Category: Observations

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The Uncertain, Risky Virtual Universe

Should credit unions be investing time and resources in the emerging virtual realities, especially crypto options?

One of Warren Buffett’s truisms is that: Only when the tide goes out do you discover who’s been swimming naked.

The Fed clearly intends to take the tide out.  Coming rate increases will end the past two years’ historically low cost era of finance and restore  “normal” rate levels to tame inflation.

Markets are now sorting out what valuations have been overpriced with cheap money.  One of these newly created segments is the world of digital finance.  Here’s Bloomberg’s comment on one area of cypto on April 25:

Bitcoin seems to be stuck in a rut: Prices are flagging, online searches for the largest cryptocurrency and other digital assets have fallen off, fewer and fewer coins are changing hands and crypto-related funds are seeing massive outflows.  

An Assessment from the Digital Generation

I asked my computer science oriented grandson whether he or any of his online buddies were creating NFT’s as a way to make money in the virtual world.   He said no.  His reason was that this was virtual gambling.  He had seen newly issued NFT’s bid up in price through anonymous (self-promoting) purchases, and then crash when there was no offers at the pumped up value.

However he does spend lots of time in the virtual world of games and other digital experiences.

Is the meta-omniverse a real business opportunity and if so, for what end? Is it a vast new world of entertainment, an ideological, semi-religious political response to real world problems, or a temporary stage in the evolution of a parallel reality?

Two recent articles have examined both the hype and the opportunity aspects of this emerging financial sector. An internet writer Ginsberg has compared the crypto hype to a religious craze in an April 22 post: Is Crypto Just a Religion for Online Gambling.  Selected excerpts follow:

Crypto is no longer just computer nerds talking mumbo jumbo about decentralization & “the blockchain” at conferences that everyone kicks themselves for not paying attention to earlier — it’s a fully-fledged, multi-trillion dollar industry, complete with mainstream media coverage and millions of people arguing about it on Twitter.

While the fan boys call crypto the “future of finance”, its critics denounce it as a giant Ponzi scheme. In short, I believe they’re both wrong.

To me, cryptocurrency seems to be something more like an internet-based religion, mixed in with technical gambling (“trading”), all wrapped up in a strange cyberpunk economy of value, which is ultimately being capitalized on by speculators as a way to make absurd amounts of money. . .

People are constantly zapped by these seemingly mythological statements that constantly obfuscate the fact that very little real world utility is being created in the world of cryptocurrency.

Right now, the total crypto market is currently worth a mind boggling $1.85 trillion, and world-leading financial institutions continue to throw more money into crypto with each passing day. . .

From what I can see, almost all large institutional involvement comes from FOMO more than it does from an actual investment strategy.

Matt Comyn, the CEO of Commonwealth Bank, Australia’s largest financial institution said it best:

“We see risks in participating, but we see bigger risks in not participating.” 

Ginsberg’s conclusion: Unless a crypto asset solves a measurable, real-world problem —it’s probably just another delusion peddled by a self-serving preacher in this strange, ever-growing digital religion.

  A “Real” Business Opportunity?

 

Gonzo Banker’s Ron Shevlin posted a column about lending in the metaverse: Entrepreneurial bankers have a chance to establish themselves as commercial metaverse lenders. Excerpts:

Claiming to be the first bank in the metaverse, JPMorgan announced the opening of a “lounge” in Decentraland. Upon entering the lounge—which was established by Onyx, the bank’s blockchain unit—visitors are greeted by a digital portrait of Jamie Dimon (which morphs into the image of the bank’s head of crypto) and a roaming tiger.

“Virtual branches are the next logical step for how financial institutions can utilize virtual reality. Imagine never having to take a break during working hours and wait in a line at the bank. Now imagine getting personalized banking service at the comfort of your home, when it’s convenient for you while enjoying a cup of coffee.”  

The two largest virtual worlds—The Sandbox and Decentraland—saw 86,000 virtual property transactions totaling $460 million in sales in 2021.

