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Patrick McKenzie Profile picture
@patio11
Aug 12, 2019 • 8 tweets • 2 min read • Read on X
In the category of "It's obvious that there are huge chunks of the economy which need one SFBA-startup quality workflow web app", I give you blend.com , which did that for mortgage origination at banks / credit unions / independent mortgage originators.
It's one of those magically mundane things. The business process here is extremely well-understood; the actual front end and backend processes in the US for mortgage origination are, and this is a technical term, a roaring pyroclastic tire fire.
I went through Blend's white labeled process while trying to get pre-approval to hopefully help a family member out, and literally sent a human two emails "Sorry only have 15 minutes so no possible way this is done today" "Erm ignore the last I think it's ready for you."
This is helped by me being preternaturally organized but sufficient data entry for a mortgage application being collectable in 15 minutes is pretty stunning to me, even with all of the documents ready to go.
If you want to read about mortgage origination and understand why "Hmm this seems like a frontend-heavy web application that one could reasonably deliver in a hackathon" is not coextensive with the actual solution, see
amazon.com/Digitally-Tran…

(Disclaimer: read critically.)
A non-obvious challenge here is that the most important consumer for a home mortgage is not obviously the person buying the house, it is the GSE or other financial system entity which is going to securitize the mortgage.

They have *much* more exacting requirements.
And, structurally, they will *never* talk to the person buying the house, the bank that person has the down payment at, the HR department certifying that that person is gainfully employed, etc etc, *but* they have a lot of very specific questions for *all* of these people.
And so the mortgage loan originator has to have all their paperwork together and pre-reviewed prior to sending it over to the securitizing party.

And if they don't? Well, then they're at substantial risk of either eating the home loan or carrying it on their books for 7+ years.

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More from @patio11

Patrick McKenzie Profile picture
Nov 11
It is useful to understand when you are dealing with a person who can be persuaded and when you are dealing with a state machine which has formal transitions for some things you could say and literally no emotional response per policy.
The second is a much better model for many large bureaucracies than the first.

This drives some people to hate bureaucracies, which is an aesthetic reaction they are welcome to. And it causes some people to return to the interpersonal maneuvering script that they expect to work.
I recommend not choosing to lose.
Read 5 tweets
Patrick McKenzie Profile picture
Nov 7
Being bad at counting things is a policy choice.
I once had a conversation with California about counting. They were counting shots delivered. Bloomberg had published a league table which showed California ~48th in nation on delivery versus shipments, a fed number.
Good news, says California. The reality is probably better than the league table says. Not that we can admit this out loud, you see, because those are Official numbers and we have to pretend our submissions are not lies.

But we just didn’t see those numbers as important.
Read 8 tweets
Patrick McKenzie Profile picture
Oct 25
This is sort of a niche financial product but I’ll explain mechanics since plausible a few readers will eventually be able to use it:

Banks want you to have ~20% equity in your house to protect them against default risk. (Lower down-payments are subsidized by USFG through GSEs.)
That equity will almost always be in the house but for wealth management customers it could be in many other things. You could pledge a CD (hah) or basically anything you keep in your brokerage account. (Some restrictions apply.)
The pledge immobilizes your stocks for a few years, generally at the wealth management division that is making this transaction happen. (But options exist for other arrangements.)

In event value of stock declines below level bank is comfortable with, you get a low-urgency call.
Read 8 tweets
Patrick McKenzie Profile picture
Oct 11
I am reminded of the absolutely enormous detection of embezzlement as restaurants switched to cash registers, a switch which was not motivated by concerns of embezzlement.
(The combination of physically absent manager, socioeconomic realities of employee population, and no bookkeeping of marginal pizza created meant that places which believed they were high-trust environments were in fact not.)
(Ran into this once at Ardy’s in college on a debate team trip. Employee came out to take our order and said “OK that’s $20.”

Me: “$20 and what?”
Employee: “$20 will do. I’ll go tell kitchen.”
*leaves*
Me: “We’re leaving.”
Teammate: “What.”
Me: “Not eating a stolen burger.”)
Read 6 tweets
Patrick McKenzie Profile picture
Oct 6
Interesting new AI interaction model which we'll see a lot of in the future, spotted on Bench (bookkeeping service):

Patrick: *uploads statements*
Regular computer system chugs
AI: We have questions on ten line items. Your chat about them will be reviewed by a human bookkeeper.
AI: What's this use of Paypal for?
Me: *explains that it is a coworking space*
AI: Was that for daily or monthly use of a coworking space?
Me: Yes.
AI: Preliminary categorization is as Rent or Lease Expense. Should I proceed.
Me: Yes.
AI. Noted for your bookkeeper. Next.
This is so unbelievably more time efficient than requiring either a synchronous back and forth with my bookkeeper or, more likely, requiring me to bat emails around with a latency of several days because my job is not actually responding to questions about a $5 invoice quickly.
Read 14 tweets
Patrick McKenzie Profile picture
Oct 3
@GrantSlatton @waltuuuhr @tenobrus Some gaishikei (Western firms) do quite well for themselves in Japan (AppAmaGooFaceSoft for example) and *some* of those are *comparatively* not managed in the fashion of traditional Japanese companies *in many of their divisions.*

Real question is probably about startups right?
@GrantSlatton @waltuuuhr @tenobrus Question of why startups which adopted other-than-traditional management don’t just win outright is a subset of “Why don’t startups just win outright.” A Twitter thread will not usefully hold the answer to it.

Note: offering “better” culture *not necessarily in direct interest.*
@GrantSlatton @waltuuuhr @tenobrus There exist desirable candidates and desirable counterparties who are quite fine with the culture that exists, thank you very much, and will appreciate you credibly signaling your willingness to work within it to do business with you.
Read 4 tweets

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