Last year’s revelation that hyper-competitive, goal-crazed Wells Fargo salespeople opened millions of bogus accounts that customers never asked for already cost the bank’s CEO his job. But the fallout keeps growing. Today an outside law firm hired by the Wells board released a tough-talking report that put the onus chiefly on the banks’ former retail chief, Carrie Tolstedt (Reuters).
Wells said it would penalize Tolstedt and former CEO John Stumpf a total of $75 million more than it already has. These penalties are known on Wall Street as “clawbacks.” The label makes them sound difficult and unpleasant, which is exactly what executives want the world to think they are.
Mike Cagney, founder and CEO of SoFi, on his ambitions to get bigger (and better) than the Too Big To Fail Banks
Mike Cagney, the CEO of financial services startup SoFi, does not lack for confidence. But then again, confidence is what you need to raise billions of dollars and take on some of the largest and most powerful companies in the world — global financial giants like Chase, Citi, and Bank of America. To get there, Cagney’s got a pretty clever playbook: He’s partnering with those same banks, who buy the loans he originates and profit from SoFi’s unique skill at acquiring new customers.
CMO Jonathan Craig on Schwab culture, philosophy, and staying ahead of fintech competitors
Charles Schwab may be forty years old, but its founding ethos of industry disruption remains central to its mission, according to Jonathan Craig, Schwab’s CMO. In a wide ranging interview, Craig covers how the company continues to focus on cutting cost from the financial services industry, how it competes with nimble “fintech” competitors, and how to bring trust back to a sector badly damaged by its own failings during the Great Recession of 2008–2009.
The real reason Wells Fargo’s CEO had to go. Why did Wells Fargo CEO John Stumpf lose his job while so many other banking bosses never paid a price for their company’s malfeasances during the financial meltdown? In Slate, Helaine Olen argues that the Wells scandal, unlike the mortgage-finance fiasco, involved easily comprehensible bad behavior. Derivatives and credit-default swaps are tough to understand. Opening fake accounts without people’s permission? Easier. Stumpf’s old-school blame-throwing and responsibility-ducking didn’t help him. The Wells story gives us one more reminder that if your desk is where the buck stops, don’t try to duck.
What we can learn from Zenefits vs. Gusto. Zenefits was a hard-driving startup that provided software for human-resources management and that was growing like crazy until it smashed into a wall. The revelation that Zenefits had created a tool for salespeople to cut corners on insurance-licensing requirements toppled the firm’s founder and left the company in crisis. Now it’s seeking a comeback (Farhad Manjoo in The New York Times), promising more transparency and a revamped product. But while Zenefits was doing its move-fast-and-break-things act, a smaller competitor named Gusto that provided similar services took a slower, less flashy route, emphasizing trust over meteoric growth. Now Zenefits is desperately trying to persuade the marketplace to give it a second chance — while Gusto snaps up some of its customers. This story is as close as we may ever get to a controlled lab experiment in the long-term value of business ethics. The findings are exactly what you’d expect: Playing fast and loose just doesn’t pay.
Markets are putting Deutsche Bank through a safety drill. If we’re lucky, the rustle of investors fleeing Deutsche Bank late this week will prove to be a minor hiccup in the world of capital. If we’re unlucky, it will be the first domino to fall in another wave of financial disaster like the one we experienced in 2008. Deutsche Bank’s recent round of woes started with a $14 billion fine by the U.S. government for the bank’s sale of mortgage-backed securities during that last bank crisis, which sent investors for the doors (Fortune). Along with the recent scandal at Wells Fargo, which revealed that thousands of its employees had for years been opening fake accounts to meet sales incentives, Deutsche Bank’s problems remind us that, as a result of hard lessons learned a decade ago, our banking system’s safety protections got some upgrades, but they haven’t actually been tested yet. And if they’re not up to the next crisis, then we’re all going to be stuck paying the price — again.
When is a poll not a poll? When it’s an online survey in which anyone can vote and vote again. One of the foundations of data science took a beating in the political arena this week, as Donald Trump crowed over his wins in snap post-debate online “polls” even as the real polls started tilting in his opponent’s favor (CNN). Real polls, scientific ones, try to map the reality of public opinion through a process of weighted sampling. You might only ask 1000 people what they think; but if those thousand respondents match the national population in race and religion, party affiliation, income, and so on — or, if they don’t, you weight them a bit so they do — you’ve got a snapshot of something real. But if you just open the tap on the internet and ask anyone to vote, your results are nearly worthless. Trump’s wins are like Hank the Angry Drunken Dwarf’s victory in People’s “Most Beautiful People” online poll; a self-selected sample is just a gauge of partisan excitement level. In a larger sense, this overvaluing of online polls reflects our deeper confusion over how to use all kinds of metrics. By turning yardsticks into targets, we break them (Quartz). Your poll becomes someone else’s campaign; your Key Performance Indicator stops telling you anything useful because everyone in your organization is trying to game it. Without context and understanding, raw data is worse than useless — it can be toxic.
What’s at stake in the automation-prediction game. “Intelligent agents” is what we called them, once upon a time, these programs that would perform tasks for us without our telling them. And that sounded great! An agent works for you, right? But now those software bots have joined up with hardware robots, drones, and autonomous vehicles. And if a new report from the Forrester research outfit is right, they might be putting us out of work (The Guardian). Forrester says that, “by 2021, a disruptive tidal wave will begin”: Robots will already have eliminated 6 percent of U.S. jobs — starting with customer service reps and taxi and truck drivers — and more will quickly follow. If true, it’s a grim prognosis: We don’t have nearly enough public resources in place to retrain that volume of unemployed workers or to give them a safety net. But wait! Here’s another report, this one from Goldman Sachs (Bloomberg), that says not to worry: We’ve survived similar industrial transitions before, and they will open all kinds of new opportunities for those who know where to look. We just need the government and other public institutions to manage the transition in a smart way. That’s when you might take a look at our deadlocked Congress and trivialized presidential election — and wince.
Big Ag keeps getting bigger. Bayer’s $56 billion buyout of Monsanto, if approved by regulators, will further consolidate the hold of a handful of agro-chemical industrial giants on the world’s food supply, writes Brad Plumer in Vox. Monsanto holds a big slice of the global seed market, but its trademark Roundup-Ready GMO crops are already losing ground, as bugs gain resistance to the pesticide. The BigCos engaged in this frantic mating dance — not just Bayer/Monsanto but Dow/Dupont, Syngenta/ChemChina and others — are all betting that the bigger they are, the better they’ll be able to influence governments and regulators in their favor. They might be right. But global consolidation only deepens the industry’s commitment to the path of mammoth monoculture, even if that hasn’t worked so well for Monsanto’s pesticide-resistant crops. If we hope for sustainable diversity in our food supply, we may need a little more of it in the companies that support our farmers, too.