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What’s Pete Buttigieg’s Retirement “Public Option” All About, Anyway?



As I observed in my prior article, among Pete Buttigieg’s proposals for retirement is a “public option” 401(k) plan. According to his white paper, employers would be required to facilitate a payroll deduction and a worker choosing to participate at a 1.5% level would trigger a mandatory 3% employer contribution. He pledges that the retirement accounts’ fees would be required by law to be “nearly zero, like those in the Thrift Savings Plan” (even though the two programs are vastly different and it’s far more complex to manage accounts of countless employers than the employees of the federal government).

For added context, the Thrift Savings Plan, in which all federal employees participate, is not a true “public option,” because the federal government invests employees’ funds in BlackRock investment funds, rather than operating its own investment funds. The federal government does administer the program directly (that is, rather than outsourcing the work) through the Federal Retirement Thrift Investment Board, the cost of which is not “nearly zero” except insofar as (to quote Wikipedia),

“This is due to the expenses being subsidized by three major sources: matching contributions and earnings forfeited due to employees not meeting vesting requirements, excess agency contributions and earnings forfeited due to retirement plan corrections (this involves employees placed in FERS who were eligible for, and chose to be placed in, the older CSRS plan), and loan participation fees.”

In contrast, the administrative expenses of OregonSaves, the most established of the statewide automatic retirement savings programs, amount to about 1% of assets annually as charged to participants (and potentially more, in terms of actual cost).

But I was struck by Buttigieg’s use of the label “public option” — which I had encountered during the summer in a book which promotes a variety of expanded “public options.” (Yes, readers, at the time I wrote a detailed summary at my personal website, then got distracted with other projects.) The book, The Public Option: How to Expand Freedom, Increase Opportunity, and Promote Equality, by Ganesh Sitaraman and Anne L. Alstott, supports not just a health insurance “public option” — by which they mean, preferably, not a government-run insurance company, but, in fact, they use the expression “public option” to refer to any service run by the government, so that their preferred form of “public option” healthcare is a single-payer full-coverage system which is given the label “option” because one might in principle choose to opt out.

The authors propose public childcare — at no cost to families but optional in the same way as parents now may choose to opt out of the public school system and pay their own tuition at private or parochial schools. They propose a public bank, and lament the fact that public housing was not given the level of financial support which they believe would have made the system more successful and widespread. They propose (whether in addition to or instead of eliminating tuition at public universities in the 50 states) a nationwide online “basic higher education” “public option.”

And, finally, they pitch a “public option” for retirement savings. Was this the inspiration for Buttigieg’s label for a government-sponsored automatic retirement account — which others have promoted but with different labels? Sitaraman and Alstott propose something similar, in one of their variations, with a simple 3% or 5% employee contribution to TSP-like index funds. They layer further details onto this simple proposal: that the accumulations would e converted into annuities upon retirement (no details on whether these are also “public option” annuities or purchased from providers such as MetLife or Prudential) and that the tax deferral of today’s 401(k)s and IRAs would be replaced with government matching cash. Their preferred system would, furthermore, be mandatory and function as a replacement of 401(k)s rather than as an alternative for workers whose employers don’t provide them, with the intended end result that “pension administration would be centralized in the hands of the government.”

All of which means we’re right back at the same sort of Social Security add-on as we’ve seen multiple times before, such as, for instance, Teresa Ghilarducci’s Guaranteed Retirement Account (which I described in a Patheos blogpost about her most recent book, in 2018), and back to my same set of complaints / issues / stipulations, that such a system is not wholly a nonstarter but really needs to be integrated with a reformed Social Security, first, and privately-run (though with a non-profit element, potentially) to avoid inappropriate government entanglement with issues such as investment selection (and investment advisor selection) and to keep a program structure of risk pooling rather than building in government subsidies as guarantor of account balances and annuities, let alone placing in the hands of Congress the temptation to promise high-return annuity rates.

To be fair to Buttigieg, the proposal spelled out on his website has some differentiating details: it is described as opt-in rather than an autoenrollment system with an opt-out choice, and it offers a novel concept in that the worker’s 1.5% contribution is always accessible without early-withdrawal penalty, in the form of a Rainy Day Account, but the employer’s 3% is directed specifically toward retirement savings. But that design element feels overly-clever, especially because (it appears) the retirement account benefits from tax advantages but the rainy-day account becomes just another savings account.

