Colgate Finance Club Journal

Source: Fryslan0109

Fall 2017 Edition

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Source: Baylon Greyjoy
Table of Contents
Making an Impact: Impact Investing
and the Future of Finance (2)
Amazon Versus the Retail Industry (4)
Bitcoin: A Look at 2017s Hottest In-
vestment (5)
Mylans Controversial EpiPen (7)
A Note From the Editor:
On Behalf of the Colgate Finance Club, we are
pleased to present to you the Fall 2017 Edition of eccentric billionaire investing in promising technology startups in
the Colgate Finance Club Journal.
The student contributors to this publication
have worked tirelessly on their articles. We are
extremely proud of each authors piece and
hope you find them accurate and informative.
Educating the Colgate Community about the
financial markets is the core mission of our club
and this publication allows us to make our goal
achievable.
Again, I would just like to reiterate our appreci-
ation for all involved in the creation of the Jour-
nal. Without the help of the writers, administra-
tion, and alumni, this would not be possible. As
always, Go Gate!
Sincerely,
Chad Zappia 20
President, Colgate Finance Club
Chief Editor, Colgate Finance Club Journal
Making an Impact: Impact Investing and
the Future of Finance
By: Jacob Scott 20
Twenty-million low-income people served in the developing world.
Forty thousand jobs created. Dozens of firms founded that provide
services from connecting small farmers in India to buyers around
the world, to providing loans and capital to underserved small
businesses in Mexico, to financing low income housing in Peru.
Such broad-based and powerful work must have been done by a
particularly well endowed and charitable coalition of foundations,
or perhaps a development bank in conjunction with cooperating
governments. Either way, one would imagine, such socially
beneficial work could not have been been financed by private
capital seeking a financial return, right?
Wrong.
Enter Elevar Equity, a venture capital firm. Now, when one thinks
of venture capital, he or she is typically inclined to imagine an
Silicon Valley, raking in millions when those firms go big. And
there may be a grain of truth to that.
However, Elevar Equity does not fit that stereotype. That is because
Elevar Equity is a participant in the burgeoning field of what is
called impact investing. And it is through this impact investing that
the firm has been the driving force behind the positive outcomes
outlined above.
Impact investing, as defined by the Global Impact Investment
Network, is when investments are made into companies,
organizations, and funds with the intention to generate social and
environmental impact alongside a financial return (1). It is a simple
yet incredibly powerful concept; rather than individuals or firms
making investments based purely on financial return, benchmarks
of social benefit and positive environmental impact are just as
crucial in judging the viability and success of the investments.
That is exactly the method of assessment that a firm like Elevar
Equity utilizes. When it makes its investments, it takes into
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account, in its unique case, the social impact of democratizing access to goods, services, and markets
previously inaccessible to the customers and entrepreneurs that it serves (2). It does this while at the same
time generating at-market and even above-market financial returns.
That is not only impressive, but, if replicable, could be game changing. Heres why.
There are some 37 trillion dollars worth of assets under management in the United States alone (3). With
pressing social needs around the world (and indeed in the United States as well), unlocking even just a
portion of these trillions of dollars through impact investing could give rise to profound positive change.
With a mere .0002% of these resources, a firm like Elevar Equity was able to impact the lives of millions. If
even just 1% of assets under management in the United States were deployed in impact investing it would be
monumental, and could positively impact tens or even hundreds of millions of people.
However, despite this immense potential, it is still a very new field facing systematic challenges. One
challenge is the newness itself. The term impact investing wasnt even coined until 2007, and is only just
beginning to be practiced on a semi-large scale (4). And even if it can consistently produce financial returns,
it is nonetheless still a new and unfamiliar field for the vast majority of investors, who typically prefer known
risks to unknown ones. This presents a particularly difficult challenge, as investors are hesitant to act until
the investment products and opportunities have proven track records; however, these investment products
and opportunities cannot develop proven track records due to the hesitancy of the investors.
Another related challenge is that of insufficient data. While there are a variety of compelling anecdotes and
stories about impact investing and its ability to generate profit and social benefit, there is a lack of accessible
and reliable data on the breadth, successes, and potential of the field. What is more, there is insufficient
transparency, disclosure, and standardization of data among not only the firms that are making the impact
investments but also among the entrepreneurs and organizations receiving them (5).
However, there is reason yet to be optimistic. Venture capital too, before it was a proven asset class, had great
difficulty in going mainstream. However, once institutional players like pension funds began investing, the
field rapidly became acceptable and attractive to global investors. And with developments like the Ford
Foundation dedicating 1 billion dollars to impact investing over the next ten years, the same mainstreaming
that happened with venture capital may come to impact investing. This is especially true given the work of
groups like the Case Foundation, who are working to develop data tools like an Impact Investing Network
Map. Given these developments and barring something catastrophic like another financial collapse, it is only
a matter of time until other major institutional players begin to get on board (6).
Ultimately, if this method of finance grows, it could result in a mass of positive effects. Aligning the
incentives of a wide breadth of stakeholders, could systematically address issues such as housing, lack of
access to capital, poverty, and deforestation, while at the same time generating financial returns. With this,
impact investing could join models and institutions such as participatory budgeting, community
development financial institutions, and public banking in the transformation of the world of finance from
both an extractive destabilizer of the economy and accelerator of inequality to an integrated stabilizer
promoting human development and wellbeing.

