Editor's Note: In this blog, we discuss Nassim Nicholas Taleb's book Antifragile and how it relates to the financial services industry. As consumers become more connected than ever before, it's crucial that banks and credit unions evaluate the industry deeply and create digital strategies for long-term success, not just using what's new.
Nearly every day since the iPhone was introduced, somebody somewhere in some blog, article, Op/Ed or some other industry “pulpit” has declared the death of banking at the hands of digital disruptors. Some of these voices have come from neobank apologists or industry visionaries who seem to care more about their personal "brands" than the actual challenges facing the industry. Others spend time promoting their technical prowess and bashing vendors based on their achievements at banks with fewer assets than most of the wealthiest two percent of the US population. Many are self-congratulatory types whose proclamations are seldom relevant or scalable.
One of my favorite authors is Nassim Nicholas Taleb. His most recent publication entitled Antifragile is one of a trilogy that is a summa of sorts. I say “of sorts” because summae, by name, “sum up” a field of study. Taleb may have created the field for which he provides the summary, which – to my knowledge – is not typical with this type of work. Another thing not typical about Taleb is his acerbic wit when it comes to commentary on what most of us consider the establishment. I would assess him to be a Cynic in the philosophical sense if I did not know him to fancy the Stoics more.
Taleb’s sweep is broader than FinTech pundits’ but my opinion is that he would not fancy those I have described in the opening paragraph anymore than he fancies investment bankers, futurists, and economists. In general, you see, his rancor is aimed at anyone who dares to make predictions about the future . There are two reasons for this disdain: 1) All predictions about the future are, ultimately, wrong to some degree – usually to a very great degree – and 2) Studies in heuristics show that people are more likely to take risks if those risks are accompanied by predictions (which are inevitably wrong).
In other words, predictors, pundits, self-congratulatory small timers and those of a similar ilk who love to tell us what is coming cause real harm that extends far beyond that caused by those predictors we love to hate, known as meteorologists. In the FinTech industry, this harm caused by these prognostications is amplified by the theory of “shiny objects” that tends to preoccupy some of the sources from which we get our industry news. Give me a quote or storyline based on someone who actually spends weekdays and too many weekends trying to figure out how to keep his or her midsized or regional financial institution competitive in this dynamic environment. Someone with skin in the game and not people trying to stoke their personal brands in the media – social and otherwise.
The industry, especially its banks and credit unions, cannot afford to be distracted by would-be FinTech rock stars because time is becoming of the essence when it comes to digital transformation. The Internet is not going away. Smartphones, tablets, smart watches, voice-activated assistance, connected cars and smart TVs are not the end of the story. In fact, they will be joined by a dizzying array of other similar points of connectedness that have not yet been deployed or even imagined. Establishing a digital strategy that is viable for the future of a bank or credit union goes beyond the scope of many of the voices publicized in FinTech that bear none of the risk of their advice being wrong.
There are exceptions to this statement whose points of view are well researched and are built on decades of experience, some of which were inside a financial institution: e.g., Ron Shevlin, Jim Marous and Chris Skinner. Shevlin provides commentary and insights with a tone I particularly like - snarky - and that is of the same ilk as Taleb's approach. I also like the insights of Jost Hoppermann - especially his discussions of The Digital Core, Baroque castles (as metaphors for back office processing at FIs) plus the Potemkin effect (a descriptor for all those lipstick on a pig digital banking solutions more style than substance) - and Stessa Cohen who was the first analyst in the industry with the hutzpah to say the legacy online and mobile banking products were DoA in the current environment.
Later this week (or early next depending on travel conditions) I want to share with you some research recently done by Forrester. As I will explain, I disagree with the Forrester on what is making time of the essence regarding digital transformation. That, however, is a minor point as the conclusions they posit are worth consideration.