Big Auto vs. The Innovator

Yesterday Michigan Governor Rick Snyder passed Michigan House Bill 5606 (a tip of the hat to a longtime friend and fellow “car brat” who brought the story to my attention), which prevents electric car manufacturer Tesla Motors Inc. from selling vehicles in the state. Snyder, in a signing letter to the Michigan House of Representatives, says that this isn’t really news–the bill just clarifies that rather than using its own franchised network of dealerships, car manufacturers can sell through any franchise. Tesla sells directly to consumers, so sales of Tesla were always illegal in Michigan. Tesla had some damning words to say about the bill:

Not content with enshrining their ability to charge consumers dubious fees, on the last day of the legislative session, the dealers managed to make a last-minute change to the bill in an attempt to cement their broader retail monopoly. Using a procedure that prevented legislators and the public at large from knowing what was happening or allowing debate, Senator Joe Hune added new language in an attempt to lock Tesla out of the state,” Tesla said. “The dealers seek to force Tesla, a company that has never had a franchise dealership, into a body of law solely intended to govern the relationship between a manufacturer and its associated dealers. In so doing, they create an effective prohibition against Tesla opening a store in Michigan.

Either way, General Motors Co. has gone on record as a supporter of the bill, which, in the company’s view, levels the playing field by either forcing Tesla to sell through dealers or bow out of Michigan. Tesla seems committed to its direct-to-consumer strategy, so it looks like Tesla won’t be selling in the Great Lakes State any time soon.

I can’t help but draw parallels between this incident and another time that Big Auto has gone toe-to-toe against an innovator:

TuckerMoviePosterTucker: The Man and His Dream, the 1988 biographical movie, is based on the story of Preston Tucker’s attempt to change the auto industry in the 1940s. His “car of tomorrow”, the Tucker 48, featured several safety innovations, such as a shatterproof glass windshield, roll bar and seatbelts (The Tucker 48 was the first production car to include a seatbelt). In Francis Ford Coppola’s version of the story, the Big Three (Ford, GM and Chrysler) feared competition from the upstart Tucker as well as innovations like seatbelts that implied, in Detroit’s mind, that cars aren’t safe. Tucker’s dream was squashed when he and several other Tucker Corp. executives were indicted for mail fraud, conspiracy to defraud and SEC violations. They were eventually found not guilty, but Tucker Corp. fell apart and Tucker’s dream was dead.

Thinking about U.S./Big Auto vs. Tucker/Tesla brought my thoughts to all the nonbank competition out there today–and whether those nonbank competitors will remain immune from financial regulation for much longer. Of course, the picture in the bank space is significantly more complicated than in the auto industry, with big banks, community banks, credit unions, Big Tech like Google and Apple and small fintech startups all jostling for position.

And as they dig themselves further into the banking space, I think Big Tech and and the smaller fintech firms will come closer and closer to being under the thumb of the Consumer Financial Protection Bureau, an agency that enjoys freer reign than other regulators and relishes its role as the consumers’ protector. At least one law professor believes that Apple Pay already crossed the line. The more financial products and services that ‘Big Tech’ offers, the more they’ll come under the eye of Cordray. If that happens, will the CFPB mark the end of fintech innovation in the U.S.?

4Q14-Cover*If you’re interested in reading about the threat that technology companies pose to traditional banks, check out the latest issue of Bank Director magazine, featuring Jack Milligan’s cover story, “Sizing Up the Nonbank Threat”.

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Where Do You Draw the Line on Data?

SharpPencils_MFIs a national conversation brewing about how companies use consumer data?

In case you missed it, on June 17 the Proceedings of the National Academy of Sciences (PNAS) published the results of a January 2012 experiment, in which Facebook Data Scientist Adam Kramer, along with Jamie Guillory of the University of California, San Francisco, and Jeff Hancock, of Cornell University, manipulated Facebook’s news feed to provide some users with content that was emotionally positive or emotionally negative to see if this resulted in a correlating reaction by the user. Kramer, in a Facebook post, clarified the research, saying, “we care about the emotional impact of Facebook and the people that use our product.

Facebook Founder and CEO Mark Zuckerberg has so far been silent on the matter, but today the Wall Street Journal reported that COO Sheryl Sandberg said:

This was part of ongoing research companies do to test different products, and that was what it was; it was poorly communicated.”

“And for that communication we apologize. We never meant to upset you.

The apology is a bit “I’m sorry if I offended you”, but if my own Facebook feed is any indicator, the social media giant will be OK. At any given moment you can read the results of my friends’ latest BuzzFeed quiz on their spirit animal or where they should go on a time machine. (Guess what? BuzzFeed is using your data too.)

I don’t know if it’s indicative of my generation–I’m firmly in the middle ground between Gen X and Gen Y–but I typically don’t get bent out of shape about how my data is used. Data is a part of my daily life, and I know the old Economics 101 credo–“There’s no such thing as a free lunch”. Facebook has to benefit from its user base. And data is really, really valuable.

