Room for Squares

John Mayer's debut album, undoubtedly one of my favorites and still in rotation on my iPod, "Room for Squares," captures a young man finding his way on life's journey through song. I used to think every acoustic guitar strummed by a white guy all sounded the same. For some reason this album triggered emotions that others following this formula had not and tugged on heartstings to that point were underdiscovered. But whatever...I just liked it alot. :-) Since this album, I have continuously listened to John on later projects follow his own path for individuality.

Normally, I don't post things that stray too far from music, or empowerment. However, this article below is an excellent read and gives examples of a great model to follow no matter your passion. Further down in the article it highlights the founder of ING Direct in the light of the mortgage crisis. ING offers mortgages and out of 100,000 mortgages ING lended only 15 have ended in foreclosure. That's a pretty small number compared to the many in some cases the majority of mortgages owned by other well known, highly trusted banks that ended in foreclosure. I am happy to say that I bank with ING Direct and have watched a steady not huge, but steady increase of interest accrue.

Additionally, ING founder Arkadi Kuhlmann talks about the temptation to be unethical and greedy for lack of more friendly word during the housing boom. He choose to go another route. His path seems to be paying off not only for ING but for their homeowners. Kuhlmann instituted innovativeness in a less popular way. I'm sure he didn't have many cheerleaders and as many supporters but his choices have kept him above water and still winning.

I love the title, "Sometimes it's Hip to be a Square." (The road less travelled)
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How do you keep your head when all those around you are losing theirs? This has become a defining challenge for leaders in an age of technology bubbles, private-equity overreach, and, most recently, the mania (and meltdown) in the mortgage market.
Failure, we like to tell ourselves, is a powerful opportunity to learn. If that's the case, there must be lots of executives learning powerful lessons these days. The government has stepped in to rescue Fannie Mae and Freddie Mac, once pillars of the financial system, whose misguided policies enabled so much of the mortgage madnesss. The CEO of Washington Mutual, once a darling of Wall Street analysts, resigned in the face of balance-sheet pressures. Banks and financial institutions everywhere are writing down assets, bumping up loss reserves, slashing payrolls--and watching shareholder value evaporate.

What can we learn from this heartache and misery? To me, the most valuable insights come from those few leaders who refused to be seduced by the promises of fast growth and easy profits. Sure, many of the biggest and best-known names in banking decided to offer teaser rates to attract unqualified borrowers, and to approve loans without verifying incomes. But a few holdouts, who were tremendously creative in much of how they did business, decided that when it came to the "financial engineering" that reshaped the mortgage market, Huey Lewis had it right: It's hip to be square.

One case in point is Hudson City Bancorp, a 140-year-old company based in Paramus, New Jersey that has managed to avoid the mortgage meltdown and continues to post tremendous results. Business journalists have discovered this quiet little outfit and marveled at its strategic insights. Its shares are up 50 percent since last August, when the credit crisis really kicked in. (A leading index of bank stocks is down 40 percent over the same period.) "Hudson City banks the old-fashioned way," Newsweek marveled. "It takes deposits and makes mortgages to people who buy homes in which they plan to live. And then it hangs on to" the mortgages, rather than sell them in the secondary market.
Imagine the brilliance! Take deposits. Make sensible loans. Repeat over and over again, until your market cap approaches $10 billion.
The New York Times tried to unpack the secrets of Hudson's success and offered this analysis:

"The bank carefully screened loan applicants to ensure they would be able both to afford a new house and reside there, rather than flip it. And the bank demanded hefty down payments...as a cushion against any sharp drop in home prices, because it planned to hang on to the loans."
What a formula! Make sure borrowers can afford their loans. Insist that they make a big down payment. Favor owners over speculators.
Hudson City's mindful approach to banking only looks remarkable because so many established banks lost their minds. ING Direct, a cutting-edge banking innovator about which I've written in the past, also managed to avoid the march of folly in its industry. The bank avoided the subprime meltdown because it stuck to simple, plain-vanilla mortgages rather than exotic instruments that sounded too good to be true (and were). The bank has written 100,000 mortgages worth $26 billion and has a grand total of 15 foreclosures. Not 15 percent, just 15 mortgages out of 100,000.

Arkadi Kuhlmann, ING Direct's founder and CEO, is one of the most creative business leaders I've ever met. But he was able to distinguish between get-rich-quick industry fads and real innovation. "Every person who tries to do real innovation is going to be tempted by money, greed, acceptance, being in the middle of the action," Kuhlmann says. "But at the core there is one fundamental difference: I know why I'm here. I want to make a difference. If I was into this just for making money, being a big accepted banker, I would have been tempted. But that's not why I'm here. I am trying to build something that changes the business, that allows me to stay on the right side of the discussion."

Kuhlmann's skepticism about mortgage fads speaks to one of the unappreciated elements of strategy and creativity. Sometimes, the most important form of leadership is resisting an innovation that takes hold in your field when that innovation, no matter how popular with your rivals, is at odds with your long-term point of view. The most determined innovators are as conservative as they are unique. They make big strategic bets for the long term and don't hedge their bets when strategic fashions change.
"We as individual leaders operate inside a cultural context," Kuhlmann explains. "The question is, do you want to try to influence the culture that you're in, or do you want the culture that you're in to overwhelm you?"

By combining cutting-edge insights with back-to-basics discipline, ING Direct, like Hudson City Bancorp, has created a powerful new force in the financial-services market. Kuhlmann and his colleagues resisted the worst excesses of the last few years, because they weren't interested in running with the pack--they were determined to do what made sense to them. "When you run with the pack, what you generally see are other people's backsides," Kuhlmann wisecracks. "We know why we're here, and it's not to photocopy other people's bad ideas."
Do you have the values and discipline to keep your head when so many around you are losing theirs?

Word of the Day: Joshua 1:7
Always Empowering,
Kris!