WEBVTT - 31: Welcome Aboard Starship Bank 0:00:08.080 --> 0:00:11.200 Hello, and welcome to another edition of the Odd Lots Podcast. 0:00:11.280 --> 0:00:15.080 I'm Joe Wisenthal, Managing editor at Bloomberg Markets, and I'm 0:00:15.120 --> 0:00:19.480 Tracy Alloway, Executive editor at Bloomberg Markets. So, Joe, I'm 0:00:19.480 --> 0:00:23.200 really excited about our guest for today's show. He is 0:00:23.400 --> 0:00:26.960 one of my all time favorite banking analysts, a guy 0:00:27.000 --> 0:00:31.840 called David Hendler. Why do you like this, uh analysts 0:00:31.880 --> 0:00:34.199 so much? What is it about his work that separates 0:00:34.280 --> 0:00:37.440 him from other banking analysts? All right, Well, David was 0:00:37.560 --> 0:00:41.880 known for working at this research shop called Credit Sites. 0:00:41.960 --> 0:00:43.519 I don't know if you've heard of them. They have 0:00:43.640 --> 0:00:47.159 a bit of a Parish bias, some people would say. 0:00:47.400 --> 0:00:49.839 But what David did really well is in the run 0:00:49.920 --> 0:00:52.600 up to the financial crisis, he spotted a whole bunch 0:00:52.640 --> 0:00:55.160 of the risks in the banking system that not that 0:00:55.200 --> 0:00:58.600 many other people saw. And then after the financial crisis, 0:00:58.640 --> 0:01:00.680 he was one of the banking analysts putting out some 0:01:00.880 --> 0:01:05.600 really really interesting research out on the business of being 0:01:05.720 --> 0:01:09.680 a bank, what was permanently broken and what could be fixed. Yeah, 0:01:09.720 --> 0:01:13.000 this has become a really big topic. People have been 0:01:13.000 --> 0:01:14.959 talking for the about this for a while, but in 0:01:15.000 --> 0:01:17.640 the last several months, it seems like there's been this 0:01:17.720 --> 0:01:21.360 big surge in people talking about this question of is 0:01:21.400 --> 0:01:25.800 the traditional banking business model structurally flawed? In other words, 0:01:26.040 --> 0:01:29.959 not just a slow recovery from the financial crisis, but 0:01:30.120 --> 0:01:34.080 some sort of permanent impairment. Right, This is the classic 0:01:34.480 --> 0:01:38.800 structural versus cyclical debate. Are things like fixed income the 0:01:38.800 --> 0:01:41.839 bond trading business is going to come back or has 0:01:41.920 --> 0:01:46.640 something permanently changed that means they're basically dead forever? And 0:01:47.000 --> 0:01:49.960 we're definitely going to ask David how he feels about that. Well, 0:01:50.120 --> 0:01:53.560 this is a huge question because there's so much writing 0:01:53.760 --> 0:01:56.240 on the health of the bank, so much money is 0:01:56.280 --> 0:01:59.000 in the banking sector, so much wealth, and so this 0:01:59.080 --> 0:02:01.800 question of can the banks actually recover or they doomed 0:02:01.800 --> 0:02:04.440 to be much smaller than they were on the early 0:02:04.560 --> 0:02:08.400 part of the century is absolutely massive. So I'm looking 0:02:08.400 --> 0:02:21.160 forward to getting the answer. All right. Here is David Hendler. 0:02:21.200 --> 0:02:23.920 He is the former banking analyst at Credit Sites and 0:02:24.000 --> 0:02:26.880 he is now founder and principle at his own risk 0:02:27.000 --> 0:02:30.639 advisor of Viola. David, thanks so much for being with us. 0:02:31.320 --> 0:02:34.600 Thank you for your time. So I supposed to be 0:02:35.000 --> 0:02:39.600 begin You built this reputation as the guy who saw 0:02:39.639 --> 0:02:42.359 a lot of the risks coming before the financial crisis. 