So what’s the bottom line? Boosting retirement savings is great. But this design needs work.

What do you think? As always, you’re invited to comment at!

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Digital Asset Steps Up A Gear In Enterprise Blockchain



Digital Asset, the six year old enterprise blockchain provider behind the DAML smart contracts language, is one of the oldest and most established companies in the enterprise blockchain space. 

With its charismatic Wall Street veteran — Blythe Masters — at the helm, the company became famous for its rapid market dominance of the blockchain-in-financial-services space as it signed a dizzying array high profile deals with financial services clients, and pulled in large amounts of investment. 

However this infamy also became problematic when market sentiment turned and the company, for a while, became a victim of its own success. As a number of its high profile deals faltered, critics were quick to seize on this as evidence that the company had gone out over its ski’s. The criticism continued as the company shifted its business model, and its CEO left the company.

However, the company has shown remarkable resilience, emerging from a tumultuous two years with a major client success story and a fresh round of investment from a number of major technology and financial services firms.

To understand how the company is thinking about the next chapter in its life, recently spent time with Digital Asset CEO Yuval Rooz and Chief Marketing Officer Dan O’Prey.

Digital AssetThe Early Formulation

The company, founded in 2014 by Sunil Hirani and Don Wilson out of a bitcoin trading operation created by the Chicago trading firm DRW, rose quickly to prominence through aggressive acquisitions in talent and technology. 

In 2015,  former CEO at JP Morgan’s commodities division and Wall Street titian Blythe Masters joined to lead the company.

The company gained an early reputation for being highly acquisitive:, Bits Of Proof, and Hyperledger were purchased in quick succession.  The acquisition of Hyperledger proved prescient, because while few knew about that small start-up, it provided the Digital Asset team with a solution to an architectural limitation of blockchain technology that existed at the time: early blockchains relied on the concept of a coin1, however, Digital Asset found that as unworkable when modeling more complex aspects of financial instruments. Whereas Hyperledger provided a coin-less way of representing financial instruments.

The company gained early client traction in September 2015 when Pivit, an online gaming portal, completed a $5 million round of funding with a portion of the debt issued through Digital Asset’s software.

In 2015-2016, the company announced a number of new clients including; Master’s previous employer, JP Morgan, the Australian Stock Exchange (ASX) and the Depository Trust And Clearing Company (DTCC). 

In a surprise announcement the company donated the Hyperledger trademark to the Linux Foundation, an association of enterprise blockchain companies.

Following a $50m+ raise from a range of Wall Street firms in 2016, Digital Asset’s final feather in its cap was the 2017 acquisition of Elevence, which had developed a unique financial services modeling smart contracts programing language. This set the company on a path that would result in the company launching its own smart contract language — Digital Asset Modelling Language (DAML).

The Tide Turns

Through 2017, like a few of its competitors such as R3, Digital Asset both benefited from the market hype around blockchain technology and also, itself, played a part in fanning those flames through highly publicized deals and blanket media coverage.

However, by 2018, as the blockchain fervor started to subside, investors and the media started to question whether blockchain technology companies could quickly transform the archaic and conservative world of financial services and deliver on promised returns. As one of the market leaders, Digital Asset came under the microscope.

Critics began to point to shifts in the company’s business strategy and the slow progress of deals as evidence of Digital Asset’s shaky foundation. A number of clients were reticent to move beyond the successful pilot phase into a production setting; the Depository Trust Clearing Corporation hit pause because, as  Murray Pozmanter, head of clearing agency services, explained,“basically, it became a solution in search of a problem.” (Digital Asset is quick to point out that the trial did meet all success criteria and provided a launch-point for some follow-on areas of exploration).

Post-trade services provider, SIX Securities Services, a unit of the group that operates Switzerland’s stock exchange, also passed on progressing to production. 

The company also attracted notoriety for a churn of high profile staff: Masters and a number of  senior staff members left, including Digital Assets’s European head, followed by the CIO and CTO of engineering and a board member.

In the following year, stories circulated calling into question the health of the ASX project, which was one of their flagship deals. This was accompanied by an announcement that infrastructure virtualization provider VMWare had stepped in to the project as a new partner.  With VMWare appearing to have taken over the consensus layer of Digital Asset’s stack in the deal and Digital Asset switching the attention to DAML, critics seized on this as evidence that Digital Asset was having challenges with their technology, requiring a third party to step in.

