Saturday Cup of Joe: a lending and tech(ish) newsletter
Friends & Colleagues,
Saturday Cup of Joe #48. Spring is here. March madness leads into Opening Day which coincides with The Masters. Doesn’t get much more Springy than that. What must it be like to live somewhere that is 72 degrees and sunny year round? Anyone from San Diego reading this?
One of the features of Mailchimp, the service that I use to send Saturday Cup of Joe, is where the clicks originate and for the last 9 weeks or so, we’ve had a reader in France. I guess that means we’re international. Seriously though, as much as I’ve enjoyed writing on some of the cultural, economic and technology trends in the last year, we’ve had some serious political changes that come into play. I’ve tried to always be open minded and analyze the changing landscape as it comes and view it from our industry or our (collective) perspective. This week I’ve tried to do the same thing though I admit the length is probably longer than what you’re used to. I had a few long plane flights to work on it. Hope that’s ok. If not, skip around and/or let me know that’s it’s too long and difficult to find value in this type of content. I’m always open to ideas.
This week we look at:
- Blockchain is all the rage (see graphic)
- Quick overview of the scuttlebutt (Of Interest)
- Losing is learning (Got Me Thinking)
- Tips on reducing friction (Walk the Walk)
- How technology innovation impacts our lives (A Look Ahead)
- Amazon too efficient for the government? (Efficiency)
- Trump too old school for millennials? (Hard work)
- Thoughts, bonus and quote (all the way at the end)
Of Interest: For the last few weeks I’ve been wanting to do a quick recap of what I’m seeing and hearing in the mortgage industry but did not have a common theme. So this week’s common theme is that there isn’t one. Here are a few tidbits of what we’ve been talking about.
RESPA remains a hot topic as the reactions to the Prospect Mortgage consent order continue. Questions about MSAs, Zillow and whether any of this matters if the CFPB reports to Trump are all colliding on email chains and blogs. The more I think about Zillow, in particular, the more I wonder how it’s a “referral” if the consumer is literally shopping online, clicking unique links, entering as much or as little information as they see fit and knowingly delivering it out into cyberspace. RESPA lawyers can trade volleys on “endorsement” versus “referral” but isn’t shopping (particularly online) exactly what the CFPB envisions for consumers?
Remote electronic notarization (REN) as part of a digital mortgage experience gained speed as various states proposed REN-related legislation in their state legislatures this Spring. I know MBA, ALTA and NASS are watching Texas, Maryland and Utah just to name a few.
Like a light switch, the move “from refi to purchase” hit the industry in the last few weeks. The webinars, videos and newsletters are all covering hot takes and how-to’s. Some lenders are moving to acquire purchase lenders as Flagstar did with Opes Advisors this week. I’m sure there’s more to come in that space.
Lastly, the future of the CFPB remains in question. Briefs, motions and public support is rolling in from all sides on the DC Circuit case that will evaluate both the CFPB’s structure and it’s authority to issue interpretations or re-interpretations of law without formal rulemaking. Former Senator Chris Dodd and former Chair of the House Financial Services Committee Barney Frank both came out in favor of the CFPB while the current Chairman of the House Financial Services Committee Jeb Hensarling (R-TX) gave what would be considered the opposing opinion directly to CFPB Director Cordray himself during a committee hearing.
What did I leave out? Let me know what you’re hearing or what you’ve got on your mind for the next few days, weeks and months. It is proving to be an interesting 2017 in our industry.
Got Me Thinking: Sean Braswell wrote an article posted to OZY on Monday that discussed the concepts of winning and losing. It was notable in several ways. First, while high level, the article covered all the usual hot spots — sports, business, motivation, etc. — but did a good job examining how much win versus lose is everywhere in our lives. Second, it included some research. I did not know that a Stanford researcher had identified timing as the most likely element to the success of a business (42% of the time). Third, Braswell struggles with the same concepts we all struggle with (I think) which are how much competitive spirit is too much, how much value need we place on winning before we lose sight of rationality, how much will focusing on losing make us weak and how do we recognize hard work but not reward failure.
One thing that stood out to me was our reaction to failure. The only person it matters to (or should matter to) is the person who failed and/or those that depend on or care about the failure. Meaning, if we can get past what we think people are saying about our failure, we can avoid all the downsides associated with it. To wit, Braswell writes, “We’ve all heard the truism that losing builds character, but more importantly, it builds knowledge and motivation.”
Once we see failure as simply a method for acquiring information and experience more quickly, our mindset remains focused on the future, the success, the goal and we can leave the rest of the speculation (and all the time, energy and calories spent on it) to your competition.
