John Lefferts' Blog

Monday, January 11, 2016

Where is the Elon Musk of Financial Services?

I’ve written before about my experience in moving from Texas to California and how I’ve adopted green technology having bought a Tesla, installed solar panels in the home and wired the house for efficient wireless whole home technology systems. Of course, I could have done that while in Texas, but moving gives you a fresh start and it’s easier to make changes as you break out of prior rooted habits and routines (along with the opportunity to throw out a lot of crap!). Knowing my interest in new technology, my wife gave me the book Elon Musk on Christmas and I recently finished reading it. It’s an interesting read with a window into how he’s wired and his incredible drive to not just disrupt industries but transform them entirely forever. He’s been compared to Steve Jobs a lot, and while they are/were both visionaries and drivers of change, Musk is more about being on a mission to save mankind rather than develop products we didn’t think we needed. To describe him in the book, the author said that if there were a love child between Steve Jobs and Bill Gates (I know…bad visual), it would be Elon Musk, although a former Musk business partner said “But I’d say he’s nicer than Jobs and a bit more refined than Bill Gates”
“Do or do not. There is no try” -Yoda
As I read through the book, I couldn’t help but think, where is the Elon Musk of financial services? The car industry was ripe for disruption having competed on features and distributed through dealerships for as long as one can remember. But Tesla is a whole new experience. It’s more of a lifestyle. As I pull up to an intersection I’ll often see another Tesla owner glance over and give me a thumbs up as if to say, “we know something that nobody else knows”.  It operates more like a computer with wheels than a car. In a car, you need to buy a new one to get new features. In a Tesla, new features are downloaded over the wireless internet so it’s never obsolete. And there are no oil changes, engine repairs or visits to the dealership or mechanic. It is literally a game changer for the car industry in its current business model which is why they’re fighting it.
"There’s a tremendous bias against taking risks. Everyone is trying to optimize their ass-covering”  -Elon Musk
Space-X is another example of changing an industry. The space industry has not had much innovation for decades. The US has pretty much pulled away from it leaving Russia and China to lead…until Space-X came along. Musk is taking his cutting edge technology and remaking the industry at a fraction of the cost while Russia is still using the Soyuz spacecraft from the 60’s. The recent landing of the Falcon 9 rocket is also a game changer for this industry. Historically it’s been like throwing away an airplane after every flight. Imagine the cost savings and frequency of lift off by reusing a rocket for each launch.
SolarCity, another company influenced by Musk is disrupting the utility industry. They don’t make solar panels like the now defunct Solyndra did, but instead they install solar systems enabled by technology such as their partnership with Nest thermostats. If Musk is successful in getting his Nevada battery factory up and running, it becomes possible to unhook from the power grid and run an entire home from a battery pack charged by the solar panels on your roof. Again, another industry game changer.  
"Whatever skeptics have said can’t be done, Elon has gone out and made real. Remember in the 1990s, when we would call strangers and give them our credit-card numbers? Elon dreamed up a little thing called PayPal. His Tesla Motors and SolarCity companies are making a clean, renewable-energy future a reality…his SpaceX [is] reopening space for exploration…it’s a paradox that Elon is working to improve our planet at the same time he’s building spacecraft to help us leave it" –Richard Branson
What’s interesting is that Musk helped get these companies to success despite the long odds, industry old guard pushing against change and prior players having tried and failed. And he does so by integrating them in ways not done before. So this brings me back to my initial question, where is the Elon Musk of financial services? Like the auto industry, financial services is ripe for disruption rooted in old ways of doing business based on outdated regulations and resulting business models. Where it makes all the sense in the world to integrate the various business models (wrote about it here ), the RIA’s, FINRA regulated B/D’s and Insurance models are fighting to remain in their respective silos. But those silos are slowly but surely breaking down. As the old guard moves on, technical advancements continue and regulations play catch-up, today more than ever before there is an opportunity to create a more current business model built for the trend towards holistic financial advice. And it is more likely that the future Tesla/Space-X/SolarCity of the financial services industry will come from a start-up than from an established old line firm locked in legacy issues. I think that 2016 is the year we'll see that happen. Hello...Elon?
“Ignorance is always afraid of change”

No comments: