It's the Banks' Fault (op-ed)

Sometimes I hate being right.

I wrote an article 10 years ago called It's the Banks' fault, really. I was frustrated with the financial meltdown, and the government-bank bailout, but mostly I was frustrated with the lack of accountability.

  image credit -  flickr ville misaki

image credit - flickr ville misaki

 

Have you been to Las Vegas lately? I get to Vegas every couple of years, and I'm always blown away by how fast it grows. There are always shiny new casinos, and each one is bigger than the last. Then the older casinos keep updating themselves, adding additional rooms and more extravagance in an effort to stay relevant.

This has been happening consistently since the 1960s. And why? Because the casinos control the game!

  image credit -  flickr matthewpaulson

image credit - flickr matthewpaulson

 

The casinos have the money and they set the rules for each of the gambling games.

  • Who wins under every possible outcome - each turn of the card, roll of the dice, and bounce of the ball.
  • How much you'll get paid under every circumstance, and when you can cash out.

They have all the power and control, and they have set up the rules of the game such that they win more often than they lose. Period. The end. You can win one weekend, and I might win another time, but by and large, over the long run, the casinos win more than the people who gamble.

Could you imagine if the opposite were true?

What if the casinos set up the games for a short-term increase in the number of guests, rather than the long-term profitability? They would compete with each other to lower their winning percentage, a little at a time, until eventually they went below the 50% mark - and started giving the edge to the gamblers.

The gamblers would start winning more money, more frequently, and word would spread. More people would fly to Vegas from more parts of the world, and every casino's hotel would be fully booked. (Short-term goal achieved!)

But it wouldn't take long before that many gamblers, all playing with winning odds, would break the casinos.

In this scenario, all of the Las Vegas casinos would go bankrupt, and the city itself would collapse. And would we expect a government bailout?

This is exactly what happened with the banks in the early 2000s.

  • The banks had the money to make mortgage loans.
  • The banks wrote the legal language of the promissory notes. (You're not allowed to edit the loan paperwork at the closing table, right?)
  • The banks had made tens of millions of loans over the years, and had all the statistical data to determine which borrowers were more likely to repay their loan.
  • The banks set the pricing of the loan.
  • The banks were given fully compliant borrowers, and were allowed to investigate creditworthiness in just about any way imaginable.
  • And ultimately, the banks were the ones who decided which loans got made, to which borrowers, and under what terms.

But, instead of taking a Las Vegas Casino approach by setting favorable terms, the banks took the "what if" approach, and decided to give up their advantage. They stopped underwriting, and started making loans under whatever terms the borrowers wanted.

So what would you expect to happen? They stated making $500,000 loans to single-mom schoolteachers, and all sorts of other scenarios that common sense would say didn't make sense. Of course the banks lost money - lots of money. Tons of money. And rightfully so.

The banks who participated in this "close your eyes" style of lending should have been run out of business. And the people in charge - the top 4-5 levels of management - should not have kept their jobs. But they did.

The bailout let the banks, and the banks' management teams, avoid any real consequences. In fact, a few years later these same banks were reporting record profitability! It's the opposite of what should have happened.

And if bad actions don't have any consequences, do you think those actions are going to stop? NO! It doesn't matter whether you're a young child or a Fortune 500 CEO - everybody's behaviors are shaped by consequences to actions.

Grrrr. I'm still frustrated by the whole ordeal. So why drag all this back through the mud? Because I read something recently - Patrick Watson, a big-time, well-respected economist, and Neel Kashkari, president of the Minneapolis Federal Reserve Bank - totally agree with me! (see the article Capitalism Can't Work Without Losers). And worse, they think the table is being set for another round of bank-induced instability.

Being smart with your money is a great idea for us and our families. But then I guess we aren't cut out for running a big bank...

- Chris Butterworth

 

The World is Changing Fast

Each week there's a next-new thing. Another social media network. An update to your phone. Photos are auto-tagged with facial recognition. New features to learn in ARMLS. A new app wants to be your lead source.

Do you have to learn it all? Are you going to be left behind if you don't?

B 180621 - pathway.jpg
 

Let's slow down for a minute and take a deep breath.

