René Jones, CEO of
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Transcription:
Transcripts are generated using a combination of speech recognition software and human transcribers, and may contain errors. Please check the corresponding audio for the authoritative record.
Paul Vigna (00:09):
Hello, I am Paul Venia, managing editor at American Banker. I am joined by Renee Jones, the CEO of
Rene Jones (01:01):
It's a great question, but let me start by saying thank you for having me.
Paul Vigna (01:04):
Thank you
Rene Jones (01:05):
You for coming. We appreciate it. Great to be here. Yeah, so the bank did sort of grow up or get founded around all the commerce that happened around the Erie Canal. In fact, last year we just celebrated the 200th anniversary of the completion of the canal. And I think it's relevant for a number of reasons. One, even today, the bank is really focused on furthering commerce and what that looks like has changed over time. And companies that were here and industries that were here and relevant are no longer relevant, much like the Erie Canal other than for a tourist event. So it kind of shows, one, what the purpose of the bank is, and we try to hold near and dear to that purpose, but it also shows how adaptable you have to be as a financial institution as things change to be able to meet the needs of industry.
Paul Vigna (01:59):
So just in your region, the states that you guys serve, where do you see the growth opportunity? What kind of businesses are you looking for? What kind of customers are you finding?
Rene Jones (02:12):
It's interesting. 33 years ago when I first came to
Paul Vigna (03:04):
Can you tell me a little bit about your tech hub? You guys built a tech hub in Buffalo. And I'm going to sound extremely provincial and annoying, but here in New York, we wouldn't think of Buffalo as a technology center. I acknowledge how bad that sounds. But you did, you built a very sort of gleaming 21st century modern tech hub. Can you tell me a little bit about that and what that means for Buffalo and the region?
Rene Jones (03:32):
It's interesting. So we principally serve small towns and mid-tier cities across those 13 states. We are in Boston, we are in New York, we're in Baltimore and Washington, but outside of that, it's really small towns and rural places. And if you look over the last say 25, 20, 20 years or so, really a lot of the development around tech and tech hubs and tech talent has been on the coast. And a few of us sort of believe that there's this race for relevance in these small towns in the middle that actually can compete and will be able to compete because talent has become very mobile
(04:14):
If you think about what's happened. And so we set out on a journey back seven or eight years ago when I became CEO. At the time, everybody was asking us, "Well, what app are you going to deploy and what new gadget are you going to deploy?" And we had just started to embark on a mission that was really about beliefs. And the beliefs were that technology was changing so rapidly and unless you put it in as an integral place in your competitive analysis, that you were going to risk losing out. And what we realized over time, and we talk about this in the letter that we just released, is that we were actually changing belief systems about innovation and how fast that the bank had to operate faster. And so as part of that, we brought in a new CIO and one of the first things that we did was run a pitch competition for where we would house our technologists.
(05:12):
We had something like less than 50% of our technologists were in- house. We were outsourcing them. As you look at it today, 80% are inside. We didn't have a single person in the firm with the title engineer. We didn't have anybody who had the title data scientist. And so if you look at what's happened over time, the tech hub was a symbolism for sort of our behavior changes that we needed to have. What's really interesting is we also realized that what we could build for our needs turned out to be a community asset. So think about one simple example is in the middle of the tech hub, we put in our training center and we were spending about $2 million on training our own talent. But what we realized is that if we put it in a public space, we could still train our own talent, but we also for free could train technologists who were working at startups because there wasn't any additional cost, you just made it available.
(06:12):
And then we also learned that we could take individuals who were working, say, in the corrections field and make them data scientists in that space. So this sort of combination between what's good for the bank and what's good and a healthy asset for the community actually sort of had a marriage there with the tech
Paul Vigna (06:30):
Company. So the tech hub is a public private space. I mean, you use it for your own operations, but you also use it to bring in people and businesses in the community.