0:02:42.639 --> 0:02:45.919 How did you manage to do that? That's funny you 0:02:45.960 --> 0:02:49.640 should ask um. Basically, I started on the bye side 0:02:49.680 --> 0:02:54.200 at a conservative life insurance company, New York Life, and 0:02:54.560 --> 0:02:59.000 they taught me some very good old age investment principles, 0:03:00.240 --> 0:03:05.920 you know, where credit analysis was emphasized and uh, you know, 0:03:06.000 --> 0:03:12.360 being I guess cautionary or skeptical when uh, you know, 0:03:12.600 --> 0:03:17.520 new issue bonds were sold two investors as sucial investors 0:03:17.600 --> 0:03:19.520 or secondary bonds were sold to be you know, a 0:03:19.520 --> 0:03:23.200 little skeptical and not just take the up case, you know, 0:03:23.280 --> 0:03:25.480 stress tested for the down case and then if you 0:03:25.520 --> 0:03:30.760 felt comfortable and the spreads were and yields were you know, amenable, 0:03:30.880 --> 0:03:32.959 you you know, you would do the deal. So I 0:03:33.000 --> 0:03:35.160 think it's my early days on the by side in 0:03:35.200 --> 0:03:39.480 the early to mid eighties. So what did you see 0:03:39.640 --> 0:03:44.880 prior to the crisis, specifically that others were missing? Well, 0:03:44.920 --> 0:03:50.320 I had been doing UH bank and finance analysis probably 0:03:50.600 --> 0:03:53.040 for close to twenty years, So I saw a couple 0:03:53.040 --> 0:03:58.440 of cycles. I saw the nine eighties energy bust, in 0:03:58.560 --> 0:04:04.320 real estate bust and EXUS New England, California, and the 0:04:04.520 --> 0:04:08.200 SNL debacle of the nineteen eighties, and I and and 0:04:08.240 --> 0:04:11.920 then I saw, um, you know, the tech wreck of 0:04:11.960 --> 0:04:17.520 the early two thousand, so I kind of understood how 0:04:18.240 --> 0:04:20.720 things that look too good to be true usually were. 0:04:20.800 --> 0:04:23.400 And you try to try to get ahead of the 0:04:23.520 --> 0:04:28.039 decline by you know, writing reports and warning your customers 0:04:28.080 --> 0:04:32.279 are investor base about the upcoming difficulties. Then as it 0:04:32.320 --> 0:04:34.880 plays out, try to figure out if there's a risk 0:04:34.920 --> 0:04:40.200 adjusted return opportunity on the on the upside. Once you know, 0:04:40.240 --> 0:04:43.400 most people see it and they sell out, and they're 0:04:43.680 --> 0:04:46.920 overly worried because you know, I just thought it never 0:04:46.920 --> 0:04:48.800 could be this way before. Kind of like, you know, 0:04:48.839 --> 0:04:51.120 the real estate markets are so strong in New York 0:04:51.200 --> 0:04:54.480 City in the luxury area and people think it will 0:04:54.520 --> 0:04:58.520 never go down. I think that's a negative signal there, David, 0:04:58.560 --> 0:05:01.719 did any of your report before the crisis get you 0:05:01.760 --> 0:05:03.920 into trouble? Because some of the stuff you were saying 0:05:03.960 --> 0:05:08.679 back then was really controversial. What do you mean by trouble? 0:05:10.320 --> 0:05:13.320 I mean I would say that at times at times, um, 0:05:13.360 --> 0:05:17.600 you know, companies they wouldn't like it, and they would 0:05:17.680 --> 0:05:20.200 call me about it or quote people that I worked 0:05:20.200 --> 0:05:24.000 for about it. And you know usually, um, you know, 0:05:24.760 --> 0:05:27.080 we just heard him out and that was it. Um. 0:05:27.960 --> 0:05:30.960 So you know there was there was some friction. You know, 0:05:31.160 --> 0:05:34.919 investors didn't do that. I would say, I say it 0:05:34.960 --> 0:05:38.560 was more you know, the companies I covered. Let's uh, 0:05:38.720 --> 0:05:41.840 let's spin it forward today. Right now, we're in this 0:05:41.920 --> 0:05:45.400 period where people aren't so much concerned about a banking 0:05:45.560 --> 0:05:49.720 collapse or anything like that, but concerned that the business 0:05:49.760 --> 0:05:52.320 model of the major banks is just