matter a lot. Big outcomes require large markets. Apple is an enormous company worth (i.e., with a market cap of) about $2.4 trillion as of this writing. Any new business that Apple pursues must be—or have the potential to be—a large market. Otherwise, it won’t move the needle for a company as huge as Apple. Consumer and small business financial services is an enormous market, and it’s been primed to be disrupted by changes in how consumers access financial products (digital vs. brick and mortar). This makes it an amazing and high-priority opportunity for Apple.

Don’t be surprised if iBank or Apple Bank dominates consumer and small business financial services within the next five to ten years.

I listened to someone explain poll-based decision-making. When faced with a difficult decision, you reach out to people in your network and ask which choice they think is correct. Then you do whatever the majority “vote” for. For example, you ask one hundred people if it’s a good idea to put all your money into a single stock someone told you about. If ninety-nine people say yes and one person named Warren Buffett says no, this person would make the investment.

This thought process has several flaws. I’ll discuss two:

• Credibility – It’s good to ask for others’ perspectives. But it’s important to ask credible people, meaning people who have experience or a track record of success in the area. People who have no experience or success in the area aren’t credible, and their perspectives should be discounted or, in extreme cases, ignored.
• Independent thinking – It’s important to take the time to figure things out yourself and reach your own decisions. Letting other people do the thinking for you—following the crowd—can be dangerous. You can factor in the perspectives of others to make sure you’re not missing something, but you don’t know how they made their decisions. If you rely on them, you could be exposed to serious errors. Frauds like Ponzi schemes grow because new investors take comfort from and rely on the fact that other people decided to invest. People who evaluate opportunities independently are more likely to see things that are too good to be true for what they are.

I’m all for getting perspectives from others before making decisions, but I’m not a fan of poll decision-making.

I spent today working on a new idea. There were legal questions I couldn’t answer, so I looped in a lawyer. He helped me understand the legal nuances and potential challenges I should be aware of. I also learned that there are a variety of different ways to do what I’m trying to do. I can make it as complex as I want from day one. I made sure to ask what the least complex way to get this idea off the ground is.

Complexity adds time and money. When you’re trying to get something new off the ground, complexity is your enemy. You want to quickly get something out that works, and complexity slows you down. Now, I’m not saying you should put yourself in legal or moral jeopardy. You should always be on the right side of those things, but beyond that, you don’t need complexity to go from zero to one.

After consulting with a lawyer, I’m opting for minimal complexity and a quick start. Once things are launched and I have more data, I can add more complexity if I need to.

Founders who decide to raise venture capital sometimes do things unwittingly that could cause a venture fund to opt out prematurely. The most common is setting the valuation before chatting with VCs. Founders decide the amount of capital they want to raise, pick a valuation, and put all that info in their pitch deck. This can be OK in raising from angels, friends, or family, but it’s not advisable when you’re seeking to raise a round of capital from venture funds.

Founders usually don’t have as good a grasp of valuations in venture markets as venture funds do. Funds usually see a constant flow of deals, which helps them keep a finger on the pulse of market valuation for companies at a particular stage. Founders are usually relying on conversations with other founders or data they find online. While helpful, these sources of information may not reflect current market conditions or may not give founders enough data points to really understand market conditions. A fund could be interested but decline to meet the company because the valuation is unrealistic.

Another variable founders should be aware of is a venture fund’s portfolio construction. I won’t get into the details of it, but when a fund is raised, the general partner(s) communicate to limited partners how many companies the fund will invest in, the average check size of each investment, and how much of each company the fund plans to own. These and other factors help create the hypothetical portfolio of companies the fund will own and the hypothetical portfolio return (i.e., how the fund will return a profit to limited partners). If a venture fund receives a pitch deck with a valuation that’s too far high, they’ll be more inclined to pass on the company. A high valuation can mean a lower share of ownership in a company, which can throw off the portfolio construction. If general partners deviate too much from the portfolio construction they communicated to limited partners, they have to explain why. These kinds of conversations can cause some limited partners to decline to invest in future funds. Of course, founders usually don’t know a fund’s portfolio construction, so they’re at an information disadvantage when they set a valuation.

So, what can founders do when they’re raising a round of venture capital? Simple: leave the valuation out of your deck. Include the amount of capital you’re raising and figure out the valuation as you chat with venture funds. These questions can help you figure out the right valuation and evaluate funds:

• Ask VCs what the current market valuation is for companies at your stage. If you talk to enough funds, you’ll have your finger on the pulse of the market.
• Ask VCs what their average initial check size is and if they have an ownership target. If a fund says they write $1 million initial checks and aim for 10% ownership, you know they’re likely in the $10 million post-valuation range.

Figuring out valuation for an early-stage company is part art, part science, and part negotiation. I hope this will help founders go into their fund raises better prepared.

I caught up with a founder who described his traction. As he shared his update deck, two things jumped out at me. He’s raised around $100k, and he’s had a team of five or so working for over a year. They’ve made significant progress and have built a product that has early paying customers.

For a team that size, $100k is a small amount of money, so I asked how he’s sustaining things. He said his team agreed to deferred salary. Their salaries are set, but they receive only a portion of them until the product is launched. They’re about to raise a proper round from venture investors. When they do, the deferred salary will be fully paid.

This is an interesting approach to building a company absent sufficient investor capital. It definitely isn’t an option for all founders or their employees, but it’s one to be aware of. This founder has done a lot with a little. I’m confident he’ll be able to raise capital to fulfill his promise to his team and keep building.

Today I had a productive whiteboarding session about a problem I’ve been thinking about. I’ve been chatting with a buddy about the problem regularly, but those phone calls and Zooms have their limits. Recognizing this, we decided it was time to whiteboard some things out. The exercise helped us crystalize our thoughts and pinpoint critical areas to focus on.

The whiteboard itself isn’t revolutionary. It’s just a place to capture and sort your thoughts. I enjoy whiteboarding sessions because participants are in problem-solving mode. This mental state is important. The collaboration and focus on ideation about a single problem are powerful.

Looking forward to next steps stemming from today’s session.