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Amazon Versus the Retail Industry
By: Tony Hong 21

Amazon, the tech giant best known for its online shopping platform, has clawed for more market share since
its inception. Recent moves by management, however, have been particularly aggressive; Most notably, its
acquisition of grocery chain Whole Foods this August has caused severe alarm and agitation among its com-
petitors. With the company refining its existing services as well as expanding into new territory (literally and
figuratively), many fear a so-called retail apocalypse. While Amazon is certainly a significant threat to retail-
ers, there are several factors that can inhibit its power.
For much of its existence, Amazon has charged low prices. This is because Amazon is able to avoid state sales
taxes on its goods, due to its lack of physical facilities (1). This precedent was established in a 1992 Supreme
Court case, Quill Corp. v. North Dakota, in which the Court citing the Commerce Clause decided that
state sales taxes can only be imposed on companies that have a physical presence (nexus) in the state; how-
ever, as the business expanded, it was forced to build physical locations around the country (warehouses,
etc.). This phenomenon was necessitated by the companys offering of same-day and next-day delivery op-
tions. Although there is still a loophole - third-party vendors who sell via Amazon still do not charge a sales
tax - there is increasing backlash against this, from both competitors as well as others, such as state Senator
Roger Chamberlain of Minnesota (2). Essentially, the competitiveness of Amazons prices may be more tem-
porary than one would think.
Furthermore, retailers are striving to match Amazons aggressive expansion. As Mad Money host Jim
Cramer explains, The only way to beat Amazon is by becoming more like Amazon (3). Walmart, an equally
intimidating behemoth of the retail sector, said that it plans to open 255 new stores internationally over the
course of the next two years (4). Others, such as Ralph Lauren, are focusing on improvements to their e-
commerce platforms, believing that the user-friendly Amazon interface is a strong contributor to the compa-
nys success (3). Perhaps drawing inspiration from the tech giant, Costco now offers same-day deliveries in
over half of its locations, with plans to expand this service (5). Target is attempting to take user convenience
to the next level with voice-activated shopping from smartphones (6).
Clearly, retailers will not bow to Amazon. The same shopping features that attracted such a huge customer
base - convenience, variety, user friendliness - are being implemented by competitors. While the stock mar-
ket by itself may seem to indicate that Amazon is crushing other retailers, initiatives by the companies man-
agement teams indicate that a highly competitive retail environment is ahead.