sort of in 0:05:52.800 --> 0:05:55.719 either a permanently low state or a state of sort 0:05:55.760 --> 0:05:58.760 of long decline, and that the business model that was 0:05:58.839 --> 0:06:02.680 thriving pre crisis will never come back. What's your take 0:06:02.760 --> 0:06:05.680 on that? And why are we seeing such a difficult 0:06:05.760 --> 0:06:08.760 time for banks to hit goals of profitability? We see 0:06:08.760 --> 0:06:13.160 these continued layoffs. What's going on now right Well, you know, 0:06:14.400 --> 0:06:18.160 my thirty odd year career watching the bank sector in 0:06:18.200 --> 0:06:21.840 the US, primarily, I mean there there wasn't really many 0:06:21.920 --> 0:06:25.760 years that you would call normal. There's always like booms 0:06:25.800 --> 0:06:31.440 and busts and maybe some quiet periods in between. So 0:06:31.800 --> 0:06:33.880 I think what's happening is, you know, we have a 0:06:33.920 --> 0:06:38.320 demographic shift from the baby boom whars, who are on 0:06:38.400 --> 0:06:42.440 average fifty eight years old and they're retiring, and maybe 0:06:42.440 --> 0:06:44.800 they don't have enough money to retire, So what's going 0:06:44.839 --> 0:06:47.440 to happen with them? Can they put all their money 0:06:47.440 --> 0:06:49.839 in the stock market now because the bond market doesn't 0:06:49.839 --> 0:06:53.520 have enough interest yield to support their minimum living standards? 0:06:53.560 --> 0:06:55.920 I don't know. I think it's kind of risky. So 0:06:56.200 --> 0:06:59.200 I think you know you have that shift as well 0:06:59.200 --> 0:07:02.440 as the Millennias, who have a certain way of life 0:07:02.480 --> 0:07:06.880 that you know, favors urban dwellers, walkable commutes. But you 0:07:06.920 --> 0:07:11.040 know what, it's getting expensive. And they heard lately that 0:07:11.240 --> 0:07:14.360 on another media source that maybe the suburbs is a 0:07:14.400 --> 0:07:17.640 better deal. Um, And you're seeing in a lot of 0:07:17.640 --> 0:07:22.080 suburbs they're making little town centers that simulate sort of 0:07:22.080 --> 0:07:26.840 a Brooklyn, you know, parts of New York City experience, 0:07:26.880 --> 0:07:28.440 and you can get on the train and go into 0:07:28.480 --> 0:07:31.320 the real thing once in a while. So, um, I 0:07:31.400 --> 0:07:34.560 think you know that demographic shift is shifting how banking 0:07:34.960 --> 0:07:40.680 is pitched distributed. You know, people don't go into the 0:07:40.680 --> 0:07:44.120 branch anymore that these there are smartphones to make deposits, 0:07:44.120 --> 0:07:47.960 so nobody really knows the bank anymore except it's an 0:07:47.960 --> 0:07:50.760 app or something. So I think you know that's one 0:07:50.960 --> 0:07:55.600 change that's reducing employment. Um, I think it increases risk 0:07:55.640 --> 0:07:58.720 if you don't really know people on a humans fashion 0:07:58.840 --> 0:08:01.120 like face to face. I think there's a lot of 0:08:02.840 --> 0:08:05.040 threats like runs on the banks because you don't really 0:08:05.080 --> 0:08:07.200 know anybody. When you get panick, you need to talk 0:08:07.200 --> 0:08:09.800 to someone, but you never did, so how do you 0:08:09.880 --> 0:08:12.720 do it? You know? I think that's one trend. You know. 0:08:12.760 --> 0:08:18.960 The other trend is big data disintermediating back of offices UM, 0:08:19.200 --> 0:08:23.360 computer type systems types as well as you know, different 0:08:23.360 --> 0:08:32.679 types of loan officers UM. So you know, big data, cloud, bitcoin, blockchain. 