Rene Jones (06:40):
Yes. So it's 1.1 million square feet. We take a third of it and most parts of our third are secured, but they're in the building. And then there's a central suite of services that allow principally tech companies. Up until recently, it has been all tech companies that were housed in the building and we're looking at that creates collisions and it creates talent. And also when you recruit a technologist, whether it's for
Paul Vigna (07:29):
I want to look at banking sort of through the lens of, excuse me, of it as a competitive industry and look at some of the elements of that. And the one I want to ask you about immediately that comes to mind is just this idea of the threat of new entrants. It seems to me to your bank specifically, you have competitors who are both your size and larger, who are traditional banks, you have competitors who are not traditional banks at all, who are offering financial services to customers and sort of almost ... It's a weird sort of double-edged coin, the whole tech issue, right? I mean, it allows you and it allows people to sort of physically, not physically be, but they're not bound by where their physical location is. And that's a good thing, but that also can bring in different competitors. I mean, people don't have to be physically in Buffalo, New York or in upstate New York or in Vermont or New Jersey.
(08:36):
They can offer their service from California and it's stuck on an app and they can reach your clients. How do you deal with those threats coming from different sides? Well,
Rene Jones (08:46):
I just start off, Paul, by saying that just there's some misconception I think it's like everything is digital today.
(08:53):
So if you go and sit in one of our secured sites, maybe the one around the tech hub and you were to sit there, you get this immediate realization that everything we do is digital and we can track everything we do and we can track anomalies of the things that are happening. There's probably a tracker that says, "I'm sitting here today and where I'm at." So everything already is digital. And those same principles around working remote or from different locations apply are benefits to us as well. I have a chart on my desk. It goes back to the year 1800. And one of the things it shows is the startup of banks, new banks, new bank charters, the failure of banks, and then the overall count of banks as it goes all the way through to today. And the cycle of a surge in new entrants followed by increase in failure of some banks goes throughout all that period of time, 200 plus years, right?
(09:55):
So the idea that we have competition in banking is not new. The forms have just changed, but it's really important because the patterns underneath have stayed the same. Someone comes along and does some great advancement. Think about the private credit markets. When I started my career-
Paul Vigna (10:11):
It's on my list of questions to bring up. When
Rene Jones (10:14):
I started my career, you couldn't securitize a middle market loan, you couldn't securitize a commercial real estate loan. Now you can, which is the advent of something that makes us all stronger. We have more liquidity, the markets are more liquid. But always when that happens in the beginning, there's some issue around lack of transparency, growth, or someone taking something too far, just things get heated and it results in a shakeup. When we get through it, we're better than we were when we started, right? That applies but.
Paul Vigna (10:44):
The ones who survived.
Rene Jones (10:45):
The ones who survived. The ones who survived. That's true. Right. Yeah. But the system, like the strength of the US system is usually stronger for it. It's not different with the current tech and innovation sector. We need to figure out how we can make commerce faster, how we can make it more efficient, how we can make it more inclusive to involve more people. And no matter how that happens, that's a positive thing. We've gone to a space which is also not unusual where the banking, traditional banking system was not investing enough in innovation. Now that could be because we just didn't understand it or it could be because of regulation, but you often get an outside force that is outside of the regulatory regime that actually pushes the envelope that gets the breakthroughs. But in the end, our skillset has to be, how do we adapt?
(11:39):
How do we actually adopt those tools and those new methods to actually make commerce better?
Paul Vigna (11:45):
I have follow-up questions, but before I even get to that, I have to ask you, why do you have that chart? Why does that chart speak to you that you keep it on your desk?
Rene Jones (11:55):
I'm a student of banking. Oftentimes people describe me in the inside of
Paul Vigna (12:19):
Right.
Rene Jones (12:19):
Right?