“Supply and demand dynamics are driving people into the meta-economy. Over time, the market for metaverse real estate could evolve in a similar way as the real estate market in the analog world. In time, the virtual real estate market could start seeing services much like in the physical world, including credit, mortgages, and rental agreements.”

The success of building and scaling in the metaverse is dependent on having a robust and flexible financial ecosystem that will allow users to seamlessly connect between the physical and virtual worlds.”

The Final Word

I give Warren Buffett the last word:  “Never invest in a business you cannot understand.”

 

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Too Small, Too Short

There is an urban myth about a bet a group of writers and hangers-on made with Ernest Hemmingway one evening during a night of drinking in Paris.

His friends wagered that he could not write a short story in six words.  They each put over $100 in francs on the table.

Hemmingway took a napkin and wrote the following:

For sale. Baby shoes. Never worn.

He won the bet.

Too Small-An Obsession with Numbers

A similar mindset exists in many organizations about the value of size.   Growing larger is the basic criteria for success.

I was reminded of this obsession with numbers, not from the siren calls for mergers among credit unions, but rather from an observation on the decline of churches in America:

A church with 1,000 people can be a dysfunctional mess, filled with shallow believers, making zero impact in their local community.

And a church of 30 people can live out the faith, change lives and be true to the Gospel.

Is my church too small? That’s the wrong question to ask.

Instead, ask whether your church is healthy?

Insert the word credit union for churches; repeat the question.

 

 

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Money Changers and Temples

In his first inaugural address  March 4, 1933, Franklin Roosevelt called out financiers.  Here are some of his remarks about that segment of society.

“This is a day of national consecration. . .

“This is preeminently the time to speak the truth, the whole truth, frankly and boldly. . .our distress comes from no failure of substance. . . Plenty is at our doorstep, but a generous use of it languishes in the very sight of the supply. . .

“Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men. . .

“Faced by failure of credit, they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence. They only know the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish.

“Yes, the money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of that restoration lies in the extent to which we apply social values more noble than mere monetary profit.

“Happiness lies not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort. The joy, the moral stimulation of work no longer must be forgotten in the mad chase of evanescent profits. These dark days, my friends, will be worth all they cost us if they teach us that our true destiny is not to be ministered unto but to minister to ourselves, to our fellow men.

“Recognition of that falsity of material wealth as the standard of success goes hand in hand with the abandonment of the false belief that public office and high political position are to be valued only by the standards of pride of place and personal profit; and there must be an end to a conduct in banking and in business which too often has given to a sacred trust the likeness of callous and selfish wrongdoing.”

One initiative to bring more options was passage of the Federal Credit Union Act in 1934.

FDR’s Biblical Reference: A Holy Week Sonnet

Cleansing the Temple   by Malcolm Guite

Come to your Temple here with liberation

And overturn these tables of exchange

Restore in me my lost imagination

Begin in me for good, the pure change.

Come as you came, an infant with your mother,

That innocence may cleanse and claim this ground

Come as you came, a boy who sought his father

With questions asked and certain answers found,

Come as you came this day, a man in anger

Unleash the lash that drives a pathway through

Face down for me the fear the shame the danger

Teach me again to whom my love is due.

Break down in me the barricades of death

And tear the veil in two with your last breath.

The Question:   Where are credit unions today with this ever lasting challenge to cleanse the temples of finance?

 

 

 

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HEADLINES

April 7, 2020, Wall Street Journal, (pg. B 12)  Fed Could Set Off a Lengthy Tantrum

Sub head: This time with quantitative tightening, the central bank may not give in so easily to market protests

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May 18, 2020, Wall Street Journal (pg. B 1) Virus Deals Credit Unions a Losing Hand

“Almost a third of the nation’s 5,200-plus credit unions are tied to a single employer, industry or other association. . .” The two credit unions chosen to illustrate the story’s theme were WestStar Credit Union in Las Vegas, Nevada and Endurance FCU in Duncan, Oklahoma.  The entire credit union system and these two all are doing well two years later.