0:08:32.840 --> 0:08:36.120 You know, that's all reducing So it's like a human 0:08:36.760 --> 0:08:39.480 thud cuts everywhere you look, there's some sort of threat 0:08:39.559 --> 0:08:42.720 change and um, you know. Then there's a lot of 0:08:42.720 --> 0:08:46.439 credit building up again in credit cards. We just pierced 0:08:46.640 --> 0:08:50.040 one trillion and outstandings for the first time. I think 0:08:50.040 --> 0:08:53.680 it's gonna double in size as the millennials use the 0:08:53.720 --> 0:08:58.120 credit cards to realize their dreams by borrowing money, and 0:08:58.120 --> 0:08:59.800 a lot of them are gonna get into trouble. They're 0:08:59.800 --> 0:09:04.400 just humans like everybody other generations. So, um, commercial real 0:09:04.480 --> 0:09:07.199 estate I think is gonna have some problems multi family, 0:09:07.240 --> 0:09:11.200 which everyone thinks is a ticket to gold. It's I've 0:09:11.200 --> 0:09:15.080 seen it in my own buying and selling in different 0:09:15.280 --> 0:09:18.600 craze periods in the eighties and nineties and two thousands. 0:09:18.600 --> 0:09:20.960 So you know, trees don't grow to the sky, and 0:09:21.000 --> 0:09:22.959 you have to see when it's overdone and try to 0:09:23.000 --> 0:09:25.200 get people to focus on it, because when they have 0:09:25.240 --> 0:09:26.959 a house and it's going up at price, they don't 0:09:26.960 --> 0:09:29.240 want to hear a story that housing is going down. 0:09:29.840 --> 0:09:32.120 It hurts their own personal pocketbook. They just don't want 0:09:32.120 --> 0:09:35.800 to face the reality. What about interest rate risk, David, 0:09:35.800 --> 0:09:38.000 I remember this is something you talked a lot about 0:09:38.120 --> 0:09:41.360 a few years ago, and since then, you know, rates 0:09:41.360 --> 0:09:43.880 have stayed pretty low. We had one rate hike from 0:09:43.920 --> 0:09:46.720 the Fed. We're talking about another one possibly this month 0:09:46.800 --> 0:09:50.840 or next. Is that a risk for the banks? Well, 0:09:51.640 --> 0:09:56.360 I think what's happened is rates have stayed low so 0:09:56.480 --> 0:09:58.040 long that some of the things I talked about a 0:09:58.040 --> 0:10:02.880 few years ago, they kind of um the yields rolled 0:10:02.880 --> 0:10:06.079 into a lower environment, whether it was the investment securities, 0:10:06.160 --> 0:10:11.240 the cash securities like MBS mortgage backed securities, or you know, 0:10:11.400 --> 0:10:15.760 different types of derivatives that simulate you know, investment views 0:10:15.880 --> 0:10:20.559 or mbs, So I think, uh, you know, rates banks 0:10:20.640 --> 0:10:22.640 maybe you know, take a little bit more risk on 0:10:22.679 --> 0:10:25.000 the on the cash side, it's hard to simulate it 0:10:25.160 --> 0:10:28.520 as much on the synthetic derivative side. It's kind of 0:10:28.520 --> 0:10:31.760 played out in a way. But you know, when rates rise, 0:10:32.040 --> 0:10:34.800 you know, nobody really knows how sensitive deposits are to 0:10:34.880 --> 0:10:38.559 hire rates. So far, with the basis point move, that 0:10:38.800 --> 0:10:43.520 has not been you know, a huge outmigration from bank deposits. 0:10:43.559 --> 0:10:47.440 But we'll see how it goes, if how gradual the 0:10:47.520 --> 0:10:51.800 fet is um the pace and how you know deposits 0:10:51.840 --> 0:10:55.000 react as deposits could read price faster than bank loans 0:10:55.000 --> 0:10:59.720 could be or securities yields. What about the decline of 0:10:59.760 --> 0:11:03.439 these trading businesses, So we continue to see the major 0:11:03.840 --> 0:11:06.160 Wall Street banks slim the ranks of their trading. They 0:11:06.160 --> 0:11:08.120 always talk this was a bad quarter for trading and 0:11:08.160 --> 0:11:11.200 there wasn't a volatility. Is that business ever going to 0:11:11.679 --> 0:11:14.880 thrive in a big way again? It's going back to 0:11:15.040 --> 0:11:22.160 its core purpose, which is capital creation to grow businesses 0:11:22.400 --> 0:11:27.720 or consumer asset classes less speculative by far less speculative. 