Paul Vigna (12:20):
All right. You mentioned private credit, so let's go there. As you said, and you said in your shareholder letter too, in the last cycle, private credit basically didn't exist. It wasn't where it is now. It has grown rapidly now to the point where I would imagine to some extent it's a competitor with you. And I know you also have some involvement in the market. So how do you balance
Rene Jones (12:55):
Yeah. I mean, I think the key is to sort of not be too ambitious to try to actually follow the trends that you see underneath. You described it really well. Private credit is both a competitor and a partner. And when it comes to things like liquidity and trying to make sure that the risks that we hold on our balance sheet are appropriate for our customers and our appetite, they actually are a great ally. I think the things that we point out in the letter though is that nothing is more important than integrity of the financial system. And we sometimes, I think, make the mistake of thinking that there are two or three financial systems. There's not. There's just one. It's very interconnected. And to the extent that we see certain things emerge, sometimes it's rapid growth over a long period of time. Sometimes it's transparency.
(13:51):
Can we see what's actually happening underneath? And I think today, one of the concerns is that we don't have that full transparency as much as we would like. And so we have to be cautious as we kind of move in that direction.
Paul Vigna (14:05):
You don't have full transparency into what exactly? What part of it are you? Well,
Rene Jones (14:10):
It's interesting because if you think about all the innovation, we sort of go to these one places, but there's been a lot of innovation. So you think of crypto, stablecoin, one form of innovation. You think the private market's another form of innovation, right? You think of institutions that are labeled buy here, pay here, or buy now, pay later, right? Two different things, right? In that particular case, we're cutting out the middlemen and the banks. So there's been a lot, and it's not all the same. When it gets to things like the last two that I mentioned, right? You really don't have a lot of transparency into actually what's happening. When someone doesn't pay, you don't have the same segregation of duties to be able ... And then under the regulatory environment to be able to understand what's happening with those trends, as well as you would if it was happening within your institution.
(15:04):
And each of those forms are the same, right? So private credits don't do ... We talk a lot about picking- Payment and kind. Payment in kind. The same loan for those events at a bank would be a delinquent loan and probably would affect that loan's marketability, but you don't have that same transparency. You're not necessarily getting public trades with price discovery and so forth. And when you begin to see that, you just have to give a pause. It doesn't mean that it's bad, but we're risk managers first. But you don't know. We don't know. We're risk managers first. And so you get more cautious overall as opposed to saying, "Well, I won't do business in private credit."
Paul Vigna (15:43):
So how do you manage those risks? How do you hedge those risks? You're invested in some private credit. Let's say tomorrow it all went belly up. I mean, crashes happen. How are you hedged against that sort of a thing happening?
Rene Jones (16:01):
Yeah, I know the specific threads. You train your bankers really well to focus on what your mission is. Our mission is to make a difference in people's lives in the communities that we choose to be in. So over 70% of our loans are simply to businesses and individuals that live in our community. Another 9% would be loans to financial institutions, some of which would be private credit. So you're always kind of looking at the balance. And when you look back at bank failures over a long period of time, usually some form of concentration risk. The first one on one of my charts was like over concentration in the Confederate dollar.
Paul Vigna (16:41):
Really?
Rene Jones (16:42):
Yeah. That became a problem.
Paul Vigna (16:44):
Right,
Rene Jones (16:44):
Right.
Paul Vigna (16:45):
Who couldn't have imagined that had a future?
Rene Jones (16:47):
For us, most recently over the last couple of years, we have a fantastic commercial real estate lending business. It has been very, very, very successful over decades, but we just sort of felt that because of the overall environment and the amount of change going on, that it probably was prudent not to carry 40% of your balance sheet in that space. And now we're somewhere around between 17 and 18% of our balance sheet. And that's not because there isn't any issue with commercial real estate, you're kind of looking at the evolving environment and realizing that you could have a shock anywhere. And then how prepared are you to think about that risk? So it's not about hedging against private credit, it's about understanding your own portfolio, understanding all the risks that are in your portfolio and in the market, and sort of coming to a view of where you want to be with safety and soundness.
