May 15th, 2013
Good McKinsey article about how to create a powerful risk culture without turning the organization upside down, and some related thoughts by Chris Skinner.
The most effective risk managers we have observed act quickly to move risk issues up the chain of command as they emerge, breaking through rigid governance mechanisms to get the right experts involved whether or not, for example, they sit on a formal risk-management committee. They can respond to risk adroitly because they have fostered a culture that acknowledges risks for what they are, for better or for worse; they have encouraged transparency, making early signs of unexpected events more visible; and they have reinforced respect for internal controls, both in designing them and in adhering to them.
The values and culture need to focus back upon doing what’s right for the customer and society, being ethical and moral, open and transparent, trusted and secure.
These are all things that banks used to be, some say, and should be again. In particular, like lawyers and doctors, banks should have a code of conduct that they adhere to and that, if broken, would result in being struck-off.
Now these are things that some feel are already there.
We do have an industry code of conduct regulated by our Chartered Institute of Bankers and Institute of Financial Services. However, these are nowhere near as formalised or respected as the Law Society or the Medical Council in the legal and healthcare services, so being struck off by the Chartered Institute of Bankers does not strike fear into our hearts.
May 2nd, 2013
Eric Brewer about CAP Twelve Years Later: How the “Rules” Have Changed:
The CAP theorem asserts that any networked shared-data system can have only two of three desirable properties. However, by explicitly handling partitions, designers can optimize consistency and availability, thereby achieving some trade-off of all three. In the decade since its introduction, designers and researchers have used (and sometimes abused) the CAP theorem as a reason to explore a wide variety of novel distributed systems. The NoSQL movement also has applied it as an argument against traditional databases. [...]
The “2 of 3″ formulation was always misleading because it tended to oversimplify the tensions among properties. Now such nuances matter. CAP prohibits only a tiny part of the design space: perfect availability and consistency in the presence of partitions, which are rare. Although designers still need to choose between consistency and availability when partitions are present, there is an incredible range of flexibility for handling partitions and recovering from them. The modern CAP goal should be to maximize combinations of consistency and availability that make sense for the specific application. Such an approach incorporates plans for operation during a partition and for recovery afterward, thus helping designers think about CAP beyond its historically perceived limitations.
And Todd Hoff recently wrote about a later presentation Brewer gave, and that motivated me to finally blog about above article… Myth: Eric Brewer on Why Banks are BASE Not ACID – Availability Is Revenue:
In NoSQL: Past, Present, FutureEric Brewer has a particularly fine section on explaining the often hard to understand ideas of BASE (Basically Available, Soft State, Eventually Consistent), ACID (Atomicity, Consistency, Isolation, Durability), CAP (Consistency Availability, Partition Tolerance), in terms of a pernicious long standing myth about the sanctity of consistency in banking.
Some good examples about banking and ACID requirements… or the lack thereof, and how that risk is contained.
April 18th, 2013
Building your brand: If you are in the start-up world, either as an employee, founder, investor or aspiring to do any of the three, it is important to thoughtfully build your online and offline identity. The beauty is that these efforts are valuable for anything you might want to do, and, in fact, is great practice for what you’ll do when you land your dream role. Develop a thesis and take a stand. How can you add value to the community discussion? Start writing, but with a purpose. It forces clarity of thought, opens up your mind and lets people get to know you better. Create opportunities for speaking in public and sharing your ideas with others. This will help bridge the online/offline gap and build a more personal identity, as well as providing a forum for feedback and debate instead of living inside your head.
Well said, and equally important also in corporate land; the laws of success are similar.
April 15th, 2013
Well, as we now know from Lanny Breuer and Eric Holder, too-big-to-fail is also too-big-to-jail. We now have admissions by the federal government that, in fact, this behavior was not extensively examined or investigated because of systemic issues.
It raises an interesting point, doesn’t it? Because if now, as the senior member of a bank, or the board of a bank, I know that there are no criminal penalities for breaking the rules, don’t I have a fiduciary responsibility to my shareholders to actually play fast and loose? Because if I get caught, that’s just the cost of doing business? I know it’s a frightening thought, but if carried to its logical extreme—if truly people believe that because of their size, they can’t be prosecuted, it actually brings forth a new issue of moral hazard extreme: illegal behavior.
That’s why equality under the law is an important concept – one that is being violated now.
Taking it to the extremes.
April 15th, 2013
Bitcoin’s record highs and the ensuring surge in hacking attempts and thefts may be grabbing headlines. However, beneath the chaos, Silicon Valley’s best-known venture firms are finally starting to make real bets around the crypto-currency.
Much better than betting in Bitcoins is to betting on the Bitcoin ecosystem: VCs are funding more and more startups in that space.
April 11th, 2013
It’s amazing how often Monkeys and Money come up in conversation. First, there is the proof that money is in our DNA like sex. Monkeys proved it in a Yale University exercise back in 2009.
Every now and then, there’s a truly heart-warming story about crowdfunding, like the case of the school-bus monitor who was tormented by kids on her bus and wound up with a windfall of $700,000. [...] If you are going to appeal to the crowd for support, then you are essentially striking a bargain with them: they provide money, but you have to do more than just provide whatever the end product is. You have to be as open and transparent as possible and do whatever you can to maintain the trust of those supporters, and that changes the dynamics of the situation completely. And once that trust is lost, the game is effectively over.
Trust is key everywhere, the difference is that with crowdfunding, everybody will engage, and everybody will know, not just the few investors you’re directly pitching your idea to.
March 30th, 2013
Simultaneously [with the Cyprus crisis], the value of BitCoin shot through the roof.Why?
Is it because BitCoin is well designed as a replacement for the currency that currently operates enormous economies in seventeen industrialized nations? Could it possibly be used as a replacement for the currency that underlies trillions in financial instruments, corporate debt, sovereign debt and more? Not even close.
So what does this signal? A crisis of faith.
The market is telling the world’s central bankers that their attempts to neatly control all of the world’s economic activity from a handful of cities (controlled by apparatchiks from a handful of universities) are a failure.
Bitcoin is seeing widespread support like no other alternative currency before.
March 20th, 2013
[...] banks need to think about how they reconstruct themselves for the 21st century. What this really comes down to is that banks are becoming pure managers of bits and bytes of data. It is the data that has the value today and it is the data that is the basis of competitive battles in the future. Data is our greatest asset and raw material, not capital or people.
Think that one step further, and you end up with a radically new offering… Dropbox for strictly confidential data.
February 27th, 2013
As part of its effort, Affirm will use Facebook for authentication of consumers, and also use a number of other social and data signals to assess risk. It will then guarantee payment to merchants — who will pay Affirm a fee — after this check.
“We are trying to get as close as possible to one-click, which has always been the case on the desktop,” said Levchin in an interview today. “In mobile, it has become an imperative to be able to buy it now or you lose a customer quickly.”