Exclusive Interview with the Founding Managing Partner of HCM Capital: Jack Lee
Today we will have a conversation with the founding managing partner of HCM Capital - Jack Lee. Lee has rich experience with investment banking and the capital markets. He has had stints at JP Morgan, Citibank, and joined Foxconn as the Chief of Investment Officer in 2007. In 2015, Lee launched HCM Capital as a Founding Managing Partner. Blockchain, and digital banking are the key focus areas of HCM. So, what are the criteria Lee will use to make an investment decision? How will blockchain influence the manufacturing industry, and new blockchain cell phones?
Bianca: How did you and HCM capital get into the blockchain space.
Jack: About three years ago, when HCM was founded by myself, we started to look at the financial service technology space, also known as the Fintech space, because at that time I was also in charge of all of our groups in terms of financial service initiatives. We’ve found out Fintech should be one of the very important areas by using the technology to do better financial services for the new market.
At that time, we found out block chain technology indeed was a revolutionary change to disrupt or change the current financial service work for the last few decades. So that's how we got into the block chain space in order to learn more about the technology and the industrial environment.
Bianca: So, you got into the block chain because of Fintech. But I know you have been the space for more than three years. What kind of criteria do you have in terms of picking a good block chain company win which to invest? And do you think beyond Fintech, are there any industries that could be good use case for block chain?
Jack: Yes indeed. Financial services are just one of the important pieces for the Blockchain, what we also call Block chain 1.0. It's mainly used for payment, for lending, and for remittances etc. And for blockchain 2.0 or 3.0 in the future even 4.0, it can be used to validate the data, digital assets, even many devices, the supply chain, and other applications.
So, it is indeed a modem Fintech. We not only looked at the Financial service space, but also looked at some other digital assets. In the future, I think we're getting more and more used to the non-fungible token, by using the token to attach it to a real asset. For example, like art, some casinos and many other forms of entertainment.
Bianca: I know HCM capital is under Foxconn. When you are doing an investment, do you also incorporate your investment goal into Foxconn's long-term strategy?
Jack: Foxconn is a diversified company from contract manufacturing and design manufacturing into more and more of a technology service space. For example, like industrial Internet subsidiary that just combined and listed in Shanghai. Foxconn is also looking for a downstream financial service area, including financial services, money forums, logistics for (inaudible) and other information. Big data has become one of the important pieces in help to build new businesses around technology services.
Therefore, using Blockchain can create a distributed ledger to collect the data, validate that data and engage in new types of business. This can well integrate with the fast (inaudible) in future business.
Bianca: Talk more about the manufacturing industry, how do you think this upcoming technology will change the manufacturing industry, in other words, are we going to see like a different kind of working flow among machines or, as a lot of people have said, AI and the blockchain will work together eventually. What's your observation?
Jack: Yeah, let me use three examples to talk about this. We believe, for enterprise use especially for manufacturing and industrial services, blockchain is one of the very important technology pieces to build. Like you mentioned about AI, I believe AI is an example of how to use the artificial intelligence and how to use the data by machine.
Block chain can create data in a more inclusive, decentralized or distributed way. So, block chain is the way to collect and build the database. AI is a good way to use the data by machine.
Therefore, I believe block chain should come first before AI can be widely applied into more and more cases. Now that AI is just using the centralized database and is limited to certain use cases.
So, it won't be it inclusive and won't benefit many people. I encourage those companies who are using data or collecting the data for AI should adopt the blockchain.
Bianca: And I know you are from the traditional banking space and you have worked for investment banks for many years. When you are looking at the blockchain, this new and upcoming technology, how do you think this technology will revolutionize the banking industry? Do you think it should be seen as a threat?
Jack: The banking system has been established for over 100 years, even some of today's financial products go back that far. In the US, everyone nowadays is still using a plastic credit card and it's been in existence for 50 years. But when you think about other emerging countries, like China, almost no one or fewer and fewer people use a credit card. They rather use Wechat Pay or Alipay, the new type of financial payment instrument. So, a thing like Token, the blockchain, or bitcoin, is a new thing for the millennial generation.
I think it will be definitely a threat to the existing banking industry because this kind of intermediation will become more possible when there's a more use cases. For example, I met a Korean company in my last trip to Seoul. I found out this company is mainly focusing on social media apps, such as ride sharing and music applications and services. The company is thinking about tissuing the token for all their existing users, maybe more than 50 million people. Then I think it would be a really big gamechanger to add on what we call financial services or the Payment (inaudible) after this existing system. Just like Alipay and Wechat Pay change the way people use banking and financial services in China.
So, I believe the tokenization can alter many aspects of daily life as well as banking behavior. I think that will be a really revolutionary change, but, maybe like the mobile internet, it will evolve from an emerging country first.
Bianca: I read the news that Foxconn is working with some labs to develop certain blocking cell phones and I think HTC also announced that they are going to launch a blockchain cell phone. What do you think about these kinds of new blockchain cell phones?
Jack: I cannot comment on any specific client of my associate group whom we are working with. But, I learned about HTC and other Chinese companies has such an initiative to launch what they called the blockchain phone.
Indeed, let's think about what's the purpose for adding the blockchain. Either you want to do mining, or you want to do the co-wallet, for this to function. Thinking about mining first. I think to have a mobile phone doing the mining is a kind of way to limit its power. So, if we think about co-storage, it will even create more problems. When a person loses his/her cell phone, he/she also loses a lot of bitcoins. So, I think it is more like marketing in terms of this kind of blockchain phone.
Bianca: Do we need a new generation of cell phones for this blockchain age?
Jack: Yeah. let's think about the future. There's about 2 to 3 billion unbanked people now. Since those people previously had no banking service, they may only use cash. Now with the Bitcoin or other digital currency, they may use the phone to store the value, do the payment or even get services from this type of crypto currency. Then, I believe the phone, even a cheaper phone, can provide this feature. I think that will be a possible solution to benefit those people.