Davos09: Open Bank

At the end of my Davos week, I finally saw tiny notes of hope – faint LEDs at the end of a long tunnel – and they came not from the business, government, and journalistic leaders here but instead from technologists, entrepreneurs, and educators.

I ran a session in mass innovation in which we charged groups to pick an industry and bring the benefits of open collaboration to find an opportunity or repair a problem. One group took on the toughest assignment they could today: banking.

They proposed the Open Bank. It would feature radical transparency: full disclosure of performance and compensation. The group decided that a banker should not sell a product unless he could pass a test about it. They even decided that there had to be a means to confirm that customers understood what they were buying. They proposed collective risk assessment, creating a means for its constituents to select and perhaps vote on investments. They explored how to offer transparency on each product and customers’ performance with them so that you could compare your returns with fellow customers. And they argued that bankers should be compensated on profit. It wouldn’t be an easy business to run; being answerable is hard. I said later that its slogan should be, “the only bank you can trust.” That is what would make it successful. When I asked, most in the room said they would be such a bank’s customers; many said they’d work for it; almost everyone said they’d invest in it.

Mind you, this thinking didn’t come from a bunch of crazy, webby, gum-flapping bloggers and academicians (like me). It came from the sort of business machers who come to Davos. But there wasn’t a banker among them. That was the point of the exercise: to look at an industry from the outside and see new opportunities and needs. Bankers are in fortress mode; they won’t do that.

Later that day, at one of the still-lavish closing parties, I said to a top banking executive what I’d said earlier in this space about the week in Davos: that the leadership here had to take responsibility for their failure. He sneered at me. There’s no need for that, he said. He will be the last to open up, the last to change.

But back at the workshop I was leading, the three dozen machers who came mainly from investment, technology, and education said something different: The stakeholder is taking control. That stakeholder had to be informed. And that requires transparency.

It was under those rules that they reimagined retail, education, and government.

The day before, I went to a session on educating entrepreneurs with Cisco’s John Chambers, Intel’s Craig Barrett, and other leaders in worldwide movements to train the people who will start businesses and create jobs and true value, in large economies and small. They recited statistics about the value that comes from giving young people the tools to start businesses. They argued passionately that we must change education to enable such creation. Then I hung out with fellow blogger Robert Scoble, who has been arguing that the way out of our mess is to start a million companies. And I went to Yossi Vardi’s annual sabbath breakfast with Israeli President Shimon Peres, who made a forceful argument that the future will be secured with investment in technology (including biotechnology) and education (which he as much as said was the next thing to come after the internet wave).

But instead, the governments that are flexing their muscles here to announce that they are now in charge are giving trillions of dollars to the incumbents, to people like that sneering banker. And he and his peers here in Davos are, as I said in my earlier posts from here, are circling their wagons, refusing to take responsibility, and change.

We should, instead, be investing our money in entrepreneurs and technologists, the people who will change old industries, reimagining them under new rules with new people – us, in the long run – in charge. I leave Davos thinking that more often than not, we need to look at replacing rather than just repairing these broken institutions. Entrepreneurs and educators do that.

We are bailing out the past. Instead, we must bail out the future.

  • Agree with this post, and the concept of investment needs to go deeper, wider… it has to mean a universal access to a collaboration of views, ideas, experiences, knowledge.

    What if we could truly create a mind-set and opportunities where we all are part of the solution and accountable for mistakes, in this case Banking – what works, what doesn’t; local needs, international trends; transparency of ideas and their implementation. Surely this has to be a good thing. We already have millions upon millions of ‘experts’, all out there, doing their ‘thing’ in increasingly harsh conditions; they are the front-line, and it is their insight and expertise that will become the real currency in the future.

    Note: to disclose my particular interest in this, I am founder of an incredibly small, embryonic ugc news site that soft-launches in March 09.

    The reason this post is so timely for me is that I happen to be meeting with a (non-sneering) small commercial bank this week to discuss how our site can not only be used by them for a braver, more transparent approach to to communicating clients and customers, but also for the bank to get insight directly from their customers/general users of the site into what’s going on at ground level.

    Our meeting may prove fruitless for both parties, and what we are offering may be too narrow at this point, but I for one believe such an approach will at some point be of true value… in every sense of the word.

  • Say_No_Just_Go

    Typical elite gathering. They caused the freakin mess and they are losing their control over the masses. Now they are scared. Boo f***in hoo.

    The riots will come.

  • You are so right! I used to be a corporate training and development expert, now while still doing some consulting work, my focus in on developing entrepreneurs! Let’s stop bailing out the past and get to the future!
    Please, accept my invitation, for you, and Jeff Jarvis??? to come talk to my entrepreneur leadership groups – we’ll focus on the New Book? What would Google Do??? and begin a power movement/revolution that creates creative, entrepreneurial thinking that is not cemented in past thinking!! I am located in NYC, seriously, please contact me!

  • What’s clear from the global economic system meltdown is our old models of “how things always have been done” are breaking under the strain of the realities that exist today. What’s equally clear is that whether it’s kicking and screaming or looking for new opportunities, we’re all going to have to start living in the future because the past doesn’t work anymore.

    “People’s right to know” what their leaders – political and economic – were up to was a way to sell newspapers and commercials during the industrial era for some, a calling for others. At the same time we need more transparency, more information about what’s going on, newspapers are in a crash dive.

    We need in this post-industrial era accountability – that means everything from expanding a hundred-fold the public’s right to know and enforcing the principle that no one is above the law. Case by case, (Home arrest on Park Ave. for Bernard Madoff a shining example) it has become the norm that people with power and/or money get off.