Walk the Walk: As business people, leaders, industry experts and young executives, those of us that have come together around these Saturday Cups of Joe emails have one thing in common — we are curious about the world and we want to do the best work we can do while we’re here. One thing that has always interested me are the obstacles to getting a job done inside an organization. That’s why an article caught my eye this week where what I had been calling obstacles were given the label “friction.” Friction is the aspect of a product, service or idea that makes it difficult (or impossible) to access. In the case of the remote control car that doesn’t come with batteries, friction is the fact that the customer cannot open the product and immediately use it.
The remote control car was Kintan Brahmbhatt’s “earliest brush with what he calls friction — anything that gets in the way of a customer and a task.” My obstacle is Brahmbhatt’s friction.
Brahmbhatt is writing about friction specifically related to consumer products (he’s a former Amazon exec). I think this lessons are valuable in services, leadership and relationships too. Brahmbhatt encourages us to look for 3 warning signs where friction might occur:
- Use/Behavior (also imagine here, reaction)
In thinking about ways to ensure we’re always on the look out to spot friction, here are some of the takeaways:
- First impression is key but early connection is critical
- Keep it simple: Acknowledge and migrate your target/audience to the path of least resistance
- Reduce anxiety experienced during decision or loss
- Fewest steps leading to satisfaction will keep your customers or audience coming back
A Look Ahead: Detroit is on another list. We love lists, especially when we’re at the top. A travel blog called Travel Pulse named Detroit the best place in America for business travel. Others in the top 5 included Phoenix, Denver and Cleveland. It’s kinda interesting because while it makes sense for all the reasons mentioned — central or easy air travel, hotel prices and relative traffic — Detroit also maintains its reputation of being dangerous or barren. I had dinner this week with a career strategist and technologist/futurist (yea, I know how that sounds) and he’s been traveling the country 30 weeks a year for 10 years but Tuesday was his first visit to Detroit. I’m taking that as a good sign but it underscores how long it takes to rebuild a reputation and economy in a major city.
Technology has made that recovery easier and many signs point to continued success in the near future. Detroit is drawing attention from tech and venture capital alike. Specifically, I read this week that Detroit has surpassed the Bay Area as the center of the autonomous car industry. Makes sense from a historical perspective, obviously, but might also be a sign of how we value things these days. For instance, I read Ben Giumarra’s newsletter on bank and mortgage compliance each Wednesday (see below for a way to subscribe to Ben’s blog) and this week he highlighted an article from NPR that found Tesla had a larger market capitalization ($48.7 billion) than Ford Motor Company ($45.6 billion) despite the fact that Ford generated $151.8 billion in revenue in the last 5 years to Tesla’s $7 billion. Listen. I’m all for innovation, disruption and taking chances. I’m pretty much a millennial. I know, I know. I’m supposed to be writing “Who’s Henry Ford?” articles or something.
The truth is I think a lot about traditional industries and traditional ways of doing business struggling to compete in a digital/mobile world. Fundamentally, technology is changing faster than our values. Tesla is not the perfect illustration as I don’t think electric cars are pushing our values in a new direction. In fact, electric cars is a natural progression. Autonomous cars, which is most likely the underlying component to Tesla’s valuation, however, is not.
David Cowen, the career strategist and technologist I mentioned earlier, makes a point to use the phrase “designed intelligence (DI)” rather than artificial intelligence (AI) — an important distinction in my opinion. But the point is, as these changes come quickly, how will we handle them from a policy and values perspective?
This has a direct impact on the consumer finance and mortgage industry. A few examples. I wrote a few weeks ago about the most common occupations in the US. Truck driver remains high on that list. Likewise, about 4 million Americans are employed as cashiers, not to mention the big box retailers who employ millions more to unload the trucks, stock the shelves and clean the facilities. When autonomous cars put drivers out of business or Amazon perfects cashier-less stores, how are we going to react to those who cannot find work? What’s the plan for banking, credit and other consumer finance industries? Continue to cater to the upper class or upper middle class professionals is a short term solution but it’s unclear the cost savings associated with automation and “DI” can offset the cost to innovate, design and deploy constantly evolving solutions.
I do not have a response to this yet, but I have come to at least one conclusion. Trying to take steps — policy steps or regulatory steps — to stop advancement & enhancement simply because we don’t know what to do with displaced workers is a war with no clear mission. It’s Vietnam. We cannot just jockey in front of a growing wave of dramatic and evolving technologies because of how fast inventors are moving. And while I hate to always fall back on the big, big picture, we do not have anyone looking at this holistically. I mean across the economy, across industries and across future statistics or trends. The conversation should start now before we’re faced with the critical choices. How will we finance our lives — cars, homes, basic needs — in a world where an aging population does not work or does not work in ways that meet their fundamental expenses?
