Jun 12, 2017
Saturday Cup of Joe: a lending and tech(ish) newsletter
Friends & Colleagues,
SCJ57. Vacation. Some of you might be wondering why I still decided to send out this email while on vacation in Northern Michigan. I wanted to make sure I stay connected to my writing and my reading. Vacation offers more time for both. It also seduces me into long nights in front of a campfire, but that’s the fun part, right? Another reason I wanted to maintain my weekly email was a connection to my friend & brother, Bradford Frost. As you all have read in the past, Brad was diagnosed with rare, aggressive kidney cancer on October 12, 2016 and passed away on January 22, 2017. Brad has a twin brother named Dave. Brad & Dave committed to spending every birthday together and for 35 years, they did. When Brad passed, I agreed to spend every birthday (June 4) with Dave. So far so good. One for one.
Brad’s mission statement more than anything else he believed was “honor your commitments.” Later after we started Defending Your Life, we all latched onto “live courageously” and it remains an exciting driving force in our lives. But “honor your commitments” is how he lived. And so, this has become my commitment and I want to honor it.
At the same time, this week’s newsletter is a bit of a different in that it’s a hodge-podge of quick observations on a few articles I couldn’t resist and brief looks into some bigger questions that drive our businesses and our lives.
Have a great weekend and wonderful summer season.
This week we look at:
- Risks of PACE loan programs are many (Of Interest)
- A mission statement is critical to your career (Got Me Thinking)
- Perhaps the Nextbelt will attract single entrepreneurs (This week in Detroit)
- Selling more than the American Dream (A Look Ahead)
- 10 shortcuts to overcome obstacles or challenges (Walk the Talk)
- Moment of non-business
- Thoughts, bonus and quote (all the way at the end)
Of Interest: I always bristle at comparisons that began “this is eerily similar to the subprime mortgage crisis.” Even if true, it doesn’t do either side of the equation justice, in my opinion. I read some reporting in the LA Times this week about PACE loans and several California companies leading the lending in this area. Unfortunately, the thought that popped into my head had nothing to do with mortgage crisis. The pattern described in the article is simply in-person telemarketing. We’d all agree that the pressure on the consumer is heightened by in person / door-to-door sales. As a result, it sounds like the controversy here is size & scale. The reality is these are niche financing products that are being mass-marketed as for everyone. That’s the comparison to the subprime mortgage crisis that’s accurate. Otherwise, we’re talking about sales practices that do not attract any attention when the product is available in 6 easy payments of $129.99 but become problematic when it’s $5,500. There’s still some silly part of me that wants the rules to be the same regardless but I know that’s just not the case. The rules change as the cost and revenue increase.
Unfortunately, the perspective of the article leaves out the much larger risk to the mortgage market and the policy questions that arise.
These financing programs, formally known as Property Assessed Clean Energy, are established by governments to help homeowners pay for energy-efficient appliances and projects through loans that are paid back as line items on their property tax bills.
The programs pass the payments collected by governments to lenders that pay and manage the contractors. The criticism mentioned above is one of disclosure and properly informing consumers of payments and risks. There is also a hidden risk to mortgage lenders and banks because the payment structure means unpaid liens are treated as tax assessments or otherwise can take priority over first mortgage loans.
It’s a potential morass on a lot of levels. While there may be examples of the loans used appropriately, overall there is a lot of confusion of how to handle the lending and servicing, particularly around default. If these liens are allowed to take priority over existing, first lien mortgages, it could spell chaos for lenders and loan servicers. And the sales are outpacing the structure. I will be interested to see whether federal PACE legislation or other reforms break through some of the usual red tape or the stories like the one in the LA Times will continue to come.
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Got Me Thinking: CEO mindset. Are you the CEO of your own life? An article in Entrepreneur highlighted the importance of corporate culture and even mentioned the QL “ISMs” as an example. The two things that I picked up on where “culture always starts at the top” and the importance culture plays in decision-making (at the micro and macro level). Ryan Holiday wrote this week about how Eisenhower set the culture as he walked in the room before the D-Day invasion. But in both articles, in every organization and in every person in the need for a core culture. Those core set of beliefs that drive decision-making.
The first time I tried to write a personal mission statement I was pretty self-conscious. It was the June 11, 2016 version of Saturday Cup of Joe: “I will be a thoughtful, candid and articulate communicator so that I can add value to my organization and those I come in contact with so I can have my own organization/team someday (and provide the lifestyle for my family to enjoy.)”
I have since written and re-written it. But it still rings true today. I’m always trying to get more specific on my exact value and the type of organization we’re working toward. If I run into an obstacle, challenge or difficult question, I can always come back to — what value can I add here?
I once heard Matt Damon talking about writing the script for Good Will Hunting and he said they cut any dialogue or scene that did not add value to the story. Similarly, I try to find my specific value in any situation and if I don’t believe I can add value, I don’t over complicate it by trying too hard. Instead, I just try to think in a new and creative way about what or who would add value (more on that below). Then execute on that. Find the value and then engage.
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This week in Detroit: Top 5 city for single men. The #Nextbelt ended up with 3 of the 5 incidentally. Detroit, Pittsburgh and Cincinnati. So, if I can’t persuade millennials on the entrepreneurial opportunities of the #Nextbelt, perhaps a more basic appeal will work. Come for relationships, stay of the character and innovation.
