When you read that this article is about Guns NТ Roses bass player Duff McKagan, youТre probably going to check your calendar to see if it is Friday. I donТt blame you for thinking this is a Geekend post. But actually, this is about financial services. Specifically, this week, Duff McKagan opens up Meridian Rock, a financial services firm designed to help rockers and other high-profile clients manage their money.
The whole concept came when Duff was reading financial reports for the band in the 90s and realized he didnТt understand a word. Not only was he frightened that he didnТt know if the band had any money, but he was also intimidated to ask for help. Duff ended up enrolling in finance courses to get more informed. Ultimately, this led to giving advice to friends and eventually a business.
The reason DuffТs company is interesting, however, is not because heТs famous. What I keyed on was Meridian RockТs three tenets -- righteousness, transparency, and education.
Many of the people I come across in technology, engineering, and science have chosen their fields because of lack of moral ambiguity. The great thing about technology is that, for the most part, they behave the exact same way every time. And unlike people, technology is neutral. What is done with it can be good or bad, but the tool is neutral.
Of course, when you enter IT in the financial services, this changes. You accept trust from your customers and stakeholders to create secure infrastructure and safe investments. You can use technology to move (and therefore steal or hide) millions of dollars in an instant. Nearly all banks have some sort of moral language in their mission statements and marketing. They trade on words like trust. However, few are so simple and explicit as Duff McKaganТs concept of what a financial services firm owes its customers. LetТs look at all three as it pertains to the IT department in financial services firms and other IT departments as well.
Righteousness: Many people point to failures in subprime lending and mortgage-backed derivatives and assume greed-clouded judgment. Personally, I agree with E2 blogger Tom Redman that, in many cases, these errors werenТt necessarily greed-driven but mistakes with learning how to manage data. Most executives seemed to have honestly thought derivatives were a great way to spread risk rather than increase it. But as early as 1994, people were warning that mortgage-backed derivatives could be a problem. In 2007, the warnings rose to a crescendo. Who was best-placed to say that we werenТt mitigating the risks as advertised? IT professionals and data experts who put together the tools in the first place. Yet a combination of pressures from the business side and an unwillingness to step out of ITТs cubbyhole led to disaster. As financial services get more and more complicated, data driven, and focused on technology, it has to become ITТs responsibility to create righteous tools that do what they claim theyТll do.
Transparency: In many ways, transparency and righteousness can be the same thing in financial services. So much trust is built into believing the foundation of the financial services is solid. And that solidity is demonstrated through transparency. The most frustrating part of the financial industry lately is that many people have not learned anything. The infamous $2 trillion error in S&P AmericaТs credit rating calculation is the obvious example. When it was shown to them, they could have gone back and done the math again. Or they could have shown how the error didnТt effect their formula by demonstrating the formula. Instead, they stuck to their guns as though being questioned was above them. There are no bond ratings, no large scale stock purchases, no compliance reports, no transactions of any kind that do not go through the IT department. Yet, the black box continues in the industry. Who is equipped more than IT to lift the shroud?
Education: When Duff talks about education, he talks about educating the client on financial decisions so they can be a part of the effort. What I mean is that IT needs to explain its limits and capabilities better to management. Returning to those mortgage-backed derivatives, the main issue is that the process and the technology that was in place couldnТt really parse the risk as well as believed. There was a point in the construction of any new financial instrument where IT is brought on board to execute it. At this point, IT needs to more vigilant than ever about explaining the limitations of the new instrument to management.
Of course, please donТt mistake my urging you to take a larger role in handling an accusation that more could have been done before. IT has always been treated like a child that is to be seen but not heard. But the time for silence is gone. Technologists can no longer afford to just watch and remain neutral. It is time to take an active role in the deployment of technology in a morally and economically viable way. An awful lot of peopleТs jobs and livelihoods depend on it. I know it seems funny to take morality advice from a guy who once put out an album called "Appetite for Destruction," but just roll with it. Destroy your preconceived roles and find a new place for IT.