June Reflections

June, for me, is a month of reflection. It's my birthday month - a time to take stock in where I've been and where I'm going. It's Father's Day month - when I think about the impact my Dad had on me and the impact I'm having on my kids. And it's my Dad's birthday month - he passed away a few years ago, and I still think of him often, especially in June...

What Really Matters

Let's be honest: does it really matter what platform you use to stay in touch? Will you lose a relationship because you tweet a snap from instabook instead of some other connected app?

One of the things my Dad did really well was the way he talked with people. He talked with everyone, but he rarely talked about himself - sort of Dale Carnegie style, although I don't think he ever read that book, it was just his way. He was the exact opposite of a "self promoter."

Dad was friendly and respectful to everyone, although he wasn't a natural extrovert. And he was genuinely interested in hearing how you were doing. (Genuine being the key word there.)

The thing is - even though he didn't talk much about himself, he was really well liked.

The World Isn't Changing at all

Technology is getting faster. Google and Amazon know what you want before you do. People's attention spans are getting shorter.

But they're still people.

And people like others who treat them well. Who respect them. Who are friendly towards them. And who are interested in them. It's the same as it was 30 years ago (and 30 years before that.)

Take the time to build genuine relationships, and you won't have to shout-chat faster and louder than the others bragging about themselves - your people will come to you because they know you'll take care of them.

- Chris Butterworth


Ps - One way to stay in touch with your sphere of influence is to send out a monthly eNewsletter. (or twice-monthly!) If this sounds like a good idea but you aren't sure how or you don't have the time, I'd love to help - hit reply and let's talk!

 

Take Flight!

image credit - flickr llee_wu

Take Flight!
This is the moment you've trained for.

You've done all the hard work.

Research. Planning. Networking. Gaining Experience through the school of hard knocks.

Everything is in place, just waiting for you to move forward.

So do it! Take the leap. Spread your wings.

Then do it again tomorrow. And the day after that...

- Chris Butterworth

 

Every Phone Call Counts

To build a tribe, and have a raving group of fans (contacts) out there who wouldn't even consider working with somebody else, you have to do something to create that raving fanaticism... Make every phone call count!

  image credit -  flickr eric kilby

image credit - flickr eric kilby

 

Today I spend far more time typing than talking - text messages, messenger, email... I make fewer phone calls than I used to.

Which makes every phone call that much more important!

Each phone call is a personal interaction, where the person you're talking with can hear and feel everything you're giving to the conversation - both verbal and nonverbal cues, regardless of the message.

  • Energy Level - are you the Energizer Bunny, or are you yawning while last night's lack of sleep catches up with you?
  • Mood - are you upbeat, uplifting, positive, and friendly, or a Debbie Downer?
  • Outlook - a cool head and a calming presence, or frantic-frustrated-discouraged?
  • Focused - is this phone call the most important thing in your life right now, or are you talking to other people at the same time while clicking on a keyboard and/or shuffling papers around?
  • Prepared - do you know the history, the details, the options, and the potential outcomes and alternatives, or are you just winging it?

It's easy to come across as the hero when the news is exciting:

Great news - the Buyers want to give you more than your asking price! ... Yep - they’re going to pay cash, which they’ve already deposited into escrow. Oh, and they can close by the end of the week but are willing to let you stay in the house as long as you need to until you’re ready to move! :)

Tribes are built, however, on the other kinds of news:

  • "They didn't accept your offer, but I'm confident we'll find a similar house in your price range soon."
  • "The buyers' loan has been delayed, so they can't close on time. Here are some options to consider as this will relate to your moving date..."
  • "The offer is lower than we had hoped for. Let's look at the comps again and discuss the benefits & drawbacks of accepting this offer compared with waiting for another, potentially better one."

Every time you pick up the phone, whether you're sharing good news, bad news, or no news at all, the goal should be the same: At the end of the call, when the other person hangs up, they should be happy they talked with you.

So pause. Take a deep breath. Smile. And say hello.

- Chris Butterworth

Ps - One way to pre-sell your contacts on your knowledge, ability, and helpfulness, is to send them a monthly or twice-monthly eNewsletter - every month, like clockwork. I can help you do this, if you want - it's what I do best..