4 min read

Frequency Analysis #4: Spies in space, VT captives & more...

This week 's progress piece wrapped up the manmade causes of the Great Stagnation and took a lot out of me, so I'll keep this preamble short and get right to the risk news:


Anyone who has been to Vermont in the fall knows it's captivating. Next month, leaf peepers will flock to Vermont for the bright colors, sleepy towns and... captive insurance regulations? Vermont recently passed insurance enclaves like Bermuda and the Cayman Islands as the number one domicile for active captive insurance, a trend that has been growing since regulatory changes in 2018 made non-US insurance more expensive. Captive insurance is a wholly owned legal entity that insures the risks of the owner. The insured often knows something the insurance carrier does not about the risk they wish to transfer, but if what you know is that the risk is less than perceived, it's hard to capitalize on that knowledge. Since captives meet regulatory capital requirements and standards, you can get a lot of the benefits without some of the costs of a traditional policy, assuming you actually do understand your risk better than the professionals.

This insider/outsider dichotomy of risk knowledge pops up again and again. In the beleaguered fintech space, Ramp, the expense card company once valued at $8B is taking a 30% haircut on its latest round. Thrive Capital, the venture capital firm led by Josh Kushner, is leading the series D round. If you listen to the interview with Josh, you learn that he's built a $16B (yes, billion) venture firm with fewer than 50 employees by deploying large amounts of money into concentrated bets, particularly at the later stages of companies they have previously invested in. One way of thinking about late-stage venture is that the expected returns are much less because the price is so much higher. Another way of conceptualizing late-stage is that the big outcome is so more likely because the company has addressed the major risks. But a third approach is to accept the high price, recognize the risks are not zero and embrace deploying $200M. Thrive has managed the rare feat of getting a better price on a still fast-growing company and deploying a serious slug of capital. It helps to be an insider who knows the specifics of the situation, and in this case, it appears that employees clamoring for liquidity worked to Thrive's advantage.

One place where insiders often have an advantage is cryptocurrency. Bitcoin was down 9% yesterday on news that SpaceX wrote down its Bitcoin holdings in 2022. This isn't the first time Elon has publicly said the price of Bitcoin is too high. The report comes at a time when high growth at the company allows it to post slim profits despite various losses. Lots more space news to come this week...

But speaking of losses and financial crashes, the Russian ruble broke 100/1 with the dollar. Despite the most crushing sanctions regime ever declared, Russia's finances have held out due to steady oil exports and plenty of demand. In response to the currency's depreciation, the Russian Central Bank hiked rates to 12%. That is still far below the 20% rates from 2022. The wild ride for rates likely isn't over, but neither is the Russian economy, at least for now.

Back in aerospace news, the British defense giant BAE Systems is making its biggest acquisition ever, spending $55B for Ball Aerospace. For a while, the Ball Corporation was the leading manufacturer of mason jars and satellites. Selling consumer packaging and government hardware may not seem like it makes much sense, but selling to consumers and government isn't a bad way to diversify. Now BAE is betting that the space race is on and Ball can get back to its core business.


Space companies got a warning from US officials that they are being targeted for cyber attacks. These kinds of blanket warnings are always hard to decipher without being on the inside, but usually, the government is trying to do two things by going public. One is to shame the industry into doing better and another is to let adversaries know that they are watching. It's hard to know which is the main goal in this case.

This news comes on the heels of Russia's recent moon launch. Its first step towards making good on cooperation with the Chinese space program, but if anything, this launch is more about the power of propaganda. As with the US government's public revelation of spying in the commercial space sector, the announcement may be more important than the feat itself.


If you're worried about the Russian and Chinese space programs teaming up to get ahead of the United States, have no fear. Space startup True Anomaly got the green light from regulators for their autonomous orbital vehicle, equipped with three cameras and capable of meeting up with other satellites. With intelligence playing such a critical role in Ukraine and more and more satellites being launched, both of these capabilities are much needed.

In non-space news, Matt Morris, a leading operational technology security expert believes that AI will play a big role in protecting our cyber-physical infrastructure. He makes the case that when dealing with critical infrastructure, we'll need humans in the loop and cyber-informed engineering (CIE), a Department of Energy strategy, to detect patterns and interface with vast amounts of data. Just like True Anomaly's satellites, more intelligence and more hardware (generating even more data) will require novel solutions.

Lastly, a word on cybersecurity budgets. About half of Chief Information Security Officers surveyed say that budgets are down and two-thirds say implementation work has slowed. Areas like cloud security and data security are still top of mind driven by compliance and vulnerability management concerns. Despite the lay-offs, budget cuts and return of bundling, the pace of innovation in cybersecurity is driven not by market conditions, but by adversaries. It is telling that the primary strategy CISOs are employing to combat these pressures is automation. It just goes to show, even a bad market can't keep a good trend down.