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October 6, 2021, Washington Post, Fear Sells.  It’s our Job not to give in to it.  by David von Drehle

“A healthy society is not a society without problems, because no society has ever been without problems. A healthy society is one that faces problems without fear because its people have courage–and their courage raises courageous leaders.”

Enough said.

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Transparency: the Co-op Leader’s Advantage

An essential factor in  leadership success is communication.   What differentiates a co-op leader in my experience is transparency, not scripted speeches or PR prepared messaging.

But what does transparency mean?   What leadership qualities describe this skill?

Understanding this skill was an assignment  a credit union CEO gave to a consultant.  Following are responses to the request: “If you are to be scored for transparency as a cooperative leader, what are the questions you want your peers to use when evaluating you ? “

Following are some of the responses.

The Concrete Ten

  • Does the CEO share financials openly and often?
  • Does the CEO share board room interactions, themes, issues, etc.?
  • Does the CEO educate the cooperative’s members as to the “real deal” that results in their being better users of services?
  • Does the CEO openly define pricing issues so that members have input into pricing models and the rationale for prices?
  • Does the CEO allow audits of key company events openly?
  • Does the CEO explain like a marketer, educator, or peer?  Does the CEO know the difference?
  • Will the CEO present an issue until the person making the inquiry feels confident enough to explain the topic to someone else?
  • Does the CEO share enough to build trust with all cooperative stakeholders?
  • Does the CEO share to the point of risk?
  • Does the CEO share inconvenient truths about the organization when members need to be more effective stakeholders?

I added other qualities that create a positive leadership environment.

  • Does the CEO recognize and honor those who  crafted the legacy successors­ now stand upon?
  • Does the CEO admit when in error?
  • Does the CEO balance challenging words to staff with empathy?
  • Does the CEO delegate execution when there is agreement on key goals?
  • Does the CEO keep renewing the firm’s priorities even as agendas seem full?
  • Does the CEO participate in employee events and activities, social and other?
  • Does the CEO ask staff to be part of conversations with  outsiders and higher ups?
  • Does the CEO share personal interests and experiences apart from work activities?
  • Does the CEO demonstrate balance in the ability to play and have fun as well as work hard?
  • Does the CEO have open dialogue with members, the press and other interested publics?

A CEO’s suggestions

  1. Does the CEO lead with conviction, the projects or strategies that are past their full life but need pruning, as well as shiny new ideas that are just beginning (being planted).
  2. Does the CEO share with the board the areas for improvement within the Board? (i.e. the Board has weaknesses that need to be addressed)
  3. Does the CEO share with stakeholders the self-development efforts to be a better leader?

 

 

 

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Spring Storms

from “The Land”  (1926)
by Vita Sackville-West
That was a spring of storms. They prowled the night;
Low level lightning flickered in the east
Continuous. The white pear-blossom gleamed
Motionless in the flashes; birds were still;
Darkness and silence knotted to suspense,
Riven by the premonitory glint
Of skulking storm, a giant that whirled a sword
Over the low horizon, and with tread
Earth-shaking ever threatened his approach,
But to delay his terror kept afar,
And held earth stayed in waiting like a beast
Bowed to receive a blow. But when he strode
Down from his throne of hills upon the plain,
And broke his anger to a thousand shards
Over the prostrate fields, then leapt the earth
Proud to accept his challenge; drank his rain;
Under his sudden wind tossed wild her trees;
Opened her secret bosom to his shafts;
The great drops spattered; then above the house
Crashed thunder, and the little wainscot shook
And the green garden in the lightning lay.
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For Ukraine’s Hour of Need

From English composer John Rutter:

https://www.youtube.com/watch?v=lJl3kVwl2-U

Blue Skies Over Golden Fields of Grain

The Ukrainian flag is literally about grain

General Patton on prayer (December 8, 1944:

Chaplain, I am a strong believer in Prayer. There are three ways that men get what they want; by planning, by working, and by Praying. Any great military operation takes careful planning, or thinking. Then you must have well-trained troops to carry it out: that’s working. But between the plan and the operation there is always an unknown. That unknown spells defeat or victory, success or failure. It is the reaction of the actors to the ordeal when it actually comes.

