Getting Out of the Doghouse

Hey, finance professionals: we've got a problem.  Really we do.  In case you haven't noticed, the Great Recession of 2008/9 has a Villain (with a capital V) and it's you and me.  I know, I know, we did nothing wrong; we're generally decent, hard working, well-intentioned souls who humbly ply our trade in a peculiar, esoteric, and well-paying corner of the economy.  But we don't actually produce anything tangible, which makes us an easy target when a lot of people who do actually manufacture real "stuff" are out of work.

And, indeed, the demagogues swirl like turkey vultures seeking carrion.  Who is blameworthy for the sad state of affairs in this country?  The cry rises from the frenzied mob: Banks!  Private Equity Firms!  Mortgage brokers!  Investment banks!  Venture Capitalists!  Money Managers!  MBAs!  (Barney Frank busies himself handing out torches and pitchforks while Timmy G and the Treasury crew ready the shackles.)

But even our friends are enemies in this battle: over the summer I helped a cousin work through a mortgage refinancing.  Some Excel whiz-bangery did little to clear up a confusion born of too many options marinated in too many layers of uncertainty.  "Forget the spreadsheet; what's the best choice for me?" asked my cousin.  "It depends," I replied, dusting off an all-purpose answer.  "What do you think the future holds?  How long will you live there?  Are rates going up or down?  What will your tax situation be?" etc., etc.  "It's all so confusing," was the reply.  Then, my cousin's tone changed to bewildered frustration: "you finance people have made this stuff so complicated, and each choice seems like another opportunity for people to get ripped off."

And then it hit me: the average person doesn't want life to be an HBS case.  The Socratic method may work well in air-conditioned, wi-fi enabled classrooms with sage professors guiding a meandering discussion, but people live in the real world where decisions have consequences and costs -- sometimes big ones, sometimes immediate ones.  And all of the optionality increases anxiety, not to mention adding complexity to once-simple account statements.  I know some pretty smart people who just don't understand their cell phone bills.  The dis-utility of complexity has exceeded the utility of choice optimization. 

But we can help, finance people!  And burnish our tarnished communal reputation at the same time!  Here's my modest proposal: what if everyone in finance, insurance, and real estate committed to doing a few hours a month of pro bono work?  Maybe we could participate in "office hours" for half a weekend day once a month?  We could use bank branches; after all, the government owns a lot of 'em now.

Sure, you'd have to pass some good Samaritan protections so that lawsuits wouldn't ensnare the well-meaning, but imagine the good (and goodwill) that would arise from an army of savvy people helping oldsters understand their cable bills, helping young couples think about their mortgage options, helping college graduates set up their 401k plans.  Anything that has to do with money and is even remotely intimidating would be fair game.  (Of course, it would have to be a marketing-free zone.)

You could even make it a continuing education requirement for the first five years after attaining professional licensing or designation like a CPA, CFA charter, Series 7, CLU, or CFP, with subsequent participation encouraged.  I suspect the idea of ongoing participation could elicit some chortles on the 5:26 out to New Canaan, but remember, guys: that cat next to you from Ropes & Gray's New York office could be coming back from a day at the NYC Family Court Legal Service Project.

My old buddy, the Prof, suggested making some threshold of pro bono activity a requirement for FDIC insurance.  He even had the idea of creating the equivalent of "patient advocates" for thornier cases.  Maybe we could establish industry-funded fellowships to support laid-off or on-sabbatical professionals.

You could even imagine some kind of clearinghouse for people that incorporated the best of Web 2.0: feedback ratings, maybe even a "bid system" for appointments or specialists.  Think of it as a mashup of Craigslist, eBay, Google Maps, and us.  You could even throw in Twitter for good measure.  We can fix this, we have the technology.

Now the last thing I want is to create more bureaucracy and regulation.  But we have to realize that the regulation train has left the station and is bearing down on us at full steam.  And indeed, there are a lot of folks in the chattering classes who would portray finance professionals as the looters that smashed the storefronts of the economy, cynically plundering from the earnest masses.  Maybe the best thing we can do for ourselves and the economy is to pick up a broom and start sweeping up the mess.  

Comments

[Sam]

This idea has merit, as in we should all do it now. I say that not because my afternoon today was spent doing non-profit work... but because every year since i was in high school I've done non-profit work. This is not as many years as Chris (sorry!), but its enough to learn a few things.

And, if there is one thing I have learned its that people take advantage when they don't respect. You cannot respect unless you can understand intimately what it feels like to be on the other side of the trade, or have to 'earn it' (rather than dish it) on the other side of a venture round. This is why i believe venture has gone off kilter a bit/a lot: not enough 'earning it' and too much 'dishing it'.

[Ian Fisk]

Chris -- This is what I manage for a living. And there are about six other similar programs. Give me a call (202 462 2943) anytime to discuss. My shop, Wall Street Without Walls, has been around for 10+ years. Others (FSVC, BwoB, etc.) are newer.

[Mark]

I think the beauty of this idea is the one-on-one counseling (instead of NP to NP). But I'm not sure it would be sustainable without a minimal level of economic consideration.

What about creating a national organization that requires a minimal monthly fee from consumers of $5 or $10 dollars but would have quasi-volunteer "counselors" in cities across the nation holding office hours. This might solve the liability issues and create some capital to build websites, distribute educational materials, and perhaps pay a meager amount to the volunteers to cover gas, etc.

If I needed help I could enter my zip code on the website and it would pull up the closest volunteers, when they are holding office hours, and what their background/expertise are. And you would know that no matter what state you are in, you could find somebody.

I'm just thinking out loud, very interesting idea. Back to work.

[Andrei Vorobiev]

Chris, thanks for the invitation.

Well, perhaps there is no need to re-invent the mouse trap. Here is one already successful formula for getting out the Dog House to the White House:

A few days ago Barack Obama presented one financier with the Congressional Medal of Honor. I am not sure the financier needed the recognition – he already has the Nobel Peace Prize, is the most popular man in his country, and people there (and even in Chicago, where I met him) often kneel before him... Yes, I am talking about Muhammed Yunus, Bangladeshi professor turned financier, the father of microfinance.

Among the world-wide respect that he and his many followers in microfinance have achieved, two stand out: they proved beyond reasonable doubt that EVERYONE can be an entrepreneur, and that you can teach financial literacy even to absolutely ILLITERATE people.

Obviously, few pros of corporate finance can redeem their reputation by switching to microfinance or giving money to the Grameen foundation. I read somewhere last week that India, for example, already has a glut of micro-finance money chasing potential borrowers. But the brainy among you can think up of something reputation-building that doesn’t involve yet another educational website for those who are too busy (or lazy) to use the existing ones.

Well, this ex-professor thought of one scheme relating to Private Equity (Chris has heard about it) which involves doing what PE pros already do, only faster, easier and more profitably. I won’t inundate you with details, but for those interested to hear it, I am anvoro@gmail.com.