The Open Bank

With all the daily news about banks and bailouts, one thought comes to mind: Why not let all the doomed banks rest in peace and create good banks instead of bad ones? Well, it's not an easy thought as SinnerSchrader works for two important German banks.

As food for thought, a few weeks ago we asked the Jeff Jarvis question: What would Google do? And we applied this question to banking. As it is still an ongoing project, I can't yet tell you the answers we found. Have a look at these notes instead.

But it's worth to note that Jeff Jarvis himself encountered a somewhat similar experience last week at Davos. He ran a session on mass innovation in which he 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.

I think that is just what we need. Jeff argues that we should invest in ideas like the Open Bank instead of bailing out the incumbents who 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.