Some people call that getting the breaks; I call it God. God has His part, or margin in everything, That’s where prayer comes in. Up to now, in the Third Army, God has been very good to us. We have never retreated; we have suffered no defeats, no famine, no epidemics. This is because a lot of people back home are praying for us. We were lucky in Africa, in Sicily, and in Italy. Simply because people prayed.

But we have to pray for ourselves, too. A good soldier is not made merely by making him think and work. There is something in every soldier that goes deeper than thinking or working–it’s his “guts.” It is something that he has built in there: it is a world of truth and power that is higher than himself. Great living is not all output of thought and work. A man has to have intake as well. I don’t know what you call it, but I call it Religion, Prayer, or God.

 

 

 

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Welcome to the Omniverse

Two years ago I knew nothing about the company NVIDIA or even how to pronounce the firm’s name.  Then my granddaughter received an internship followed by a full time offer when she finishes college.

But if you want to see where computing-networked technology is taking us, this may be a place to start.

The company built its reputation as the creator of graphic chips used in computer games.  But as reported in the Wall Street Journal:   its chips are now being snapped up for everything from game consoles to data centers to self-driving cars. .  . Nvidia told analysts Tuesday (March 22) that it now sees a total addressable market of $1 trillion for its growing line of chips and related software.”

The firm is in the middle of its GTC annual developer conference. The keynote address by the President Jensen Huang also aired Tuesday.

His full talk is about 90 minutes and covers the firm’s recent product releases and latest innovations.  The theme of the presentation  is the creation and production of artificial intelligence (AI) “factories.”

These fully automated intelligent processes will change the way most businesses operate from driverless cars to digital biomedicine to warehouse management.

I was unable to follow many of the technical capabilities which NVIDIA will empower.  However he recaps his talk near the end so you may wish to start with this overview before diving into the entire speech.

His opening described NVIDIA’s four layers (integrated stacks) for the networked world designed to “accelerate computing” resulting in “the creation and production of intelligence.”  One example of a critical technical component is NVIDIA’s H100, an 80 billion transistor chip.

The Omniverse: Creating Digital Twins for Real World Events

The platform that combines all of these new technical designs and interfaces is NVIDIA Omniverse defined as an “easily extensible platform for 3D design collaboration and scalable multi-GPU, real-time, true-to-reality simulation.“

You can hear the Omniverse presentation by starting the keynote stream here.  The session  begins with the Apollo 13 “almost disaster” to demonstrate the power of a “replica,” or what Haung describes as today’s virtual equivalent, a “digital twin.”

As I understand, this simulation engine (Omniverse) enables the creation of a digital model that exactly duplicates the physical world.  The two realities work together, the real with the virtual version. Companies across industries now have the power of “enhanced predictive analysis and software and process automation that maximize productivity and help maintain faultless operation.”

Prior AI was based on pattern recognition technology, with robotic programmed platforms.  The new digital world provides autonomous platforms for applications such as driving, monitoring climate change, and even cell and molecular research.

The digital twin duplicates the real world’s physical environment, events and task management. The virtual model can then create new simulations beyond real world experiences.   AI  becomes a self-learning technology that can then be used to manage actual events.

One example: NVIDIA’s Earth-2 project is building a super computer  dedicated to predicting climate change through simulations.  This should encourage changes in human activity now versus waiting till the events actually occur.

Huang referenced several big companies using Omniverse Enterprise to create digital twins of their own operations. These  include Amazon, the German Railway system-DB Netze, Kroger, Lowe’s and PepsiCo.   NVIDIA’s integrated platform “builds physically accurate digital twins or develops realistic immersive experiences for customers.”