Paul Vigna (17:42):
A couple of words have come up several times in this conversation, transparency, risks, regulation, crypto, stable coins, private credit, all that stuff. And it seems to me certainly that the whole point of regulations is to manage risks and transparency, especially for publicly traded banks, right? Because of the environment that we had a century ago where there wasn't any transparency into what banks were doing and a lot of them got over their skis and that's why you have these collapses. How do you see the environment right now, the environment right now in terms of the regulatory apparatus and the transparency of these new entrants and where you think all that ... Do you think it's well balanced? Do you think it should be balanced in one direction or the other?
Rene Jones (18:33):
Paul, so there's a core part of our belief system, both on the competitive side. And when we think about AI, where are we going to invest? When we think about what parts of our institution are most important to put resources to, that really goes back to this, is that there's been a lot of change in the banking industry over hundreds and hundreds of years, right? But the thing that's been remarkably resilient is the reasons why banks thrive or get in trouble, right? Credit, talked about concentration risks, deposit movements and liquidity, fraud, trading, right? Maybe there are eight.
(19:18):
And so for us, we're always focusing our resources and time on those items and making that front and center of what we do. So if you think about the investment and how we think about investing in AI, we can't necessarily compete with the largest banks if we were to do everything they were to do because they just have more resources. So our goal is to be sharper and reinvent and re-engineer those processes that are tied to those eight fundamental risks, right? And if we can make loans faster, we can understand where something is moving in the wrong direction faster, if we can prevent fraud, right? If we can fight off so that people who are giving us a cyber attack using AI much faster, whatever, those are the areas that we're likely going to focus on. And so that tends to drive everything we think about.
Paul Vigna (20:10):
Do you think that, again, you have some new entrants here, you have the crypto companies, the stable current companies, private credit, that you have a lot of businesses coming in that don't have the same regulatory umbrella that you have.
Rene Jones (20:28):
You know where I'm going. Yeah. So when I think about the regulatory framework, one of the best changes that we're in the middle of is this realization that you really have to put your resources as a bank and as a regulator to the things that matter most, to the health of the banking system and survivability. And I do feel that we got away from that. We were doing lots of activities and things that were maybe more nice to have, but not fundamental to furthering safety and soundness of the banking system. And so that narrowing and getting that right to the right space could prove and probably will prove to be really productive for the economy.
Paul Vigna (21:10):
You've mentioned AI a few times, so why don't we just talk about AI. What are you guys doing in terms of AI? How are you employing it within the bank? I'm not so much interested in the investment picture. I'm interested in how you're using it at the bank and what your plans are just because everybody's talking
Rene Jones (21:31):
About AI. I know. I'm trying on my own old world not to use the term AI and try to figure out specifically what it is it that I'm working on. One of the changes that we made over the last seven years is if you would've been here eight years ago, we would talk about these large technology projects and these big amorphous kind of things. And they'd have funny names and they'd say, "You're fixing the XYZ system," which means basically nobody really knew what you were doing if you were an outsider. But one of the things we've done is we do a lot of these release trains today. So if I go over and look at our retail bank and I grab it this Monday and I look at the release trains, everything that was released last week, it says-
Paul Vigna (22:13):
What does that mean? What's the release train? It's
Rene Jones (22:15):
Sort of all of the things that you're working on, the block of them that we want to put in place in our systems to improve something for our processing or to improve something for our customers, go in all of this block of releases. And if you were to come to
Paul Vigna (23:02):
I'm
Rene Jones (23:03):
Like, "Yeah, but what are you doing?" And what you're going to begin to see is we're really trying to drive the most important ones and the most resources around things that matter again for those eight characteristics of risk and actually trying to put it in plain English. So one of the things I do is I go to the board, every board meeting, and I've just instituted a little rule for ourselves. I have a list that I take to the board and it says, "Here are all the things that we actually deployed using AI since the last board meeting." And they're really practical. They're like, "We no longer have to run our first test scripts on the programming that we did because that's all done by AI now." And so we're putting it in playing English and moving in that direction. Again, it's really important for us because at the size bank we have, we don't have the same resources.
(23:55):
So we have to be really effective at where we deploy it and we also have to sort of get the cultural thing going, which is getting everybody in the firm to actually use some form of it to understand the fundamentals of what it can do.