0:11:28.200 --> 0:11:31.040 So I you know, under the current regime, Dot Frank 0:11:31.160 --> 0:11:35.560 BOSEL three and all the implementations. And know what we 0:11:35.640 --> 0:11:40.199 saw in the you know two thousands. You know, you're 0:11:40.200 --> 0:11:42.040 not going to see for a while whether that gets 0:11:42.120 --> 0:11:46.280 rolled back with different political movements, whether it's Bernie Sanders 0:11:46.360 --> 0:11:49.600 or Donald Trump or even Hillary Clinton. You know, we'll 0:11:49.640 --> 0:11:53.120 see um. But for the time being, you know, trading 0:11:53.200 --> 0:11:56.720 desks have been derisked. Um. You know, if you want to, 0:11:57.520 --> 0:12:00.520 you know, gamble, you know, you gotta do it in 0:12:01.080 --> 0:12:06.199 non regulated markets or sports fantasy leagues or so you 0:12:06.200 --> 0:12:08.880 would say. The main problem, the reason those desks aren't 0:12:08.880 --> 0:12:16.000 as profitable, essentially they've been stripped of their ability to gamble. Correct, David, 0:12:16.040 --> 0:12:18.400 give us a snapshot of what the Bank of the 0:12:18.440 --> 0:12:20.960 future is going to look like, say in ten or 0:12:21.000 --> 0:12:23.240 twenty years, is it going to be recognizable to what 0:12:23.280 --> 0:12:27.280 we have today. Well, it's gonna I was just anticipating 0:12:27.280 --> 0:12:28.760 that question. I think it's gonna be a little like 0:12:28.840 --> 0:12:33.559 you know, you know, Johnson Space Control, Mission control. You're 0:12:33.559 --> 0:12:38.480 gonna have you know, a few dozen really smart guys 0:12:38.520 --> 0:12:41.160 and women running the bank, and then a lot of 0:12:41.200 --> 0:12:45.920 it's going to be automated and cloud distributed. You're not 0:12:45.960 --> 0:12:47.880 gonna have you know, you're gonna have you may have 0:12:47.920 --> 0:12:51.960 more robotic investment management. I mean the by sides really 0:12:52.000 --> 0:12:54.280 at risk. I think there was a story about Fink 0:12:54.440 --> 0:12:57.680 at black Rock saying there's would be a wave of 0:12:57.720 --> 0:13:03.080 consolidation and asset management. UM. So you know, people the 0:13:03.120 --> 0:13:07.439 younger generation is more comfortable doing businesses on a smartphone 0:13:07.600 --> 0:13:10.640 or Skype or whatever. So it's gonna be a lot 0:13:10.760 --> 0:13:16.480 less people pushing out even more credit. Um. But there's 0:13:16.600 --> 0:13:19.760 risks because you know, the best way to you do 0:13:20.040 --> 0:13:23.240 credit businesses is to look at someone's eye and decided 0:13:23.280 --> 0:13:26.040 that person really gonna pay me back. And I'm not 0:13:26.200 --> 0:13:30.080 sure if fintech has solved that. Yeah, it doesn't sound 0:13:30.120 --> 0:13:33.679 like then you're very optimistic about some of they's new 0:13:33.679 --> 0:13:38.480 marketplace lenders or other attempts to make lending more efficient. 0:13:38.520 --> 0:13:41.360 If you think there's still a value in looking at 0:13:41.400 --> 0:13:45.120 someone in the eye, yeah, I would agree, or being 0:13:45.160 --> 0:13:48.560 in the same room and having a context about what's 0:13:48.600 --> 0:13:50.640 going on. So you know, fintech is going to go 0:13:50.679 --> 0:13:54.199 through an evolution of fits and starts of discovery of 0:13:54.240 --> 0:13:57.280 what sort of works and maybe it being overdone and 0:13:57.320 --> 0:13:59.280 it doesn't work. And I think we're starting to see 0:14:00.040 --> 0:14:03.040 some models, you know, break down a little, even though 0:14:03.040 --> 0:14:05.760 there was a lot of fanfare for things