For Digital AssetThe Smart Contract Layer Is Where The Value Is

While Rooz and O’Prey wouldn’t be drawn in to talking about Master’s reasons for leaving the company, they were more forthcoming around the question of the company’s “pivot,” portraying it as natural evolution of their product: as the blockchain industry has matured, blockchain vendors have started to focus and specialize on certain areas of the stack where they can differentiate.

“We might have pivoted our business model, but we didn’t pivot on the tech,” says Rooz. For Digital Asset, competing against other vendors in the industry across the full technology stack isn’t where the value is.

Rooz goes on to draw parallels in the smartphone industry: Apple controls their stack vertically from the application ecosystem through to the phone hardware and competes with other companies across that full stack. Whereas companies such as Google, with their Android offering, have decided to take one part of the stack and compete on that, and leave the other elements, such as phone hardware to other companies.

Digital Asset, has decided to specialize on its smart contracts language – DAML and leave the underlying technical plumbing, a layer that has become largely commoditized to the large scale infrastructure companies to provide.

In the same way that Android is available across a range of devices, Digital Asset has been able to make DAML available across a range of consensus models, giving adopters a myriad of choices for what underlying infrastructure they want to use including Hyperledger Fabric, Sawtooth, R3 Corda and Amazon QLDB.

“Early in 2019, against the backdrop of all these leading tech companies coming into the market, I asked myself and my team if there was a bigger vision to what we’re doing here at Digital Asset? If your product is to build the entire stack, then your strategy is to compete with everything and everyone.” 

Yuval Rooz — CEO — Digital Asset

So why did Digital Asset build a consensus layer in the first place? The answer, according to Rooz was out of necessity — there was simply nothing else available to use at the time. The team hasn’t abandoned the technology entirely, however. “We still have a team working here on blockchain tech, i.e., a ledger,” says Rooz, adding that this team is solving complex problems that others don’t: “We think we can help our partners enrich their own blockchain offerings.”

Rooz claims that the company’s focus on DAML has paid off, pointing to a range of market leading features that the language has, which had they not had such focus they wouldn’t have been able to bring to market so quickly.

“Today, building and deploying distributed applications is far from intuitive. In fact, you probably need a Phd to get a scalable distributed application running. We’re working to change this.”

Yuval Rooz – CEO – Digital Asset

However, that still leaves the question as to how the company will be able to make money out of an offering that is open source and therefore free to use. Rooz sees a number of paths to  revenue generation.

While DAML is free to use, the company plans to charge a support fee for enterprise support. That will allow adopters to ensure that they are eligible for upgrades, special enterprise features, and s expert assistance around how to use the language effectively.

The company will also offer – and charge for – “customer enablement services” to provide the expertise and support to help clients with deployment into production; as adopters are starting to find out for themselves, it’s one thing to experiment with the technology in the lab, quite another undertaking to move it to production. Digital Asset will be well placed to assist clients as today’s experiments start to translate into complex initiatives to move to production.

Setbacks Are A Part Of Pioneering

The conversation with the Digital Asset team turns to the slow adoption rate in financial services of blockchain technology and the numerous setbacks that have beset both the company as well as other blockchain providers over the last few years.

For Rooz, it’s a matter of expectations and perspective.

“When people asked about the arrival of the Internet… did they say ‘is it ready yet’?” quips Rooz. His point: If the Internet had been as eagerly hyped prior to wide-spread adoption as blockchain,  then possibly the media would have been criticizing Internet pioneers about their slow progress as they do with enterprise blockchain vendors today.

To give the company its fair dues, Digital Asset has not been alone in its setbacks with customers being gun-shy in moving to production, and the industry success rate overall has been low. In that context, therefore, it could be argued that the company’s one major early success — ASX, out of a handful of initiatives —  could be considered a relatively high batting average in the industry as a whole.

Australian Stock Exchange

The Digital Asset team are quick to “correct” the media narrative that the ASX implementation was delayed, arguing that from the outset of the initiative there was an agreed window of time (albeit quite a wide one) and that after a consultation process conducted by ASX, it came to the conclusion to settle on the later end of that window with a go-live date of April 2021.

Rooz claims that the project remains healthy and that they have yet to miss a deadline. The ASX remains dedicated to the effort, which is evidenced by the sizable dedicated team that the exchange has in place to implement the technology as well as through the exchange’s continued investment in Digital Asset that now totals $40m.