The Impact on Financial Services

Data-information management is the core of financial services.  Today the use of  AI inspired technology focuses on automated voice or chat bot responses, some enhanced data analytics and 24 by 7 connectivity.

Currently, NVIDIA’s financial service efforts include the use of deep learning, machine learning, and natural language processing to “boost risk management, improve data-backed decisions and security, and enhance customer experiences.”

I have no idea how this Omniverse capability will affect financial institutions beyond the known task functions for which it is used today.

If you want a simple future example however,  CEO Jensen carries on a live, unscripted Q & A with his digital double (avatar) named Toy Jensen.   I’m not sure which speaker was more credible!

 

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Ed Callahan… A Look Back

by Jim Blaine (Thursday, March 17, 2016)

Always suspected that the problem with Ed Callahan was that as a youth he was beaten too often by Nuns in parochial school or, perhaps, not beaten enough. Well, whatever, either way the Nuns left their mark – an indomitable spirit!

Ed Callahan was Irish – brash, pugnacious, loud, hard drinking, fun loving – alive! But why be redundant? I said he was Irish!

For over a quarter of a century, we all watched and observed as Ed Callahan created shock waves in the credit union world. No one was neutral about Ed Callahan. His friends were fiercely loyal, his enemies equally committed. Ed inspired many and angered quite a few. Ed had style; he had presence. With Ed, you weren’t allowed to make contact without becoming involved, excited, immersed, engaged.

At Marquette, Ed must have played football in the same way he played life – without a helmet. You had no doubt that Ed Callahan always played for keeps. He had no intentions of losing, that was not one of the options. Ed was very straight-forward; your choices were always clear. The mission was defined; and, there was only one direct path to the goal. That path was either with you, around you, over you, under you, or through you; you could step aside or get on board. It was your choice; but your choice never changed the mission, nor the path, nor the goal.

Some said that Ed was a visionary…

… they were wrong. Ed Callahan was a revolutionary. Visionaries talk about change, revolutionaries take you there. Ed led from the front – a leader of conviction, rather than convenience; principles above posture – courageous. Revolutionaries, by definition, create problems; overturn applecarts; rebuke the status quo. That happened at NCUA. Appointed by President Reagan, Ed arrived at NCUA in the midst of turmoil. Ed defined the mission; he reformed and remolded the Agency. He taught a regulatory agency how to stop working to prevent the last crisis. He explained that a coach never executes a play and that on Monday morning it’s never hard to see what went wrong – but it is rarely relevant. Teacher, coach, lessons in life; hopefully well learned, hopefully still remembered.

But let me celebrate the essence of the man – that indomitable spirit – one last time, for those who never had the opportunity; for those who still have doubts; for those who never fully understood. One of Ed’s harshest critics, noted with much wryness, that even in death Ed “couldn’t get it right”. Why, I asked? “Because Callahan died on March 18th instead of on the 17th, his beloved St. Patrick’s Day.” You know this type of critic – cynical, smug, self-assured without much basis, not really worth the effort, but…

Just for the record, I would simply like to point out one final time that – first and foremost – Ed Callahan was a fully-fledged, fully-flagrant Irishman – body and soul! And, no self-respecting Irishman would ever celebrate the end of St. Patrick’s Day until the last bell at the pub had rung. That would have meant that Ed Callahan’s “last call” would have come sometime after 4:00 am – on the morning of the 18th. Style, presence, courage – true to the last! A shamrock of joyful vigor and purpose!  

And one last thought… in the final analysis you can say many things about a great man’s life… some men are admired, some are respected, some are envied, some are feared… and countless other adjectives and accolades. But, in the final analysis, the most important thing you can say about a great man is… he will be missed.  

And, Ed Callahan will be missed…  

 
An Irish Prayer 
Live simply, love generously, 
Care deeply, speak kindly, 
Leave the rest to God.!


