Saturday Cup of Joe: a lending and tech(ish) newsletter from Detroit
Friends & Colleagues,
SCOJ #108. A short week that feels twice as long. Am I right? The last few days have been jam packed with meetings and events. The week culminated in a charity gala at the Michigan Opera Theatre. We attended with our friends and had a great time supporting a great cause. Next week, we’re headed “up north” to Leland, Michigan. A week focused on family and fun.
As you and your organization enter the summer, what are your big goals? What are the changing market and changing economy doing to your business? This week, the Harvard Business Review looked at when to invest in the business. There are questions about when to invest and when to look into things like Blockchain or other innovations.
Thanks for reading and I hope you find this week’s commentary useful.
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Question: What would happen if technology made it possible for a platform/network to be more efficient than a corporation? This is the question George Zarkadakis asks in his article about the efficiency of the modern firm. Zarkadakis cites Coase, who won a Nobel prize for his theories about the efficiency of the corporation. That was 1937. Today, “thanks to software, the internet and artificial intelligence, the expenses that Coase identified can now be reduced just as well with tools from outside the company as they can from within it.”
Platforms differ from corporations because the platforms bring together creators/suppliers and consumers. Platforms make money simply by charging a fee for bringing together creators and consumers, for making an efficient marketplace.
The problem happens when the platform funds limited owners, not the content providers or users. What happens when the platform distributes management, decision-making,, and profit across the participants instead? A distributed platform is one where smart contracts govern activity and tokens are distributed for voting and profit-sharing. These types of distributed organizations are very, very new but offer an alternative to the traditional corporate structure where all the resources, employees and tasks must sit under one “roof.”
Sound too good to be true? It is…for now. The author notes, “Blockchains cannot, at present, process the huge number of transactions that centralised software systems can; and for technical reasons, the amount of energy it takes to secure a transaction on the blockchain increases over time.” At the same time, the decentralized platforms have potential. A network of cells or platforms could actually function like a barter economy for products and services. It lines up with market capitalism in many ways and may provide a structure of business for the future. Until then, it’s something to consider because this is how entrepreneurs and many designers and, increasingly, users think.
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This week in Fintech: Lawyers get in the mix. A law firm built on blockchain and using distributed ledger technology to organize the practice has made national news. You’ve certainly seen me endorse Symmetry Advisors in previous weeks. This article highlights more lawyers jumping into the fray. Overall it’s a good thing for Fintech and blockchain, but it’s still a slow go encouraging adoption of new technologies.
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Granted: This new feature on Adam Grant’s website is called Wondering and allows anyone to submit a question. Check it out. Here’s one that I was interested in:
The question was submitted by Rhytha (Pakistan). QUESTION 2 — Why do assholes win sometimes in the long-run, when you say they shouldn’t?
“When assholes win, it’s because we let them get away with it. We let it happen when we build cultures that only prize individual achievements. We promote people who produce short-term results, ignoring the long-term damage they do. We keep people around who treat others like dirt because they’re “indispensable,” when that’s usually a myth of their own creation.
And we let it happen when we say yes to them in our own lives. We grant favors because it’s easier to give some quick advice than to confront a bully. We recommend them for jobs because it’s easier to get rid of them than to hold them accountable. We reward their behavior and create a world where it’s the norm. When we accept it, we make it acceptable.
For more info, read The Asshole Survival Guide by Bob Sutton. And here’s a post I wrote on changing a selfish person’s stripes.”
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Decision-making: I was in a fascinating conversation with a colleague this week and he said, “the goal is to be a subject matter expert in decision-making.” I couldn’t agree more. It was the articulation of something I had been looking for as I thought about my future. Leaders are decision-makers. The better we can become at thought-process and decision-making, the better leaders & executives we’ll be. I want to be a subject-matter expert in decision-making.
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Mortgage news: The Saturday Cup of Joe has covered mortgage industry news from time to time. Lately, I’ve avoided it because nothing has been that unique or interesting. This week, several friends sent me a Bloomberg article profiling mortgage brokers. Since every lender where I’ve worked since I started in consumer finance has accepted home loan applications from mortgage brokers, this is always of interest to me. Mortgage brokers focusing on different aspects of the market have success in our industry. This article looks at one broker focusing on credit repair or credit building consumers. Thought it was interesting to pass along.
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Let’s talk corporate wealth: The S&P 500 is set to return $1 Trillion (with a T!) to investors this year. For instance, the “first four months of the year saw 169 companies in the S&P 500 index increase their dividends while no companies cut their shareholder payouts — an event not seen since at least 2003.” In response, the Harvard Business Review looked at what CEOs could or “should” do with the money. Some companies have announced year-end bonuses or wage increases. Others will, inevitably, drive up the stock price by buying back shares.
The question is — why are CEOs so reluctant to pursue bold new investments in growth? I was into this question on so many levels. First, we’re starting to see consolidation in the mortgage industry thanks to increasing rates. So this is a topic (when to invest and when to cut) that hits close to home in our industry. Second, I’ve written before about asking yourself who in your organization is looking to 10x the company and who is working to 100x the company. Isn’t real innovation in the 100x? Third, looking purely at value, accelerating growth (especially when competitors are not investing) is the best way create value/wealth, rather than returning capital to shareholders. It’s a tough call, admittedly, but it seems like a $1 investment today is worth more than $1 saved. It’s similar to an interception returned for a touchdown in football. It went from being 6 points in one direction to 6 in the other, a 12 point swing. Shouldn’t we look at investment in innovation / growth the same way? Pick your spots and go!
What will you be doing in the next 30–60–90 days to think about this?
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“A mind that is stretched by a new experience can never go back to its old dimensions.” — Oliver Wendell Holmes, Jr.
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Compare median income to housing prices and you’ll find that many cities are out of whack, particularly those on the West Coast. For instance, 4 of the top 5 and 8 of the top 10 are cities in California. In Los Angeles, it requires the equivalent of 10 years of income to be able to afford a house. By contrast, the most affordable metro areas include Harrisburg, Cincinnati, Cleveland, and Pittsburgh. In those cities, home buyers require approximately 2–3 years of income to be able to afford a house.
Once again, the #NextBelt cities in the Midwest and former Rust Belt are the value picks. If you want quality of life with affordability, this is the place. #NextBelt
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Today’s thought: I’m curious if it’s useful to think of your teams or your employees as contracts. For instance, there are two types of contracts — time & materials or deliverables. The T&M contract pays based on just that: time & materials spent on the work. A T&M employee is simply working for the effort. The hours spent on the work are paid regardless of the outcome, for the most part. A Deliverables employee is paid on outcome(s). The deliverable is the value. My sense is that a good team is made of both T&M and Deliverables team members but that Deliverables have the upside and the value. Show movement and show progress. Who do you want on your team? How do you think about your team’s chemistry?
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Quote: “It’s easy to love people in memory; the hard thing is to love them when they are there in front of you.” — John Updike
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Bonus Content: Photo essay of the New York City subway in the ’70s and ’80s. I’ve always loved photos of classic America but specifically New York City. Hope you enjoy.
Continued Success,
