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I’m hard pressed to think of any innovation that benefited only its creator. It seems to me that innovation by definition must benefit someone else, or it has no real value…and by many definitions of innovation, something that fails to create value doesn’t qualify.

Edison, Ford, Jobs, Gates, Dell, Bezos. They all profited handsomely from their innovations, but by first creating value in the marketplace, by producing real benefits for their customers. Free enterprise can certainly be messy and unfair at times, but we put up with its imperfections because of the value it creates, because of the way it tends to raise everyone’s standard of living and quality of life. It produces innovation and we seem to have reached a consensus that innovation is a good thing, even when it creates some disruptions.

To be successful innovators and entrepreneurs, it’s crucial to understand who we serve and what value we create for them. Because if we can’t, we’re not likely to capture much value for ourselves either.

No, wait a minute.

Time out

It occurs to me that there have been innovations that have benefited no one but their creators, actually quite a number of them—in the financial industry. As I think about it, it’s a pretty extensive list. It includes complex financial derivatives that do more to conceal and transfer risk than manage it. It includes the commissions paid to mortgage loan writers that are designed to create an incentive for them to give loan recipients less favorable interest rates than they are qualified to receive and higher payments than they can afford. It includes creditors who systemically delay sending billing notices in order to push more people into late payment status, generating greater penalty fees.

One of the most creative “innovations” I’ve encountered is one by my own (now former) bank, which has managed to create the overdraft that isn’t really an overdraft—but still pays like one. Banks like to delay paying checks as long as possible to keep their cash reserves as high as possible, but that also delays when an account goes into overdraft status and generates substantial penalty fees. The solution: “temporarily” post checks—and charge a penalty for any overdraft that results, but don’t “permanently” post (i.e. pay) checks until later. So the bank gets to hold onto the money while still getting overdraft charges—on accounts that don’t have a negative balance! Then, when those overdraft fees push the account into negative status, charge another fee for that too. When customers complain, you can tell them it’s their own fault for not better managing their account. Perfect.

Maybe that’s why thousands are marching on Wall Street and across the U.S. these days.

Maybe they’re beginning to realize that when the whole business model rests on abusing and deceiving your own clients something is deeply flawed in the way the game’s being played.

Maybe, rather than serving the greater good, “innovation” has been co-opted by some to serve only their own narrow interests and no one else’s—not even their customers.

Maybe that failure to create any real value is why the financial system collapsed so spectacularly.

Maybe that’s why folks are so angry.


Who do you serve?

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