Winner take it all

MARKETS

• U.S. markets: Stocks took a hit for the first time in four sessions yesterday.
• Trade: Democrats in the U.S. House are reportedly reviewing proposed changes to the USMCA trade pact, but there’s no plan to announce the Nafta replacement just yet.

ECONOMY

If You Build It, AirPods Will Come

There’s a growing divide between the have and the have-not cities in the U.S., per a new report from the Brookings Institution.

• What the haves have: High-paying jobs in innovation sectors like tech, engineering, math, and science. $60 boxing classes.
• What the have-nots have: A lack of workers with the qualifications to attract those kinds of high-paying jobs. $2 Bud Lights.

What went wrong

Classical economics tells us markets should eventually reach equilibrium. So for example, people living in New York City would get so fed up with taking a shower in their kitchen they’d relocate to a roomy Victorian in Buffalo, and Buffalo’s economy would benefit.

But in the innovation economy, that hasn’t happened. Instead of places like Buffalo and NYC converging in economic performance, they’re becoming even more unequal. The winners are taking all.

• Consider this: Just five metro areas—Boston, San Francisco, San Jose, Seattle, and San Diego—accounted for more than 90% of the nation’s innovation sector growth from 2005 to 2017.

The authors view this regional polarization as a “grave national problem.” So they’ve proposed a call to action.

Congress, assemble!

The authors argue that the federal government should step in and sprinkle Silicon Valley dust across the heartland. This proposed program would set up an application process to select eight to 10 metro areas to inject with up to $700 million/year each for 10 years in direct R&D funding.

The authors have lined up some responses to your objections:

• How can the government create a tech hub out of thin air? Well, the federal government was instrumental in boosting R&D centers like the Research Triangle in North Carolina.
• Isn’t this a short-term fix to a more systemic issue? It’s not the only solution, but it’ll kick start economies in small towns that’ve been left behind.

Your turn: Would you get behind this federal program? Or should we let growth centers emerge on their own? Let us know here.

ECONOMY

Former Fed Chair Paul Volcker Dies at 92

The 6’7” former Fed chair and Wall St. honcho leaves behind a legacy of political independence, inspiring us all to live boldly enough to have a landmark banking regulation named after us.

Volcker played many important roles in U.S. monetary policy for more than six decades, but his two greatest hits were...

Fed chair: In the late 1970s and ’80s, Volcker led a full-court press to cut down rampant inflation. When Volcker took over the Fed, annualized inflation hit 14.7%. The Fed’s goal these days is 2%.

• Volcker’s strategy involved raising interest rates as high as 20%, sending the U.S. into a recession during which unemployment peaked at 10.8%.
• While that earned Volcker few lunch buddies in the Carter White House, he received admiration after the fact.

WH advisor: Volcker’s late-career as an Obama advisor was punctuated by the “Volcker Rule,” instituted by the administration to prevent big financial institutions from making certain speculative investments.

WEALTH MANAGEMENT

Goldman Sachs: The Everyman’s Bank

Goldman Sachs has unmatched brand affinity with the Beluga caviar types. Now, it’s planning to offer digital wealth management services to the StarKist set.

According to the FT, Goldman will begin offering a robo-advisor for individuals with investable wealth of as little as $5,000 next year through United Capital, a wealth management firm Goldman bought in May.

• United’s traditional accounts serve those with $1 million to $10 million of investable wealth. This new product will allow those with fewer than eight garages to “experience the Goldman Sachs's way.”

Big Norman Rockwell picture: Goldman’s pivot from white-shoe investment bank to wealth management for the masses has been a long time coming—already, Goldman has launched a digital bank (Marcus) and invested in British digital wealth advisor Nutmeg. It also moonlights as the issuing bank for Apple’s credit card.

The why: 1) It’s a hedge against the empty guestbook at some of its more traditional business units like fixed income trading and 2) $10 million clients don't usually start out that way.

ENTERTAINMENT

Honey I Forgot What Shows Are on Netflix

You know when you’re just trying to snuggle up with Baby Yoda on Disney+ but then you fall into a Hulu hole, and as you scramble out you get lost in a Netflix mockumentary maze before realizing you wanted to watch Apple TV+ the whole time?

There are companies trying to help. One of them, Berlin-based streaming guide JustWatch, has acquired smaller U.S. rival GoWatchIt for a mix of cash and stock. GoWatchIt only had eight employees, so the acquisition was mainly to gain access to B2B clients in the U.S., the company told TechCrunch.

Zoom out: The streaming wars era has brought with it an almost paralyzing amount of video content. Users have always required viewing guides (GoWatchIt was founded all the way back in 2011), but they’re playing a bigger role as the number of streaming services grows. JustWatch is competing with other platforms like Reelgood and TV Time to be your go-to for juggling subscriptions.

PODCAST

How Technology Is Making Insurance Sexy

Like building something from Ikea or responding to an “are you in the right headspace to receive information that could possibly hurt you” text, getting insurance can be complicated. But does it need to be?

This week on Morning Brew’s weekly podcast, Business Casual, we hear the argument that it does not. Lemonade CEO Daniel Schreiber suggests the traditional broker-based insurance business model is “fundamentally and structurally” flawed.

Because when there’s a misalignment of incentives that egregious (insurer and insuree fighting for the same dollar), we’ve got no choice but to fire off those “it’s so ducking annoying” messages to the group chat after making a claim.

• Schreiber wants to reinstate insurance in the realm of social goods. To do that, he’s leaning hard into technology, behavioral economics, and 100x the data of traditional insurers.

Hear Schreiber’s thoughts on the promise of the insurance sector, the future of the IPO market for tech startups, and what it’s like to know Masayoshi Son on a first-name basis.

WHAT ELSE IS BREWING

• Amazon accused President Trump of putting “improper pressure” on Pentagon officials who awarded a $10 billion cloud computing contract to Microsoft.
• Morgan Stanley is axing about 1,500 jobs globally in a “year-end efficiency push,” reports Bloomberg. That's about 2% of its total workforce.
• Drugmaker deal roundup: Merck is buying ArQule for about $2.7 billion to diversify its cancer lineup and Sanofi is buying Synthorx for $2.5 billion for...similar reasons.
• Disney has officially brought in over $10 billion in box office sales so far this year, a new record.
• Netflix earned the most Golden Globe nominations of any studio with 17, including four best picture nominations.

LET'S GO BOWLING

Match this season's college football bowl game with its sponsor:

Sponsor: Tropical Smoothie Cafe, Tony the Tiger, Bad Boy Mowers, Lockheed Martin, SoFi

Bowl: Frisco Bowl, Gasparilla Bowl, Hawai'i Bowl, Sun Bowl, Armed Forces Bowl

LET'S GO BOWLING ANSWER