But Facebook wasn’t transparent about how the data was used.

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Training a New Generation of Bankers

Eighty percent of 2014 graduates expect a formal training program from their employer, but less than half of recent graduates say that this actually happens.

It’s all about Millennials these days, isn’t it? This Viacom study predicts that the banking industry is at a high risk of disruption at the hands of the generation born between the early 1980s and 2000, and on its heels, Accenture just released its 2014 College Graduates Survey, which includes this illuminating infographic:

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Yesterday I had a conversation with James Geeslin, vice chairman at Extraco Banks and CEO of Extraco Consulting, who explained to me how placing a high value in employee training translated into success at his bank. About 7 or 8 years ago the $1.2-billion asset bank, based in Temple, Texas, began to place a high priority on employee training as part of a highly successful branch transformation. Turnover at his bank was “off the charts,” he says, but a combined focus on training, compensation, smart hires and developing a career path for employees has cut turnover by a whopping 80 percent. Many of these customer-facing universal bankers end up working their way up through the organization. “They are so good…[other departments] want our consumer employees, which is kind of a downside because we have to hire more, but the good news is [that] we’ve got [our bank’s] culture spread and infiltrated within our company.”

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Following up on yesterday’s post: The Huffington Post just released results of a survey conducted with YouGov they conducted from February 7-9, 2014 to gauge American opinion on the U.S. Postal Services proposed expansion into financial services. Their survey found that:

  • Just shy of half have a favorable opinion on banks, while 74 percent have a favorable opinion on the USPS, but…
  • Seventy-nine percent of those polled are satisfied with the banking and financial services currently available to them.
  • Forty-four percent favor the USPS offering services like check cashing, bill pay and small loans (but not checking or savings accounts). That said…
  • Less than 10 percent say that they would use these services often, and one-quarter say that they would “sometimes” use these services.

You’ll find the complete results here.

Will Banking Keep the USPS Afloat?

toyboatsI’m absolutely fascinated by the latest idea (though not an old one) that the United States Postal Service should offering banking services, but can’t help but think that this is more about keeping the USPS afloat than helping the unbanked. That doesn’t mean it won’t work, but banking ain’t easy, y’all. As Billy Beale, CEO of Union First Market Bankshares Corp., said at Bank Director’s Acquire or Be Acquired Conference last month: “Banking isn’t complicated. It’s complex.”

The USPS has been bleeding money for years, suffering from the dual challenges of keeping pace with an increasingly technological population relying less and less on traditional mail coupled with its obligation to contribute $5.6 billion to retiree health care benefits–a payment the agency failed to make last year. The USPS ended 2013 with a net loss of $5 billion, and has posted losses for 7 consecutive years.

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What Can Banks Learn from the Waffle Taco?

Taco Bell is testing a waffle taco, a product (I will not call it food) that gives me the creeps. While it might be your idea of a good breakfast, the thought of mystery sausage wrapped in a waffle from Taco Bell is just wrong.

Cleverly so.

This is a country that treats the annual return of the McRib like a celebration. College and high school kids will line up in droves for this. Based on the wild success of the Doritos Locos Taco, Taco Bell could have another hit on its hands.

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Diversity of Thought

Extrovert-Introvert_o_130380I recently read Susan Cain’s Quiet: The Power of Introverts in a World That Can’t Stop Talking. I can’t recommend the book enough. Certainly it spoke to me as an introvert – it’s more typical for me to spend a Saturday night curled up with a good book – but the book also speaks on a deeper level of understanding how introverts and extroverts can differ, yet work together.

One theme I pulled from the book is that you need diversity of thought to run a successful business. Yes, you need big, vocal extroverts that can charm a crowd with their charisma and bravado. But you also need the cautious introvert quietly waving the red flag when you’re making a risky move.

American business tends to laud the extrovert: we love the brashness of mavericks like Richard Branson and Mark Cuban. However, Susan Cain, as quoted in this Time article, feels that the culture of the extrovert played into the financial crisis:

I don’t want to be too simplistic because obviously it was caused by many different factors. But I think one underappreciated role is the fact that Wall Street has such an extroverted culture and bold risk-taking. It doesn’t appeal to the type of person that is more cautious and pays attention to warning signs. What happened is that over the last few years, those types became more and more discredited because it seemed as if their warnings were false. There was one bull market after another. Even those who had doubts didn’t feel empowered to express them.

I can’t help but wonder how many introverts serve on boards – particularly risk committees – today. Yes, the world needs risk takers – but we also need those introverts quietly saying: “Hey, wait just a second. Should we take this risk?”

The Bank Director team is looking towards our biggest event of the year – Acquired or Be Acquired! Al Dominick looks into growth options for banks as we approach the event.

What do you think of GoBank?

What works – and what doesn’t – on KickStarter.