Source: Alvaro Ibanez

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Bitcoin: A Look at 2017s Hottest Investment
By: Ethan Ackerman 20
Over the past year, Bitcoin has taken the world of finance by storm, outperforming just about every single as-
set class this year. At the time of writing, the price of Bitcoin stands at roughly $5,500 ($13,133 at the time of
publication) (1), reflecting an almost 800% annual rise. However, despite its explosive growth, most people
dont really know what it is. So, lets answer the question: what is Bitcoin?
Created in 2008 by an anonymous programmer under the pseudonym Satoshi Nakamoto, Bitcoin is the
worlds first decentralized, digital currency (2). Unlike a traditional currency, there are no physical bitcoins in
existence. Bitcoin users can store and manage their bitcoins in a digital wallet, which is a program installed
on a computer or smartphone. Bitcoin transactions are verified through a process called mining, in which
people use their computing power to solve cryptographic algorithms. By solving these algorithms, the validity
of each Bitcoin transaction is cryptographically verified.
The key difference between Bitcoin and a traditional payment processor is that the Bitcoin network is decen-
tralized, meaning that there are many nodes that individually verify the validity of each transaction. This
eliminates any central point of failure and also ensures that all transactions are immutable, meaning they can-
not be undone. In contrast, for a payment processor like Paypal, all users depend on Paypals servers to verify
each transaction. Decentralization is very important for a number of reasons, the most important being that
centralization carries with it a number of risks. In a traditional payment processor, there is a central point of
failure. If something were to go wrong with Paypals servers, it could cause serious damage. In a decentralized
system, every single one of the thousands of Bitcoin nodes would have to fail in order to cause a network fail-
ure, an event that is astronomically unlikely to happen. Another benefit is that a decentralized network en-
sures payment immutability. In contrast, a centralized payment processor can reverse or forge transactions at
whim. For example, Paypal chargebacks happen quite frequently, and sometimes cause serious losses to mer-
chants that use Paypal (3).
Due to Bitcoins unique use of cryptography in verifying payments, it has often been referred to as the worlds
first cryptocurrency. However, since Bitcoins inception, a variety of other cryptocurrencies, frequently re-
ferred to as altcoins, have emerged (4) The degree of variety among altcoins is quite dramatic, with some alt-
coins being quite similar to Bitcoin and others having a variety of differences. The most notorious altcoin is
Ethereum, which functions similarly to Bitcoin, but differs in its use of smart contracts, which are lines of
code that can be executed alongside a transaction. These smart contracts enable other cryptocurrencies,
known as tokens, to run on the Ethereum blockchain (5)
Although its unclear what has caused Bitcoin and other cryptocurrencies to skyrocket in the past year, there
are a few popular theories. One main theory is that the launch of Ethereum in 2015 fueled the creation of new
and innovative altcoins and tokens, many of which raised funds through an ICO, or initial coin offering. An
ICO is a crowsdale mechanism in which units of a new cryptocurrency are sold by the development team in
exchange for capital, usually in the form of Bitcoin or Ethereum (6). Many of these ICOs have been tremen-
dously successful, with some tokens raising hundreds of millions of dollars in funding during their ICOs. This

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explosion in funding and innovation has drawn many new investors into the cryptocurrency space, and has
propelled it into the public spotlight. Another theory was that demand from Asia, particularly from Japan and
Korea, was what first propelled Bitcoin in the early stages of the rally (7). A looser regulatory environment in
those countries, combined with a budding cryptocurrency mania, pushed the price of Bitcoin on Korean and
Japanese exchanges well above the dollar-denominated price. Regardless of what sparked Bitcoins initial rise,
once it started reaching all-time highs in early 2017, the media and public began to take notice, and awareness
of Bitcoin increased massively, which has since helped to push the price up even further (8).
Right now, the million-dollar question (literally) seems to be what will happen to Bitcoin and its price in the
future? Although many reporters, bankers, and pundits have called Bitcoins rise a bubble, and have done so
for many months now (9), there are no signs that Bitcoins rally will cool off anytime soon. The more im-
portant question is what will happen to the Bitcoin protocol and the concept of blockchain in general? The
increased press coverage has helped to boost public awareness of Bitcoin, and more institutions have ex-
pressed eagerness to integrate blockchain technology into their operations; however, Bitcoin itself still has a
long way to come. The community is currently locked in an intense debate over the best way to scale the
Bitcoin network to handle increased transaction volume, and only a limited number of retailers currently ac-
cept the digital currency. Will Bitcoin eventually replace the dollar? Only time will tell.

Source: FreeGreatPicture.com

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Mylans Controversial EpiPen
By: Jessica Kern 20
Over the past few years, Mylan Pharmaceuticals has been under national attention for the price of its infa-
mous EpiPen; when injected, it will stop a potentially fatal allergic reaction. Mylan received national backlash
when the price of EpiPens soared to over $600 in early 2016 for a pack of two one-time injectables, increasing
from the original price of $100 per two pens back in 2007 when Mylan first took over ownership rights of the
product from Merck KGaA (1).
A major reason Mylan was able to raise the price of the EpiPen without losing consumers is due to the patent
it has for the EpiPen through 2025. The patent protects Mylans EpiPen design which injects the drug, rather
than having the patent on the fairly common epinephrine drug used. This ensures Mylan is the only company
with the right to distribute EpiPens and no other company can produce a product with a similar design (2).
This makes it so that other companies have a difficult time entering the market with substitute goods for the
EpiPen. Because competing pharmaceutical companies must create a product with a fundamental difference
in design than the EpiPen, these products must receive FDA approval before hitting the market, which can be
difficult and time consuming (2). This was the case when another pharmaceutical company, Teva Pharmaceu-
tical Industries, tried to create another product with the ability to inject epinephrine which would compete
directly with the EpiPen. The FDA prevented Tevas product from hitting the market citing it had major defi-
ciencies with the design, specifically believing the design would be difficult to use in dire and stressful events,
such as an allergic reaction (3). In many cases, such as the EpiPen, patents allow for a company to have sole
production rights over a certain drug for a period of time, which can lead to drastic increases in prices of life
saving drugs; however, some argue that patents are a necessity for medical advances, citing the high profits
for a medical breakthrough gives companies the incentive to invest large amounts of money in research .
While Mylans patent allowed it to have sole production rights of the EpiPen, United States antitrust laws
prevent Mylan from acting as a monopolist for the product. In late 2016, Mylan settled a $465 million lawsuit
with the U.S. Department of Justice for acting as a monopolist and overpricing the EpiPen (4). In the lawsuit,
it was presented that it costs Mylan about $34.50 to produce a single EpiPen, which injects $1 worth of the
drug epinephrine (5). While the original EpiPen has not received a drastic price since the lawsuit was settled,
Mylan has started producing a generic version of the EpiPen, selling at $300 per two pack. Furthermore, CVS
has received FDA approval for a generic product called Adrenaclick with a similar purpose to the EpiPen, sell-
ing at just $10 per two pack (6).
Mylans unethical economic practices with the EpiPen was not an isolated event for the company, or even the
pharmaceutical industry as a whole. Mylan, along with 17 other pharmaceutical drug companies are currently
facing a lawsuit from 45 U.S. state attorneys alleging these companies have engaged in price fixing (3). Price
fixing occurs when a group of companies simultaneously agree to higher prices above the current or market
equilibrium price. If enough companies take part in price fixing it can be very effective because consumers
have little to no options at the lower, unfixed price. This investigation is still ongoing. With the affordability