“When you think about all the components that go into building a system like CHESS, it’s incredible what we have been able to achieve with the ASX in such a short period of time.”

Yuval Rooz — CEO — Digital Asset

To many, it did seem strange that both the ASX and Digital Asset appeared to be publicly championing a project that’s not really a great poster child for distributed ledger technology. After all, the exchange is already one of the most digitized, consolidated and centralized in the world, and with such a decrepit infrastructure in place, implementing any modern technology as a replacement would have sufficed.

The Digital Asset team has some sympathy for this argument, but for Rooz and O’Prey the real opportunity is the long term opportunity; the CHESS replacement provides a toe-hold that ultimately will expand into a myriad of adjacent areas that include “back office as a service”, the creation and lifecycle management of new forms of digital assets, as well as potentially taking on the colossal superannuation business.

Financial Services Is A Focus But Not The Only One 

Digital Asset claims that DAML has widespread applicability to any business process, not just modeling financial instruments.  The company points to its marketplace that showcases a number of solutions across a range of industries including healthcare, aviation, and retail.

Yet despite the company’s ambitions to deploy DAML across industries, Digital Asset’s brand remains closely associated with financial services; the company is a regular fixture at Barclay’s derivatives hackathon, where the majority of teams choose to use DAML over other smart contract languages. Digital Asset also sends their own team to the hackathon and claims to have created a simple swaps contract in just 100 lines of DAML compared to  the 800 lines of Kotlin. For the company, that’s a major proofpoint of the language for Fintech.

For the company to meet its ambition of achieving ubiquity, broadening DAML’s appeal beyond financial services will be critical, especially given how notoriously conservative and slow to change financial services has been. It’s possible that the company may be able to make more headway in these other verticals, many of which are more lightly regulated and less archaic.

Feature, Not A Bug

While that may be the case, those that are close to the language have complained that it is hard to use, mirroring aspects of how financial instruments work rather than how programmers intuitively think. That creates a learning curve and commands a very different programing mindset than is employed by developers of traditional non-domain-specific languages, such as Java, making adoption more challenging.

For Rooz, it’s a feature rather than a bug — programming complex distributed applications through smart contracts is different from standard programing, and therefore the experience shouldn’t feel familiar. Rooz contends that “with DAML, you’re trying to solve really complex problems. It is naive to think you can solve complex problems with simple, general purpose, tools.”

The Digital Asset team points to another key feature of DAML, which is how the language has been designed with the principle of composability at its core. The power of composability is that it enables a programmer to pick off one small part (or service) of a much larger and complex problem rather than fully solving for the whole piece. This means that an engineer can decide to solve just for the payments aspect of a complex supply chain rather than seeking to fully move the whole solution to blockchain. In turn, companies can slowly integrate blockchain technology into their processes, thus reducing the risks and costs inherent in the all-or-nothing approach to adoption.

Ready For The Next Phase Of The Journey

Regardless of how the company got to where it is today, what is arguably more important is where it is headed.

With a new injection of cash of $35m from it’s recent Series C financing round, the company plans to “accelerate adoption of DAML across multiple industries, expand the number and variety of DAML-enabled partner products, and fund new products designed to enhance the DAML developer experience”.

Its newest strategic investors, Salesforce and Samsung, are likely to be strong allies in enabling DAML to become ubiquitous and we may see in the coming year DAML becoming integrated into Salesforce CRM or in range of Samsung products across a consumer, medical, heavy industries, and automotive segments.

A C round is typically used to scale a company that has achieved some traction in the market. However scaling is not without risk, and companies going through this type of expansion can sometimes take their eye off the ball with so many things simultaneously vying for management attention. The company will need to balance the complexities of expansion with staying on target for getting ASX live by April 2021.

The company will also need to start demonstrating to investors as it scales its business model that it is able to deliver healthy and repeatable revenue, especially given that some of those investors have been waiting for over six years now.

The coming year will certainly be an interesting one for Digital Asset.

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Financing An Accessory Dwelling Unit: A Matter Of Trust



“My wife and I are seniors, our house is worth about $1 million with a loan balance of $460,000. The payment on the loan is quite burdensome, and we have been offered the following deal by my daughter’s fiancée. He would pay off our loan after which we would transfer ownership to him. He would then build an accessory dwelling unit (ADU) on the lot that we could live in rent-free. What do you think?”