(24:09):
And that's kind of where we are. We're in the early stages, moving fast.
Paul Vigna (24:13):
How difficult is it? I've heard this from other people that, and I think this is probably true that a lot of the banking system in general is, it's basically technology built upon technology, built upon technology. Everything is kind of bootstrapped and kit bashed together over the course of decades. How difficult is it to bring a new technology into what are sometimes decades old computer systems? Or have you completely rewired
Rene Jones (24:45):
Yeah. So that was part of our cultural change. Essentially, you describe it really, really well. So what you have to do today is really, it's really not talking about any particular initiative. It's an end-to-end rewrite of your systems. With a product, success is resiliency.
(25:05):
And if something resiliency essentially is assuming it goes down, how fast can you get it back up and running and how can you move, which goes directly to, do you understand what is in the value chain and what's the underlying platform? What's the programming that existed before? And so a lot of what we do is about re-engineering and it will logically end up using AI, but the point is not AI. The point is how do you construct the bank so that you get more resilient outcomes, faster turnaround and things like that. A lot of mapping and end-to-end development. And if you think about that, you need a different talent pool than you might've needed 20 years ago. And so those engineers and those people who, those systems thinkers who are actually thinking about the broad picture from where you get started with a customer to the end of that journey is important.
Paul Vigna (26:02):
(26:54):
And I think when you're a certain size, it is much more familiar with your customers. It's easier to kind of be on the ground level. When you get to a certain size, it might be fears that you're getting too big and you lose touch with your customers. It seems to happen at large companies sometimes. So is there pressure for
Rene Jones (27:23):
So I'll do two things, but remind me to talk about management systems if I miss it. So just at premise of the first part again. Is there pressure to get bigger? Yeah, yeah. So we've been given a gift in the past. And so I took over for Bob Wilmers. Bob Wilmers ran the bank for 34 years. And one of the things that was really unique is between himself, the board and the employee base, we own 25% of the company. So that's pretty rare. And then we had a small number, one or two investors that probably owned another 10%. And so throughout that time, we never actually had pressure from our shareholder base to grow. So our method was always about what were our returns and how strong the balance sheet was and were you prepared. Much of the growth came during very difficult times in the economy.
(28:23):
And so where we were either able to step in or we were asked to step in to help somebody, and I would say probably 85 to 90% of the growth and deals that we had came from that. And so we've sort of been trained in our DNA that nothing's more important than staying healthy and that the banking industry is actually not a growth industry.
(28:45):
It's run right, it's a safety net for a community. And so that being in our DNA has helped us actually oddly grow.
(28:55):
So if you think about it that way, we don't do growth for the sake of growth. There are questions about with the expanse of technology, what is the right size? And I think that changes over time. I mean, think about for us, we've grown in size. I think we've doubled in size since I've been CEO, but we've gone up threefold in our technology spend, really significant. And I do think that there's a level which smaller where you would be at a very large disadvantage to be able to keep up in the space. So it's a bit of a catch 22. I think the way I think about size and it's important is when you're small and you're in your headquarters city and that's the only place that you do business, all of your management systems are designed to get the right performance outcomes that you want.
(29:47):
Many of them are risk management outcomes. And then as you move further and further away from home, well, those signals get weaker. The effectiveness of those management systems are at risk of not being as effective.
(30:01):
On top of that, with the amount of change that's going on in the industry and the amount of competitors that are coming in, it also gets more noisy. And so it's one of the primary reasons why we're actually focusing all of our tech on our performance systems to make those routines that were really critical when we were just in Buffalo, really relevant today, even further away from home. So how do we get faster at identifying delinquent loans? How do we get faster at identifying fraud? How do we get people to, when they see something, to say something? And it's one of the big advantages I think we have is that we're large enough to have the resources and all the products and services of a very large bank, but we're small enough so that we're not so complex that we can't actually reinforce and take the time to reinforce those management systems.
(30:50):
And I think that's the key to any successful company, not just a bank, is your performance management systems matter a lot.