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and access to drugs these companies produce being the difference between life and death in certain situa-
tions, it is time as a society to discuss whether our current regulations on drug companies are effective
enough to protect the consumer, and not simply focus on profit maximization for pharmaceutical companies.

Source: Wikipedia.com

Citations
Making an Impact: Impact Investing and the Future of Finance

1. https://thegiin.org/impact-investing/need-to-know/#s8

2. https://www.elevarequity.com/about/

3. http://www.lifteconomy.com/blog/2017/2/5/fran-seegull-investing-in-private-social-enter prise-for-deep-impact

4. https://www.rockefellerfoundation.org/our-work/initiatives/innovative-finance/

5. https://ssir.org/articles/entry/data_the_next_frontier_for_impact_investing

6. https://ssir.org/articles/entry/data_the_next_frontier_for_impact_investing

Amazon Versus the Retail Industry

1. http://www.businessinsider.com/amazon-sales-tax-walmart-2017-10

2. http://money.cnn.com/2017/03/29/technology/amazon-sales-tax/index.html

3. https://www.cnbc.com/2017/08/08/cramer-retailers-are-finally-starting-to-buck-amazons-takeover.html

4. http://marketrealist.com/2017/11/analysts-expect-walmarts-fiscal-3q18-sales-rise/

5. http://www.businessinsider.com/costco-delivery-options-vs-amazon-2017-10

6. http://www.nasdaq.com/article/here-are-factors-influencing-targets-tgt-upcoming-q3-earnings-cm876639

Bitcoin: A Look Inside 2017s Hottest Investment

1. https://charts.bitcoin.com/chart/price

2. https://bitcoin.org/bitcoin.pdf

3. https://www.paypal-community.com/t5/My-Feedback-for-PayPal-Archive/Why-Does-PayPal-Allow-Chargeback-Fraud/td-p/658022

4. https://coinmarketcap.com/

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6. https://qz.com/1004892/the-bancor-ico-just-raised-153-million-on-ethereum-in-three-hours/

7. https://www.cnbc.com/2017/08/12/bitcoin-vaults-to-new-record-above-4k-boosted-by-japan-and-multiplying-its-value-fourfold.html

8. https://www.coindesk.com/reasons-behind-bitcoins-price-media-hype/

9. https://www.bloomberg.com/news/articles/2017-11-29/for-bitcoin-skeptics-the-question-is-what-will-pop-this-bubble

Mylans Controversial EpiPen

1. https://www.theatlantic.com/health/archive/2016/08/epi-pens/497126/

2. https://www.statnews.com/2016/09/09/epipen-lack-of-innovation/

3. https://www.usatoday.com/story/money/2017/10/31/mylan-generic-drug-fixing-lawsuit/817859001/

4. https://www.nytimes.com/2016/10/08/business/epipen-mylan-justice-department-settlement.html?ref=topics&_r=0

5. https://www.nbcnews.com/business/consumer/mylan-says-it-upgraded-epipen-2009-so-experts-looked-inside-n652651

6. https://www.consumerreports.org/drug-prices/epipen-alternative-that-costs-just-10-dollars/

Members of the Colgate Finance Club meeting with alumni at BNP Paribas in New York City

Colgate Finance Club Journal Fall 2017 financeclub@colgate.edu www.colgatefinanceclub.com

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