Efficiency: Speaking of Amazon, on the heels of Jeff Bezos becoming the world’s second wealthiest individual, there have been many, many stories speculating at Amazon’s control, power and future. One that came across my radar this week was published in The Economist quite appropriately in the Corporate Ambitions column. At the same time, I noted a few interesting statistics. 92% of Amazon’s value is assigned to future earnings after 2020. And this from a company that made $136 Billion last year. Already a massive force, “Amazon will have to grow faster than almost any big company in modern history to justify its valuation.” Amazon has done most of its growth and profit on two areas — e-commerce (Amazon.com) and cloud computing (AWS). Unfortunately the first potential friction mentioned in the article is regulation. I’m not about to sit here and make a case for monopolies. Anti-trust regulators have a specific threat to monitor. But, sadly, the authored mention competition only in passing while identifying Amazon’s primary opponent — the government. The bottom line is that whether or not Amazon survives is not going to make or break our businesses or our careers, for most of us.
Yet, Amazon is a small piece in the large vision I’ve laid out where homeowners can live anywhere in the US while working for companies anywhere in the world. Gone are the days of having to move to the city and then transition to the suburbs remaining within a train or car ride of the city. Now, we can work in Manhattan and then move to Louisville or Detroit or Pittsburgh. We can freelance and never leave Asheville, North Carolina. We can stay with our employer for 10 years (though, admittedly, that’s becoming increasing unlikely for the cohort I’m describing) and live 3 years in Austin, 3 years in Boulder and 3 years in Columbus. Amazon is, in part, a logistical piece to this new lifestyle but more than that, Amazon represents the idea that we’re no longer tied to place. We can commit to a community and commit to home, but we can also opt-out and redefine what homeownership looks like. Perhaps throughout our lifetimes, we won’t all own 2–3 homes within 15–20 miles of each other anymore. Perhaps we’ll own 7–8 all over the country. Or, as I’ve suggested before, perhaps we’ll own a piece of equity and move around the country like a timeshare. I don’t know. But I believe that Amazon is playing into a world where we can easily navigate the necessities — food, clothes, binge-watching television — in order allow for the real focus on ourselves, our families and our contribution. That’s the real power of Amazon. And, of course, Alexa is pretty convenient too. “Alexa! Play White Flag by Joseph.”
Hard work: Millennials do not agree with Trump or share his optimism. According to “a new study of more than 1,000 employers and job seekers, 38 percent of millennials said job growth would decrease under Trump, compared to 26 percent of Gen Xers and 28 percent of baby boomers.” An unemployed millennial need not look back to the campaign for evidence that Trump favors manufacturing jobs to opportunities in a knowledge economy or global marketplace. Just last week, Trump removed certain restrictions on the coal industry to purportedly spur mining and jobs. Dan Schawbel observed that regardless of whether Trump’s strategy is successful in bring back some coal jobs, millennials don’t want a job or future in coal anyway. It’s not that we are too sensitive to shovel coal, but that shoveling coal does not fit in the world we see around us. We all agree that people want to feel connected to their work. Any millennial who refuses to start as an intern or receptionist because it’s “beneath” them despite the position being in the company/industry of their dreams deserves the criticism of every generation. But asking a millennial to shovel coal just to do some work doesn’t make any sense.
The bottom line for real estate finance and financial services is a growing number of people who can afford to buy homes, take risks, invest and save for the future. Thinking that environmental issues, globalization or similar policy decisions are unrelated to our businesses is just plain wrong. We’re in the midst of a changing of the tides. That moment where the swirling waters seem to be going all over the place because it’s not high tide or low tide. Those specific waters can have dangerous undertow and we should tread carefully, but they are also a necessary part of this larger ecosystem, the ocean, providing life and a multitude of other benefits to the entire world. If the American Dream (yes, home ownership) is about hope for the future, these things not only matter to our sales people, our companies and our bottom line but they should matter to us. In many ways, technology and the global reach of the Internet creates a direct connection between our lives and hope or potential for the future. The Internet is imagination at our fingertips. Without a direct connection between our lives and the future, proposals that rely on the past or old views of economic and domestic life in America can’t last. Create that direct connection and make that argument. Then you’ve got something. One observation I’ve made about my own generation is that we are not as quick to judge, and yet we are willing to pivot based on new data, new features or new platforms. This isn’t about old political loyalties it’s about messaging and it’s about connection.
Today’s Thought: There’s always a solution. Too often I find myself problem solving before I’ve fully understood the problem. I’m already starting in on solutions before I’ve even finished comprehending the initial information. This is partly based on the speed we’re expected to answer in today’s business world. It’s also partly because our minds immediately go to a problem we’ve solved before and begin working. On one hand, this is good. We’re effective and deter
mined leaders/problem solvers. On the other, it limits our ability to produce the best solutions.
Taking a breath. Thinking. Asking some key questions. These are all ways to discipline our minds to consider all the information and the best possible solution.
Bonus Content: Ben Giumarra’s Banking compliance newsletter
Quote: “I will study and prepare myself and someday my chance will come.” — Abraham Lincoln