Paul Vigna (30:58):
I wanted to ask about the economy. Just in general, where you see things right now, it's a very chaotic time. But then I also wanted to ask, you had mentioned talking about identifying delinquent loans. How granular is the insight into your communities and how fast can you see conditions changing? So one, just give me your view of where you see the economy right now in general. And two, I'm interested in how well you can see what's going on in your communities.
Rene Jones (31:34):
Yeah. So again, we said this in our letter. We labeled it a Rorschach economy. And the health of the US economy is extraordinarily, extraordinary. I mean, everywhere you look, you see vibrancy, people investing. And as we talk about though, you have to get below to find those places where everybody's not participating exactly equally and the trends aren't all the same. And so we talk a lot about looking underneath the hood and what are some of the things that we see. But on the whole, the economy is really good. We just have to kind of look out there for what's going on. The information, that's the business we're in. And so traditionally, our approach of being number one, two, or three in terms of market share in the communities that we chose is really around information sharing. So if you set aside this extraordinary tools that we have now for information sharing, and just think about it.
(32:31):
The most frequent thing that I'll hear about
Paul Vigna (32:43):
Really?
Rene Jones (32:45):
And the reason for that is that we have this engagement model because we're focused on improving the quality of people's lives. We get ourselves ingrained in everything in churches, in government, and not- for-profits, right? In the arts and so forth, because we think that our job is to build trust outside of financial systems outside of a financial transaction.
(33:08):
At the time you're going to do a financial transaction, it's too late. Either you have trust or you don't have trust, but spending time in the community on shared and shared problem solving really is a bit of a hallmark for us. And so it's almost hard to pin down, but we have great, great access to what's actually happening in the communities because we're ingrained in them. I think as you think about technology going forward, it's going to be remarkable because without actually that, you're going to begin to see, bring these to light with technology in a lot more efficient way than we have been in the past. I think all that bodes really well. And quite frankly, if you can master that, I don't think the size matters as much.
Paul Vigna (33:50):
Okay. You mentioned in your shareholder letter, you talked about the ... Briefly, you mentioned the changing nature of money. And you said you're a historian of the banking system, and it seems to me that the money is changing, but I wanted to ask you about that. And what did you mean by that? How is money changing? What is the changing nature of money?
Rene Jones (34:16):
Well, for me, I have this thing which is that there's all this language that comes up. And one of the things I was taught is that over hundreds and hundreds of years, nothing has really changed in finance. It gets repackaged and called something different. And so we have cryptocurrencies and now we have stablecoin. And for me, it's always helpful to go back to the foundation to first principles. What are we trying to do? And that's sort of where I had been asking for a couple of years around and exploring actually, what is money? And the purpose of money is just a system of ledgers to further commerce, to make sure that we've got the right trade balances and we understand what's actually happening through. And I talk a little bit about the three real fundamental, important characteristics that haven't changed. One is that you're transferring a stable known value that I send you a dollar today and tomorrow you receive a dollar and it's worth that.
(35:17):
And then two, the expandability for expanding commerce. So you would never do so, but if I overdraft my account, use the bank, let me do that,
(35:29):
Let the transaction go through, let commerce actually happen. And then finally, the most important one is trust and integrity in the system because if people don't trust the system, they won't use it and it makes the cost of commerce go up. And so we spent ... I didn't talk too much about the first two. Those are different subjects, but this idea that we are under the same rules and that we have one financial system, I think is sometimes misinterpreted. I think when we say we want a level playing field, that banks are focused on having the right competition so they can do better. I think we're really focused on the entire US system. And as we think about our customers, we want them to know that their money is going to be safe, it's going to be free of fraud, right? It's not going to be used for illicit activities because all of those things we can trust and increase the cost of commerce to take it.
(36:23):
And so that was our idea to point out that we don't believe that there's a need for two financial systems. We think there's one and we should sort out the rules of the system with a focus on how do we make the trust in the system go up.