like lending 0:14:05.800 --> 0:14:10.280 club UM and others, you know, where the algorithms don't 0:14:10.320 --> 0:14:14.360 capture the human element precisely, and uh, they get carried 0:14:14.360 --> 0:14:20.760 away standing credit automatically. Are there any technologies you mentioned 0:14:20.800 --> 0:14:23.400 mobile it's going to be a key avenue banking. You 0:14:23.440 --> 0:14:27.120 mentioned the cloud. Are there any technology other technologies that 0:14:27.160 --> 0:14:29.360 you are actually quite bullish on or that you think 0:14:29.360 --> 0:14:31.840 will be really important? I mean maybe yeah, some of 0:14:31.880 --> 0:14:34.000 the lending clubs won't live up to the hype. But 0:14:34.280 --> 0:14:36.160 are there areas that you think right now are being 0:14:36.240 --> 0:14:39.880 underestimated that are going to change the nature of finance? Well, 0:14:39.880 --> 0:14:43.600 I think you know, where you can make mundane practices 0:14:45.200 --> 0:14:51.320 more efficient and less intrusive on somebody's lifestyle, like you know, 0:14:51.440 --> 0:14:55.080 quick pay or Venmo or PayPal. You know, I think 0:14:55.280 --> 0:14:58.560 things like that have been I think successful, Like more 0:14:58.600 --> 0:15:02.120 on the transaction process s side, where going to the 0:15:02.160 --> 0:15:04.840 bank and getting your past book stamped with interest, which 0:15:04.880 --> 0:15:07.440 is what I did when I as a kid, you know, 0:15:07.560 --> 0:15:11.520 on my paper route, say, um, depositing that check. You know, 0:15:11.520 --> 0:15:13.880 you just don't need to do that anymore, so I 0:15:13.920 --> 0:15:23.120 think there's you know, lifestyle efficiency, productivity applications and activities 0:15:23.160 --> 0:15:26.680 that you know, make banking just easier on everybody. What 0:15:26.760 --> 0:15:30.080 about blockchain you mentioned that earlier. Do you think I mean, 0:15:30.080 --> 0:15:32.280 there's a lot of hype about that, but I haven't 0:15:32.400 --> 0:15:36.240 really grasped how that's going to change things. Do you 0:15:36.360 --> 0:15:41.080 see a significant role for that technology in finance? I mean, 0:15:41.120 --> 0:15:43.440 I'm not an expert in it, but you know it's 0:15:43.520 --> 0:15:49.120 trying to make things more transparent for the ledger of 0:15:49.160 --> 0:15:55.320 different activities, whether it's trading or you know, payment systems. 0:15:55.480 --> 0:16:00.000 We have massive amounts of payments going one way or another. Um, 0:16:00.160 --> 0:16:03.120 so I think it's going to help on the efficiency side. 0:16:03.520 --> 0:16:07.400 And uh, you know what's happening with banking, and I 0:16:07.480 --> 0:16:10.600 said this in different reports and different talks, is that 0:16:11.240 --> 0:16:14.400 it's really becoming a commoditized business. We have to brand 0:16:14.480 --> 0:16:19.480 it to get loyalty so that you could reuse the product, 0:16:20.360 --> 0:16:25.200 the investment the product across more users and people. So 0:16:25.360 --> 0:16:27.680 you know, you need a strong brand. And when you 0:16:27.720 --> 0:16:31.479 have brands, you have to deliver on the brand concepts. 0:16:31.480 --> 0:16:35.240 So you know, banks like Chase should continue to do well. 0:16:35.520 --> 0:16:38.640 Banks like City self to prove themselves again, even though 0:16:38.680 --> 0:16:41.360 they kind of with the first big bank to do 0:16:41.800 --> 0:16:44.920 mass marketing of credit cards back in the seventies and eighties, 0:16:45.360 --> 0:16:49.280 Bank of America's trying to get that brand of you know, 0:16:49.360 --> 0:16:55.600 reliability across mortgages and credit cards and you know other activities. 