Things We’ve Read & Recommend

Balancing Innovation and Efficiency

2018 Letter to Shareholders of Amazon
By Jeff Bezos
Amazon.com is just 25 years old, but it is already one of America’s most iconic companies. It sold $277 billion worth of physical merchandise last year, split between sales made by Amazon itself and sales made by third-party retailers on Amazon’s marketplace.

The foundation of Amazon’s success is its innovative culture. “From very early on in Amazon’s life, we knew we wanted to create a culture of builders-people who are curious, explorers,” wrote founder and Chief Executive Officer Jeff Bezos in his 2018 shareholder letter. “They like to invent. Even when they’re experts, they are ‘fresh’ with a beginner’s mind. They see the way we do things as just the way we do things now.”

Analysts and commentators love to cite Amazon as an analog for other industries, as if its approach can be replicated elsewhere. It cannot be, of course, but Bezos’ insights in his latest letter, particularly those on the balance between innovation and efficiency, are deep, counterintuitive and industry agnostic.

Pleasing Warren Buffett

A Plain English Handbook
By the Securities and Exchange Commission
“For more than forty years, I’ve studied the documents that public companies file,” wrote Warren Buffett in the preface to “A Plain English Handbook,” a writing guide produced by the Securities and Exchange Commission. “Too often, I’ve been unable to decipher just what is being said or, worse yet, had to conclude that nothing was being said.”

The most common problem “is that a well-intentioned and informed writer simply fails to get the message across to an intelligent, interested reader,” Buffett continued. “In that case, stilted jargon and complex constructions are usually the villains.”

The SEC’s writing guide is designed to cure this. It is concise, at less than than 80 pages, the advice within it is invaluable, and it is available for free online. “Write as this handbook instructs you,” advised Buffett, “and you will be amazed at how much smarter your readers will think you have become.”

The Taxi Medallion Meltdown

Article series by The New York Times
By Brian Rosenthal
The value of taxicab medallions in New York City-which essentially are a license to operate a taxi-rose from $200,000 to more than $1 million between 2002 and 2014. Uber Technologies and Lyft then entered the scene, causing the medallion market to crash and leading to over 950 bankruptcies by medallion owners, with thousands more struggling to hang on.
“[M]uch of the devastation can be traced to a handful of powerful industry leaders who steadily and artificially drove up the price of taxi medallions, creating a bubble that eventually burst,” wrote Brian Rosenthal, a reporter at The New York Times, which conducted a 10-month investigation into the practices that led to the bubble. “The practices were strikingly similar to those behind the housing market crash that led to the 2008 global economic meltdown.”

The story by Rosenthal, “‘They were Conned’: How Reckless Loans Devastated a Generation of Taxi Drivers,” is a compelling read. It is also a timely reminder that asset bubbles fueled by shortsighted lending can materialize in the most unlikely of places.

Back to the Basics

Basics for Bank Directors
By the Federal Reserve Bank of Kansas City
One would be excused for thinking that a bank’s board of directors has little impact on the institution’s financial performance. It’s the executives, not the directors, after all, who manage a bank’s operations on a daily basis. But in an industry predicated on risk, having a robust layer of oversight has proven to be essential.

“At the Federal Reserve Bank of Kansas City we have consistently found a strong correlation between overall bank health and the level of director engagement,” wrote Kansas City Fed President Esther George in the introduction to its governance manual, “Basics for Bank Directors.” “Generally, we have seen that the institutions that are well run and have fewer problems are under the oversight of an engaged and well-informed board of directors.”

The manual is a foundational document for directors. In a little over 100 pages, it offers an overview of bank business models, the industry’s byzantine regulatory framework and what to do when things go wrong. And it cycles through a series of safety and soundness challenges faced by banks.


John Maxfield


John Maxfield is a freelance writer for Bank Director magazine. He was previously the senior banking specialist at The Motley Fool. He regularly writes for Bank Director magazine and BankDirector.com. His work has been syndicated widely to national publications including USA Today, Time and Business Insider, and he’s been a regular guest on CNBC. John has a bachelor’s degree in economics from Lewis & Clark College and a juris doctorate from Southern Methodist University. He’s a licensed attorney in the State of Oregon.

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