Paul Vigna (36:40):
Are you talking about stablecoins there? Are you talking about cryptocurrencies? I'm
Rene Jones (36:43):
Talking about all the change that we're doing.
Paul Vigna (36:45):
Yeah. Yeah. Yeah. Where do you stand on crypto? What do you think about ... It seems like everyone and their mother is starting a stablecoin these days. Is that a good technology, bad technology, neutral technology? How do you see it?
Rene Jones (36:59):
No, I look at it. It's interesting. So we've been through things before. We made the shift from paper to digital. We're all still here. We're okay. But the idea that there might be a better way than using a physical ledger to use a distributed ledger sounds like a very sound idea and probably will become a big part of commerce going forward. So the technology ... If you think about tokenization that is applied in both crypto and in stablecoin, right? The idea that you keep the money safe is a real positive. And quite frankly, as a banking industry, we should have been investing more down that path, right? Somebody else just did it and now we're aware of that technology to move forward. So the essence of the technology is not bad. All the technology innovation is a positive thing. It's just about how do you end up applying it and do you, particularly when it comes to the monetary system, right, do your consumers understand what they're being offered and are we really competitive?
(38:10):
So I think what you'll see is you'll see those two things will continue to exist, but you'll also see things like banks develop tokenized deposits to move money faster, cheaper, in a much, much, much less complex way.
Paul Vigna (38:23):
Yeah. I think part of what trips people up is they see money as a sort of tangible physical thing that the possession of it on its own is the value of it. Whereas what you're talking about, I think is very interesting. Money is a representation of actual of commerce, of resources.
Rene Jones (38:50):
I got to stop you. I got to say, this is great. It's a funny story. I'm not going to get it right, but as I was going through the whole money thing, there was this very, very remote community years ago, and they had these stones.
Paul Vigna (39:06):
The appease rye.
Rene Jones (39:07):
Yes. They had the stones, right? And do you know the story about the ruling family and one of the ships sunk and it went to the bottom and they claimed, well, now it's in a really safe place so no one can get it. That idea is exactly right, the shift of ...
Paul Vigna (39:21):
Right. So it was an island somewhere in the Pacific, the island of Yap and their monetary system, for anyone who doesn't know, their monetary system were these round stones will hole in the middle and they had different size stones and they represented value. And some of them were so large that they never moved on the island, but everybody knew who owned that stone and that person had that, that was their wealth. And you're right, there was this story that one of them, they were transporting one of the stones between islands and it sank and-
Rene Jones (39:56):
And the
Paul Vigna (39:56):
Owner- Everybody knew where the stone was, everybody knew who owned it.
Rene Jones (39:59):
And they couldn't get it.
Paul Vigna (40:00):
And they couldn't get it.
Rene Jones (40:01):
So it was
Paul Vigna (40:01):
Safe. But it didn't matter. It didn't matter. So yeah, that's a very interesting illustration of what money is.
Rene Jones (40:07):
Yeah. And you have to make that shift to understand this point about commerce and what it really is trying to do in order to then put in context new innovation. And we shouldn't be afraid of new innovation, we should embrace it, but really one of our key roles is to explain to the public what it is they're getting into, right? And we think that's the transparency kind of thing that we think is really important as we move forward.
Paul Vigna (40:38):
All that being said, what are you focused on the next year, the next five years? Where do you see the bank going? Where do you see the monetary system going? You said you're a student of the history of banking, but I'm going to ask you to be a little bit of a prognosticator. Where do you see it going?
Rene Jones (40:59):
Well, I'll start with
Paul Vigna (41:00):
Rene Jones (41:02):
Start with
Paul Vigna (41:20):
Little further off than the middle. You're not just a mill, Renee.
Rene Jones (41:23):
Well, I mean, some of the banks are-
Paul Vigna (41:26):
Yes. Some of the banks up the block here.
Rene Jones (41:28):
10 times us, 20 times our size. There's only a couple of
Paul Vigna (41:31):
Them.
