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This Executive Demystifies the Future of Financial Services

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July 27, 2020View From the Top

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Rayne Steinberg, CEO and Co-Founder of Arca, a digital asset investment firm, joined Kurt Daradics, Hunt Club’s West Coast General Manager, on View From the Top to offer insight on digital assets and the transformation of financial services, share why patience is critical for founders and more.

About Rayne As CEO and Co-Founder of Arca, Rayne leads the overall direction of the company and is responsible for securities structuring and risk management.

About View From the Top View From the Top, Hunt Club’s executive interview series, provides insights from the top minds in business today. Just as Hunt Club’s expert network facilitates community, this series aims to offer opportunities for connection and discussion across industries, geographies and career levels. You can read more View From the Top interviews here and join the Hunt Club expert network here

The following interview has been edited for brevity and clarity. 

Demystifying Digital Assets

Q: Tell me about your current company, Arca.

A: In one sentence, Arca s is an innovative investment management company focused on digital assets and blockchain technology. In other words, asset management on blockchain.

Q: What are digital assets and how will they change the world?

A: Digital assets are digital representations of assets—anything that used to be paper that is now represented in a digital form. What the internet did for information, digital assets will do for value. 

The internet made information and the transference of it ubiquitous, free and available to almost anyone in the world. The same thing will happen to value transfer—all the costs will continue to be crushed down. We know that whenever you cut costs and make things easier, there's always disruption. They’re going to become ubiquitous and displace the financial system.

Q: I can imagine that one of the benefits is to help people who are unbanked?

A: Yes, the unbanked and underbanked typically pay the highest level of fees. In our world, the people that can least afford to bear fees pay the most. When we look at remittances, which is money sent around the world, those fees average nine percent globally; people are sending money back home and paying a nine percent fee. On the other hand, the wealthy pay almost nothing on transfers. Digital assets remove the middleman, enabling people to send money to a hundred people instantly. This takes place outside the financial system, but is completely safe and recorded on the blockchain. You can see how transformative that would be.

This is different from a normal tech disruption. You've heard the phrase “move fast and break things.” People’s money and wealth, sometimes the accumulated capital of one lifetime or multiple lifetimes, is not the type of instance where you can “move fast and break things.” There's a reason financial services is a heavily regulated industry; a mistake can be catastrophic. New technology in financial services has to be bulletproof right out of the gate. There is no “kind of works” or “public beta” in a financial service technology product. That’s why we see a much longer disruption curve in this space. 

Q: What are the biggest misconceptions the market has around digital assets?

A: I think there's so many and it's hard to pick just one because it's such a fragmented idea. This transformative financial service product has come from the grassroots and not the center. The very nature of digital assets is that they're decentralized, which doesn't allow for a coordinated message, idea or even product. 

One of the most powerful misconceptions is that digital assets are exclusively Bitcoin. There's a huge diversity in this ecosystem, including securities, financial products, calls on cash flows, loyalty points, or a way to incentivize a trading network. Right now there are thousands, and soon going to be millions of applications, and it's not all Bitcoin.  

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Leading for Success 

Q:  You co-founded WisdomTree. What were some of the most critical hires to scale up that organization?

A: The most critical hire at WisdomTree was our director of sales. The individual we hired was a really fantastic sales manager. He had both broad vision, which was important, but he was also very detailed and managed people in that sales role.  He was strategic and effective, with limited resources. The way he built the sales team was a huge part of our success.

Q: What would you say are some of the key strengths of a leadership team at the growth stage?

A: Flexibility and tenacity. It’s a bit of a paradox because you have to be open to new information and able to adapt to it, but at the same time, you can’t be blown about and need to stick to your North Star. You're going to be challenged and sometimes it's going to feel like there's no way what you’re doing can be accomplished. You need a group that is tenacious, believes in the company and is willing to fight, sometimes in the face of what seems to be insurmountable odds.

I would add that all of our early employees are utility players. They all have a specialized skill set, but early on, everybody does everything and they have to do it well. 

Q: What is most critical for managers to learn during hyper growth? 

A: This is a bit contrary to the last example—a lack of patience. There is a slow build. I found there's a period where the vision doesn't appear. This is when nothing has changed in your thesis and your overall approach, when what you're going for is right, but it's taking time. 

If you're scaling something gigantic, you're probably displacing something or creating something that had an entrenched footprint. If this was obvious and easy to do, someone would have done it. You need to have the patience to let the plan work out and not over-pivot. Just because something is taking longer doesn’t mean it’s wrong.

I’ve found scaling to be like a physics problem. You’re overcoming some sort of friction and there's a certain amount of force and work that you have to bear on it. Then, all of a sudden, that friction is overcome. 

Advice for Founders 

Q: What is the best piece of business advice you've received and who is it from? 

A: The best piece of business advice I received was definitely from my Dad (Saul Steinberg). He gave us many books and guidance, but one that was really interesting was Benjamin Franklin's lessons on happiness and the thirteen virtues. If you stick to these thirteen things, it's really hard to go wrong—things like sincerity, humility, and industry. I have them printed out on my desk and am monitoring for these virtues constantly.

Q: You've worked with some of the smartest and most high profile investors in the world. Is there a common thread you see that most successful investors share?

A: What I've found in the great investors that I've had exposure to is creativity; an unbelievable wellspring of original thought, an ability to see the world differently and a curiosity for learning that was insatiable. I have not run into a great investor who was not intellectually curious.

Q: What qualities are important in a founder and where should founders focus the majority of their time?

A: Focusing on culture and the people you hire is incredibly important. It's much easier to do in the startup period. But, as you scale and more people join, how do you keep that intact? It requires a focus from the beginning. You have to understand what makes the organization special, how to safeguard that at the beginning and how to communicate it as you grow.

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About Rayne Steinberg
Rayne has a rich history of financial and entrepreneurial successes over his nearly two-decade career. As CEO and Co-Founder of Arca, a digital asset investment firm, Rayne leads the overall direction of the company and is responsible for securities structuring and risk management. Prior to founding Arca, Rayne co-founded WisdomTree, where he led the sales and marketing efforts responsible for raising $15 billion in ETF assets. Rayne graduated from the Wharton School at the University of Pennsylvania with a B.S. in Economics.
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