I was having lunch with Luke Janssen, founder of Tigerspike, the other day talking about history. Specifically the first world war, and how technological progress caught humanity off guard like never before. Luke made an interesting connection to the disruption we’re seeing in Fintech today, so I stole his idea and made this post.
A gentleman’s game
Today we think of war as absolute horror, something that ruins nations and the dreams of entire generations across the world. Yet in 1914, the civilized nations of the western world were experiencing something called war fever. As perverse as it sounds in today’s world, war, in the European context was seen as something of a purification ritual, a romantic adventure for young men to make their names. War was still seen as a necessary part of culture, to keep humanity from descending into decadence. It was a grand game for gentlemen to rattle their sabers at the border. After battle generals would shake hands, exchange swords and the victor would win a province or two.
The iconic image of this virtuous image of war is the French cavalry. Bright shining breastplates, horse hair helmets and of course bright red pants to complete the French Tricolore. Virtually identical to the horsemen of Napoleon’s army one hundred years earlier. Nothing had changed in a century, imagine that. Their weapon of choice was the sword, yes sword, waved for dramatic effect with white gloves. These soldiers literally went into war with white gloves. Regular infantry soldiers had no helmets. They wore wool hats to the first world war. It’s hard to comprehend with the advantage of perfect hindsight.
Banks are the French Cavalry of today. They’re going into a war with white gloves.
Think about it. Banks are like civilized nations battling each other in a real gentleman’s game, where each will have it’s short lived glory. Launch a new product, hurrah! This new campaign will bump us a slot or two in the rankings, jolly good! Why don’t we open a new market, and show those locals a thing or two! Let’s send our best and brightest to duke it out. Tally-ho and ho-hum!
Say hello to my little friend
In earlier wars, the fierce hussars of the cavalry would often overrun infantry positions with aggressive sprints across the battlefield. Cavalry had been the most dangerous weapon on Earth for thousands of years. Think Ghengis Khan. Alexander The Great. Infamous for their deadly cavalry. In previous conflicts of the 19th century, opposing forces could only fire 5-6 rounds per minute in defense with their dainty rifles, by which time the cavalry had stomped their fancy frocks into the mud. Why would this war be any different.
In this new war, waving their shiny sabers and prancing onto the battlefield, the cavalry was met with machine guns. Machine guns are different. They fire 500-600 rounds per minute. In the first minute of the war, the cavalry was made obsolete. Thousands of years of military doctrine was made meaningless in a matter of seconds.
Fintech is the Machine Gun
The startups and tech giants out there aren’t competing on your terms. They’re not playing your game. They aren’t going to shake your hands, in fact, you won’t even know you’re in a war until you’re losing.
So what do you do, as the cavalry facing the machine gun? You throw away the horse and dig trenches. No, you can’t win the battle, but at least you won’t lose! You embrace new banking regulation with open arms because it means the cost-of-entry into your market is ever more difficult. Trenches!
Now you think you’re safe in your trench. Bullets are still whizzing above your head, but you’re safe.
Fintech is the Land Ship and The Zeppelin
Can you imagine what it must have felt like, to be the first soldier to witness a metallic, growling ship slowly emerge from the mists of the battlefield. But you’re not on water! It’s a land… ship. Your bullets are bouncing off. It keeps coming. You can’t stop it. What is it?!
Can you imagine the residents of Paris, seeing a dark cloud gathering over the city. How curious people must have been. Then it starts dropping bombs. You thought the war was being fought hundreds of miles away! Home was meant to be safe. The Hague convention strictly forbids acts of war on civilians! How is this possible?!
It’s a war of attrition. Total war.
This is what banks are facing. Your competition isn’t playing by your rules. They’re making their own rules. They aren’t asking your permission.
What are you going to do about it? Broker a deal and create an alliance? Dig the trenches deeper? Create your own secret weapon?