My first thought was that if you preferred to stay in your current house, your better option would be a reverse mortgage which would eliminate the required payment on your existing mortgage. While the loan balance on a reverse mortgage would be slightly higher,  the reverse mortgage would have no required monthly payment.

Unfortunately, I found that at your ages, your loan balance is a little too high to qualify. My estimate is that you would probably qualify in 2 years because your loan balance will be a little lower at that time, and you will be 2 years older. But you may not want to wait, so let me turn to the option you have been offered.

It would be useful to look at it from the perspective of your daughter’s fiancée. He acquires a house worth $1 million for $460,000. That puts him $540,000 ahead. In exchange, he has an obligation to build an ADU for you that you will occupy rent-free. Since he receives no revenue from it for an indefinite period, he has a financial incentive to minimize the cost and extend the process. If he behaves like an “economic man”, the ADU could take a long time to build, and may not meet your needs when it does.

This might not happen, of course, he might be a great guy, family-oriented and generous. The key point is that you have to trust him, and the fact that he is not yet in your family is not helpful.  

But there is another way to do it that does not require you to trust someone who is not yet part of the family. This would involve having the ADU built first, with the transfer of ownership of your existing house not occurring until after the ADU has been completed to your satisfaction. This flips the power to abuse from him to you. He has to trust you not to make unreasonable demands that raise the cost of building the ADU and delay the transfer of ownership.

Doing it this way has the disadvantage for you that you don’t get out from under the burdensome mortgage payment until the deal is done and the mortgage is paid off. But this gives you an incentive to get the deal done quickly. Doing it his way provides an incentive for him to drag out the process because he gets your home equity upfront. Bottom line, he has a much better reason to trust you than you have to trust him.

Do it your way.

The writer is Professor of Finance Emeritus at the Wharton School of the University of Pennsylvania. 


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Mike Bloomberg Places Spotlight On Crypto And Blockchain In 2020 Presidential Race



Former New York Mayor Mike Bloomberg offered a plan today to reform the financial system that includes a policy plank on cryptocurrency and blockchain. While President Trump has only made a few comments on Twitter indicating a negative opinion on Bitcoin and Facebook’s Libra last year, and only two prior Democratic contenders – Rep. Eric Swalwell and Andrew Yang – had made mention of cryptocurrency in terms of either accepting crypto donations or offering crypto policy positions – Bloomberg will more than likely force other candidates to offer a ‘crypto’ policy in the 2020 Presidential Race.

‘Cryptocurrencies have become an asset class worth hundreds of billions of dollars, yet regulatory oversight remains fragmented and undeveloped. For all the promise of the blockchain, Bitcoin and initial coin offerings, there’s also plenty of hype, fraud and criminal activity.’

As Bloomberg is currently surging in the polls, with the latest NPR / PBS poll showing him in second place with 19% of the voters, led only by Bernie Sanders with 31% of the vote. With a war chest for the Presidential race cited at north of $60 Billion, it is clear Mike Bloomberg has the popularity and finances to make a solid run as the Democratic candidate for President in 2020.

Thus, the spotlight of the Nation will now be on Mr. Bloomberg’s policies – and with his opening salvo today on financial reform, his plank on cryptocurrency regulation and policies will place the debate over this new asset class and blockchain – the technology behind it – on center stage.

Bloomberg’s plan specifically discussed how this new cryptocurrency asset class has grown to ‘hundreds of billions of dollars’ – and yet calls out regulatory oversight as ‘fragmented and undeveloped’. It mentions that with all the promise of blockchain and ‘initial coin offerings’, there exists ‘hype, fraud and criminal activity’.

As a solution, Mike Bloomberg’s 2020 Financial Reform Policy for cryptocurrencies includes five main objectives:

1.   Clarifying responsibility for overseeing cryptocurrencies.

2.   Providing a framework for initial coin offerings, by defining when tokens are and are not securities.

3.   Protecting consumers from cryptocurrency-related fraud.

4.   Clarifying how investments in cryptocurrencies will be taxed.

5.   Defining capital and other requirements for financial institutions holding cryptocurrencies.

Congress has already started down a path of evaluating some of these concepts, particularly as Facebook introduced Project Libra with a cryptocurrency that attracted a great deal of attention and forced many on Capitol Hill to start evaluating the basics, such as who oversees cryptocurrencies, ways to protect consumers and outlining a framework for the safety and soundness of financial institutions that hold cryptocurrencies.

Attached below is the entire plan introduced today.

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