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MIT Sloan School of Management | Office of Communications
+ THREE INSIGHTS FOR THE WEEK
April 4 – April 10, 2021
1. Analysts expected COVID-19 to take a toll on venture capital. Instead, 2020 turned out to be the second biggest year for venture capital in history, with funds deploying some $141.9 billion in investments.
That left investors feeling highly optimistic coming into 2021. At two recent events — the MIT Sloan Investment Conference and the MIT Fintech Conference — panelists identified trends they believe will shape the industry post-pandemic:
- Impact investing continues to gain momentum. “Impact is not mutually exclusive with financial returns,” said Connie Deng, a senior associate in venture capital at Emerson Collective. “We think they’re mutually beneficial.”
- Frontier markets — economies in the developing world — are attractive because of their large, untapped populations, but country-specific dynamics require “a bit of trial and error,” said Amanda Cotterman, a Kenya-based managing partner of Equalife.
- An investment in standard technology can help revamp archaic industries. “The tech is not edge-of-the-ledge,” said seed-stage investor David Frankel, but it’s fixing problems for industries that haven’t yet been brought into the 21st century.
Technology niches abound for creative startups. Panelists were bullish on bespoke financial products, collaborative fintech, and tap-to-pay and voice payments
2. Why do consumers favor credit cards? Twenty years ago, MIT Sloan professor Drazen Prelec found that people are willing to pay significantly higher prices — sometimes 100% higher — when buying something with a credit card instead of cash.
Now, a follow-up study hints at a reason why.
Prelec and co-researchers used an fMRI machine to determine how brain activity differs during credit card and cash purchases. “What we found very, very clearly is that the opportunity to use a credit card specifically engaged known reward brain networks, and especially those that are involved in anticipation and craving,” Prelec said.
Prelec and Sachin Banker, the paper’s lead author, cautioned that the exploratory study sampled only 28 participants, but said the findings raise interesting questions — particularly as cashless payment methods like digital wallets are expected to overtake credit cards in the near future.
“What if the instrument of [a] transaction creates habits and patterns that, at least for some people, might be dangerous?” Prelec asked. “What if by making major decisions with a swipe or a click you are eliminating friction that people actually rely on?”
3. In the year since the World Health Organization declared COVID-19 a pandemic, researchers at the MIT Initiative on the Digital Economy tracked how the crisis unfolded across several fronts, gathering information for business leaders, policymakers, and individuals trying to navigate the pandemic.
A new report, “Our World Accelerated: COVID-19 and the Digital Economy,” outlines research on how the pandemic has affected society, technology, and the global economy. Five takeaways:
- The impact of government interventions and social distancing on the pandemic is critical.
- Post-pandemic planning is key to the economic fallout and business implications of COVID-19.
- Social media has a large role in creating and fighting coronavirus misinformation and bias.
- Digital technology helped track COVID-19 and transformed the nature of work.
- Vaccine acceptance is still unfolding, but there are ways to increase approval.
Download the report.