I had jokingly included the above article because I wasn’t in Detroit this week and had fewer updates from around town. Last night at dinner I was asked if what’s going on in Detroit is for real or whether it’s likely to just be limited and concentrated. It’s a question we all address and think about often. The truth is no one knows, but I heard several times from Dan Gilbert on down, recently, refer to education as the cornerstone to the future. There is no silver bullet, per se, but education is the determining factor in the future. Technology may be an equalizer. Bringing technology to schools has never been easier and it is starting to happen in Detroit.
Late last night while scrolling through Facebook, I saw the news that Sheryl Sandberg had visited Detroit and toured several companies including Grand Circus. Her tour coincided with the announcement that Facebook would commit to job training for 3,000 digital jobs in Michigan. Grand Circus would provide the education partnership and digital training would benefit all the local companies including the Big 3 auto companies. It is this type of work and commitment that really changes lives. It is a ripple effect within families, within communities and within regions when education leads to productivity which leads to innovation. Everyone wins. Hopefully this is the type of good news that will only continue each week. I couldn’t help but come back to report it out to you as soon as I could. Thanks.
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A Look Ahead: I had an obvious, but new to me, realization this week. I’m on vacation and took some time to reflect on our industry and the future (as I tend to do). One thing that came to mind was the lack of storytelling in our industry. It is somewhat ironic being that loan underwriting is good storytelling in many ways. Despite being an industry built on storytelling, we don’t tell our own story well. Recruiters and colleagues who are trying to add new members to our industry generally focus on the American Dream and assisting families into achieving their ultimate goal. I think there’s a professional appeal that I don’t hear that often which is that our industry really covers all the areas of entrepreneurship, business and leadership. This might be true of all industries but knowing consumer finance and real estate finance as we do, I felt it was a good way to make this argument. Mortgage loan origination & servicing is part product manufacturing, part service industry, part professional advisor, part marketing and mostly business process management. Our companies offer opportunities to lead sales team, lead operations teams, market either the general concept of homeownership or the specific concept of your company, and/or lobby on behalf of the industry at large, members of our companies experience all different types of business and leadership roles. I would sell our industry against any I’ve come across in terms of the variety of experiences, opportunities and contexts where young executives can grow.
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Walk the Talk: I wanted to pass along a resource I found providing a way to think differently about an obstacle, whether that’s writer’s block keeping you from getting started or a missing link in a project or potential solution. These are just concepts but can help rearrange the issue much like you’d turn over a Rubik’s cube while solving it. Source: Shane Parrish, Farnam Street blog.
1. Inversion — reverse engineering or thinking backward
2. Falsification — think of what would cause the hypothesis to be false. In other words, “pseudo-knowledge” that cause the conditions invalidating the effort
3. (Circle of) competence — know the boundary of what you don’t know
4. Principle of Parsimony — also known as Occam’s Razor, simplest explanation (with the least moving parts) is the correct one (can be used as a challenge proposition as well)
5. Hanlon’s Razor — don’t attribute malice to what might be ignorance; much the same way we think a kid is hungry or tired when they cry (and we don’t assume they are intentionally annoying). Look one layer deeper for the explanation.
6. Second-order thinking — consider the ripple effect of the decision or challenge. The example I’ve heard is at a concert when someone stands up during a song, everyone behind them must stand up in order to see the stage. Try to think downstream.
7. Map is Not the Territory — if a map were to show somewhere perfectly, it would actually be the size and true form of the place. Map is by nature an imperfect relationship to reality. Maps are necessary to simplify reality but don’t let the map deter action. Better to accept imperfect relationships and move on.
8. Thought Experiment — test out the theory with intuition and gut feeling first. It is said Einstein imagined himself traveling on a beam of light as part of the process to solving the theory of Relativity.
9. Mr. Market — Your job is to think like an investor. Whether evaluating a customer, partner or part of your organization, when the others are in a bad mood, sell them a good mood. When they are in a good mood, think what acting in a bad mood might mean. Never go too far in either direction, just balance out the market or other party.
10. Probabilistic Thinking — Everything in life is a probability. There’s a chance, however remote that you’ll be involved in some kind of accident yet we fly, drive and cross streets all day every day knowing we’ve already thought, at least fleetingly, about how rare it is too occur. Thinking in these terms allows action despite some risk by simply identifying the probability.
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Moment of non-business: PBS Newshour profiled one of my colleagues, Ryan, in a piece describing how Ryan turned what appear to be obstacles into opportunity. I think this goes well with what I wrote earlier about that CEO mindset and putting a smile on every interaction. It’s a video and accompanying article. Check it out.
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Today’s Thought: UBE. Ugly but effective. I was lucky enough to play golf this week. I hit a long, low drive that ended up rolling a long way and being in the middle right of the fairway, slightly shorter than I hoped but ideal. My playing partner said “UBE.” I love it. There are so many cases in life where we get so hung up on the U that we discount the E, when in reality if it’s effective, just move on to the next shot or the next hole. Don’t dwell on how pretty it was or wasn’t. I’m definitely going to keep UBE in my rotation now.
Quote: “What is success? To laugh often and much; to win the respect of intelligent people and the affection of children; to earn the appreciation of honest critics and endure the betrayal of false friends; to appreciate the beauty; to find the best in others; to leave the world a bit better…” — Emerson.
Continued success,
