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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
Sep 4
Listening to a podcast (Trillions) a guest made an interesting claim:

Guest: You know when you swipe a card at [coffee shop] part of the fee pays for your ability to reverse the transaction with the coffee shop. But come on, no one reverses transactions with [coffee shops].
I have removed the name of the coffee shop so that no one believes I am commenting on private financial details when I say: oh you sweet summer child.
You and I will likely go through life having very few arguments with baristas. Baristas do not experience their lives as including very few arguments with customers.
Read 10 tweets
Patrick McKenzie Profile picture
Aug 3
The existence of YouTube does not make reading and writing less valuable. It gives children a constant companion who is responsive, preternaturally so, to their desires and curiosity.
(I devote a bit of brain space—not too much but I pray not to little—to making sure that constant companion does not make the entire world look like a pale imitation of itself, which would be wrong but could easily look accurate to the subjective experience of a child.)
“Any parenting tips?”

I do not have the constant fights about screen time some parents report, do not know how much of that is due to decisions I’ve made, and have one regret: we went two years without a TV due to moving and I should have made that permanent versus “completing.”
Read 5 tweets
Patrick McKenzie Profile picture
Jul 29
This letter is what happens when a credit card PM misunderestimates how much of an adverse selection effect they have in a new portfolio.
(In particular note the cap on cash back and the carveout for particular transaction types which some users are able to generate arbitrarily high amounts of or would naturally have arbitrarily high amounts relative to “normal” CC use.)
“How does this happen?”

Credit card PMs are extremely aware that there are multiple different personas for credit card use out there. One of them has a name in various banks, but you can think of them as Mercenary Financial Enthusiast.
Read 15 tweets
Patrick McKenzie Profile picture
Jul 17
If I can give a slightly more optimistic take on this: much of how commercial software development is done trades some resources for others, in ways that might not be rational for people with very different strengths than e.g. AppAmaGooFaceSoft or BigCo customers.
A lot of AWS services exist so that two teams don't need to have a meeting.

That *is not a criticism of either AWS or those two teams.* That is a preference one can have about time allocation and corporate structure, and capitalism will help you satisfy it.
If you are not constrained on organizational complexity, if meetings with yourself are free, then a lot of the standard stack that BigCo uses is both overkill and underkill at the same time.
Read 5 tweets
Patrick McKenzie Profile picture
Jun 17
So strange that card program managers make such a show of doing this careful balancing act when everyone who reads the Atlantic knows that the real source of rewards is cross-subsidization of elite cardholders by poor people. </sarcasm>
Less sarcastically: it’s a math problem conducted by people who are pretty good at math, and the marching orders they get are “In general and in steady state, all of our card programs should be margin accretive. Make it happen. If you can’t you’ll need a senior signoff.”
(The above is not private information from any particular issuer but rather is a pastiche representing industry standard practice.)
Read 7 tweets
Patrick McKenzie Profile picture
Jun 14
I think the so-called Bitcoin treasury companies have just reinvented exchange tokens: there is an asset with X real world utility but not naturally leverageable. It should flow to place in world where most leverage is bolted onto it; immediately incentive compatible. Repeat 100x
And then “Holy %}*]^ how did so much of it end up in a place with grossly deficient risk management?!”
(I understand that MicroStrategy is the opposite of leveraged exposure from the common shareholder’s perspective but if someone with hands on keyboard believes they are allowed leverage if they hold more exchange tokens then the model happens regardless of whether that is true.)
Read 18 tweets

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