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The Credit Union Movement In Five Phases

For some time I have followed the writings of Father Richard Rohr.  He is a Franciscan friar, wisdom teacher, and founder of the Center for Action and Contemplation in Albuquerque, New Mexico.

His spirituality concepts are universal, informed by all denominations and spiritual traditions.  His focus is the search for unitary conscience.   Recently he summarized five stages that religious and cultural developments have historically followed.  He calls these the five M’s: human, movement, machine, monument and memory.

I have paraphrased his approach below to apply it to credit union evolution.  I believe the framework is useful for understanding the different motivations credit unions draw upon with cooperative design.  (Adapted from Richard Rohr, The Wisdom Pattern: Order, Disorder, Reorder )

The Five Stages

“It seems that many great things in history start with a single human being. If a person says something full of life that captures reality well, the message often moves to the second stage of becoming a movement. 

That’s the period of greatest energy. Credit unions greatest vitality  as a “cooperative  movement,” resulted in thousands of new institutions formed annually.  Each was an expression of a larger vision for community. The movement stage is always very exciting, creative, and also risky.

It’s risky because the movement in history is larger than any city, state, country or economic system. Society is unable to foresee its full scope or meaning. We feel out of control in this stage, and yet why would anybody want it to be anything less?

Yet we move rather quickly out and beyond the risky movement stage to the machine stage. This is predictable and understandable. Systems are developed to support individual often independent firms.

The Dominant Machine Stage

The institutional or machine stage of a movement will necessarily be a less passionate manifestation. This is not bad, although it is always surprising for those who see credit unions as the end itself, instead of merely a vehicle for the original vision.

There is no other way; but when we don’t realize a machine’s limited capacities, we try to make it into something more than it is. We make it a monument, a closed system operating inside of its own, often self-serving, logic. By then, it’s very hard to take risks for those most in need following core values that inspired the movement phase.

Eventually these monuments and their maintenance and self-preservation become ends in themselves. It is easy just to step on board and worship their success without ever knowing why they came to be.

At this point, we have jumped over the human and movement stages, becoming like the for-profit institutions we were meant to supplant. There is little hint of knowing who we are meant to serve. Members are often frozen out of any meaningful role other than consumers.

In this stage, credit unions are a platform for building ever larger financial firms while holding on to a memory of something that once must have been a great adventure. Credit unions are no longer serving a distinctive role. Rather they mimic the priorities of the existing capitalist, market driven competitors.

Overcoming the Monument-Memory Entrapment

Increasingly credit unions avoid addressing the most disadvantaged segments of society we were organized to serve.

To avoid becoming trapped in the monument stage with the initial vision merely memory, renewal is needed. Innovative efforts are necessary to keep in touch with the human and movement aspirations. This is not  being naïve about the necessity for machine-like competencies and the inevitable human drive to embrace monuments.

We must also be honest: all of us love monuments when they are monuments to our human ambition, our movement, or our machine.”  (End paraphrase)

Applying Rohr’s Insights to the Credit Union Movement

It is feasible to align the different phases of credit union history with this model.  The more powerful application however may be to help  leaders or institutions recognize that all five stages can be present and called upon at the same time.

Can the machine success be augmented with the human passion of the creation phase? I saw one credit union CEO attempt to connect these seemingly contrasting impulses.   He organized a public member meeting each week at a different branch of the credit union.  Fifty visits led by a senior staff person for every branch over the year.

Videos were made of the visits and shared with staff and board.   The results were not, I believe, some dramatic new product or service concept.  Rather it reinforced respect for the members and  their opinions  as well as supporting staff in scattered branches.

I believe the model’s usefulness is most helpful if not seen as linear, trending in a single direction.  Rather it alerts us to the multiple motivations which contribute to success.

If we focus only on the competencies of the machine stage leading inevitably toward monuments, then we lose the important advantages of the initial creative era.   For it is human needs and relationships that were the origins of every credit union and, still today, its most important foundational advantage.