    Second transparency – There’s an awful lot of dark corners in both government and business that need a good dose of sunlight: from the under-reported California budget stalemate to what various banks did with the money we as taxpayers loaned them.

    Finally, we need to do everything possible to make it possible for startups – not just software, or IT, but business, financial, even governmental to florish: they are building the future we desperately need.

  • invitedmedia

    in regards to the money taxpayers loaned to banks– reportedly they are using it go long oil futures to drive up the price of gas that WE buy. nice.

    i’m hoping mr. jarvis’ group considered the broken retail bank branch network where there’s one on every street corner.

    branches are awfully expensive (inefficient) to maintain 24/7 when you operate strictly on banker’s hours.

  • Andy Freeman

    Nothing is stopping these folks from setting up a bank and doing exactly what they propose. Oh wait, there is. They’re not willing to bet their money on their beliefs.

  • It’s a shame that the most qualified blogger with experience in actually building a startup in the financial services spaces wasn’t on this panel.

    Maybe you’ll see to it that I’m invited next year?

  • A small bit of an example from Ireland… I know, I know… we can’t talk. But a few years ago, these guys http://www.rabobank.ie/ hired in people who were NOT bankers to start their internet only bank. Why? To be different, they needed to think different. It is possible to build new financial institutions without the old guard. New services from people like Mint are also bring a new transparency and 2.0 thinking to what a financial service actually is: http://www.mint.com/solutions/budget/

  • srw

    I think you missed the point: There is more money available than entrepreneurs success. In other words good entrepreneurs are scarce and one important solution constraint.

  • Banks should all just be nationalized. Interest rates swhould be decided by a nationalized central bank. The nationalized bank would have same access to people’s income and guarantees thus giving people loans o micro-loans would just be a totally automatic thing. Nationalized banks should simply be about keeping people’s money safe and not at all be about speculating with people’s money like the private banks are doing today.

    Speculation is for private people, for private corporations not for chartered giant private banks.

  • An Open Bank in the 21st Century would require more than Transparency. That would simply be a Transparent Bank. One would need to go much further to truly be an Open Bank.

    • Christopher,
      Say more, please. what would it mean?

  • it is tough to make it happen!! and further to control

  • What I never understood was:
    If an engineer builds a brigde and that bridge falls he pay, when a banker invests your money and you loose it YOU pay twice first for his advice and then for your loss…

  • Andy Freeman

    > when a banker invests your money and you loose it YOU pay twice first for his advice and then for your loss…

    That’s because you asked a politician to keep your money safe at the bank.

    The only thing that a politician can do is take your money and give it to someone. When you asked them to keep your money safe, they took some. When they failed and your money was lost, they took some more, so the lost money wouldn’t get lonely.

  • It is so nice to hear others opinions on how to create a new world. The world really does have creative people and if we all got together and started sharing our ideas, and even used 1% of those ideas the world would come together and be an exciting place to be. I hope in the future to have a blog thatjust has positive ideas and things people are doing to change the world for the better.

  • Andy Freeman

    > The nationalized bank would have same access to people’s income and guarantees thus giving people loans o micro-loans would just be a totally automatic thing.

    Why would/should a nationalized bank have access to my money?

    In the US, political organizations do things on the basis of politics. Govt organizations are at least somewhat politicized.

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  • Robbo

    Interesting you folks at DAVOS came up with the idea. Makes me wonder though, as it was an similar idea that came up 4 years ago on a website: http://www.globalideasbank.org/site/bank/idea.php?ideaId=5204

    At the time it feasibility rank of only 63%, and humor factor of 65%. There is something more needed than just an “open bank”

  • AndyJ

    The WHOLE gambit seems to be to return to a flawed past. Over the past ten years the American consumre hs carried the world. We survived the internet bubble, 9/11 and the first housing issue because people kept buying. Over 70% of our GDP was consumer related… The marketplace has changed. Does any serious business person believe that we will return to the consumer spending levels of 2007-? Housing prices will take 5-10 years to return to 2007 pricing levels… Just as oil fell when the American Consumre changes habits, so too, will consumer demand fall… People are frightened. For most Americans this is their first economic downturn. The President and headlines are scaring everyone… The world has changed and our leaders want to run and hide in a seemingly glorious near past.

    Doubling the national debt to take the country back to 2007 seems foolish and horribly expensive. Unless we raise taxes and cripple the economy we cannot pay back these obligations. If we inflate the dollar-do we really think any country will buy our Treasury Bills with good dollars only to earn low interest rates and be repaid with devalued dollars-? Are we really that full of ourselves-?

  • Sarge

    Now the bankers are crying foul because Obama is restricting their pay to a half million. Seems to me if they’re going to use my tax money to bail them out, they have to go by my rules. If they don’t want to accept that, they don’t have to take the money. Let them go under. I don’t care. Someone will replace them. Anyone taking the bailout money should be required to pay it back with interest and on a time schedule just like the rest of the people in this country must do.

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  • Terry Wright

    These views are my own and have no connection with my employer.

    I thank you for being positive and innovative.
    I want to share your blog with national and local legislators.
    I do agree with your ideas.

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  • Zopa is a new organisation getting a lot of press recently in the UK that operates by arranging person-to-person lending.

    The transparency is inspiring – you can download all the loans (and interest rates) for the last 30 days and more information than you’ve ever seen any financial institution.

    I hope that they can start a revolution –


    (NB/ I’m unaffiliated to Zopa and this type of lending is not for everyone – but for those who are willing to put a bit of money into finding a new way of doing things I would strongly recommend checking them out)

    They are backed by some of the investors in Skype, Betfair and Egg – all of whom shook up their respective industries

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