0:16:55.640 --> 0:16:58.520 So um, I think that's the key. Do you have 0:16:58.560 --> 0:17:02.479 a brand and then you leverage the efficiency that technology 0:17:02.520 --> 0:17:06.880 presents to your customer base. So it's brand and human element. 0:17:07.200 --> 0:17:09.359 David Hendler, thank you very much for joining us. I 0:17:09.359 --> 0:17:12.359 think there's gonna be a fascinating debate and conversation to 0:17:12.480 --> 0:17:14.560 track in the coming years, and we hope you'll come 0:17:14.600 --> 0:17:17.520 back at some point for a update on how things evolved. 0:17:17.680 --> 0:17:26.679 Thanks so much, Thank you, Tracy. I think this is 0:17:26.720 --> 0:17:30.640 going to be a really interesting topic that we're going 0:17:30.680 --> 0:17:33.440 to be talking about from many years. And I feel 0:17:33.480 --> 0:17:37.680 like this is an area the future of the bank 0:17:37.760 --> 0:17:40.719 that everyone is sort of clawing around for an answer, 0:17:40.720 --> 0:17:43.240 and I just don't feel like, uh, I just feel 0:17:43.240 --> 0:17:44.800 like there's gonna be like a huge mystery we're all 0:17:44.800 --> 0:17:48.560 gonna be talking about. Well, I suppose in ten or 0:17:48.600 --> 0:17:51.720 twenty years we'll have to reconvene all thoughts and figure 0:17:51.760 --> 0:17:54.040 out where we've come out. But I do like the 0:17:54.080 --> 0:17:59.200 idea from David of having bankers sort of like pilot 0:17:59.200 --> 0:18:02.800 the Starship bank, right, like everyone, you just have a 0:18:02.800 --> 0:18:04.480 couple of people who are sitting in front of a 0:18:04.520 --> 0:18:07.120 computer and they sort of control it and direct this 0:18:07.400 --> 0:18:11.160 massive organization, and you don't need as many people anymore. 0:18:11.200 --> 0:18:14.320 But the other interesting thing he brought up was the 0:18:14.359 --> 0:18:18.320 trade off. Right, if everything is electronic and you're not 0:18:18.400 --> 0:18:22.840 really interacting with people in person anymore, is that bad 0:18:22.880 --> 0:18:26.880 for credit management? Yeah? Yeah, exactly. It seems like there's 0:18:26.960 --> 0:18:29.080 kind of a contradiction. So on the one hand, you 0:18:29.160 --> 0:18:33.680 have the person sitting behind the Starship enterprise with all 0:18:33.720 --> 0:18:36.720 this technology around them, But on the other hand, as 0:18:36.720 --> 0:18:40.920 you pointed out, there's still no better way to assess 0:18:40.960 --> 0:18:45.399 someone's credit viability that talking to them and actually getting 0:18:45.440 --> 0:18:48.080 to know them. So it feels like this is something 0:18:48.280 --> 0:18:50.080 we're going to be wrestling with for a while. I mean, 0:18:50.080 --> 0:18:53.040 we talked about a couple episodes ago what's going on 0:18:53.280 --> 0:18:56.399 with Lending Club and the attempts to use big data 0:18:56.520 --> 0:19:00.320 or whatever to assist credit worthiness, But it doesn't sound 0:19:01.200 --> 0:19:04.560 like that issue has been solved yet. It still sounds 0:19:04.600 --> 0:19:07.080 like there's a contradiction here. No, I don't think anyone's 0:19:07.080 --> 0:19:09.920 cracked it just yet. So we'll have plenty of stuff 0:19:09.960 --> 0:19:12.119 to have plenty of talk about, and I look forward 0:19:12.160 --> 0:19:15.920 to Odd Lots episodes in the year twenty thirty six 0:19:15.920 --> 0:19:18.560 where we see how this all developed. All right, I'll 0:19:18.600 --> 0:19:21.320 see you then. Thanks everyone for listening to the latest 0:19:21.320 --> 0:19:24.400 episode of the Odd Lots Podcast. I'm Joe Wisn't All. 0:19:24.440 --> 0:19:26.919 You could follow me on Twitter at the Stalwart and 0:19:26.960 --> 0:19:30.040 I'm Tracy Alloway. I'm on Twitter at Tracy Alloway. Thanks 0:19:30.080 --> 0:19:30.560 for listening.