Rene Jones (41:31):
Yeah. Yeah. So for us, as we look at ... And the second thing we see is just a tremendous amount of change. And this is still a human business. And so we have 22,000 employees and our job is to get them through that change and to also get our customers through that change. And so we've really tried to narrow our focus into a couple of things that matter. And so right now we have ... I talked about our mission. We don't really talk about strategy because we basically think there are 300 ways to get to our mission, and so that's always evolving. But the two priorities that we've really focused in on are operational excellence and then teaming better together for growth in the markets that we're already in. Really simple, really clear that will manifest itself across our employee base in a number of different ways.
(42:25):
But the idea is back to what we said before, that I can't predict or will not be the one to write the next AI application that is going to be tremendous, but I can know the value chain of my business. I can know that my operations are clear and they've been redesigned all the way through for simplicity so that I'm much better able to adapt when new technologies do come along and need to fit into our space. So a lot of education is going on around this end-to-end mapping and understanding what it is we do and making that super transparent as we begin to invest in the new technologies and to deploy them. Again, think outcomes like resiliency, uptime, ability to defend against cyber attacks. Those are going to be the things, if we do them really, really well and we develop a reputation for excellence in those spaces, I think those are the things that are going to allow us to get through the ups and downs of future economies.
(43:22):
I think of the industry a little bit different, but the fundamental part of it is our job is actually to lean into all these new technologies, right? And you're seeing that happen. I think what we're going to see is it's going to get clearer and clearer. Right now, people just talk about AI and all these use cases, whatever, but I think we're going to get to a place where it's actually focused in on the ones that really matter the most to the industry. But all the bankers I know, everybody I spend time with, they are really focused not just on their own institutions, but trying to do the right thing for the overall system. And at times of great change, you really have to think through and there's a lot of contemplation of what that is when you're under this much change.
Paul Vigna (44:08):
Before I let you go, switch gears one more time. Yeah, sure. You and I were talking about this a little bit before we started taping, and I thought it was interesting, so I wanted to ask you about it. You've been at
Rene Jones (44:32):
Oh, that's interesting. Well, I think the thing we were talking about is that you go through these periods of time in your career, and hopefully the idea is to try to get into a new thing that gives you lots of passion, that you can add value. So we think to yourselves like, "What are you good at? What makes you happy and what do we need and what does the world or the environment need?" And so oftentimes I find that for myself, it requires me to go through change, to not be working on the same thing for too long. And the basic premise is there's always going to be somebody smarter than me that comes along and can put it on a new trajectory. So throughout my career, I would always be open and transparent with my team about like, "Okay, this is great. I'm having lots of fun.
(45:18):
I'm learning, but if I ever stop learning, it probably means I'm going to stop contributing." And so both I need something new to focus on that's relevant and we also need to bring up others. The core thing that we've done that as I look at my career over 30 years has been develop other talent. And sometimes that just means getting out of the way, letting them make their own mistakes and when they need some help, actually being there to help them out. And you just have to keep reinventing what your role is in the organization to keep things fresh.
Paul Vigna (45:51):
Can you keep doing that as the CEO? And you're at the top of the ladder. There's nowhere else for you to go.
Rene Jones (45:57):
Can
Paul Vigna (45:58):
You keep doing that?
Rene Jones (45:59):
Yeah, I think so. So far so good. It's about being honest with yourself and actually observant of the talent. And the last thing you want to do is get in the way of somebody else who could actually take the next leap to where we're going. I mean, I think about this idea of the last eight years has been so much fun and it was on the advent of losing this great leader who had ran the company for 34 years and everybody was concerned about, oh my gosh, really what they ... They said a lot of things, but really what it was is, is everything going to stay the same? Yeah. And the answer is no, it can't. And so you think of that cycle, our job is to actually engage our talent so that they're highly energized around what they're doing and trying to produce value for our customers.
Paul Vigna (46:48):
All right. Renee, thank you for coming in today. I appreciate it.
Rene Jones (46:51):
Great to meet you, Paul.
Paul Vigna (46:52):
Thank you.
