The annual IMD World Competitiveness Scorecard came out in October for 2009. In this measure of worldwide competitiveness, or “how nations and enterprises manage the totality of their competencies to achieve prosperity and profit,” the U.S., with all of its problems, was ranked #1 overall, as it has been for a while. Hong Kong switched this year with Singapore to gain the #2 position. China’s Hong Kong is “swiftly closing the gap” with the U.S.
If you read any of my blogs you’ll know that I’m very much in favor of globalization. I embrace it. There are smart people all over the world; I think cross-pollination of ideas is a good thing; and regardless of anyone’s opinion, it’s here to stay. I also agree with (and this is the only time you’ll get me to say that) Paul Krugman, a critic of these rankings, “The world’s leading nations are not, to any important degree, in economic competition with each other.”
All that said, I’m a very competitive person by nature and I like the idea of the U.S. being in the top position. In 1989, when Japan was ranked #1, everyone here in the U.S. was scared to death. Today, Japan is ranked #17 and people don’t seem to really care. I don’t want that to happen to us.
A lot of experts will argue that the current U.S. economy echoes that of Japan before its downslide. IMD economist Professor Stephane Garelli points out, “In 1989, Japan was unassailable…Then all hell broke loose: the stock market went into reverse in 1989, land prices collapsed in 1992, credit cooperatives and regional banks came under attack in 1994, large banks teetered on the edge of bankruptcy in 1997 and a major credit crunch occurred in 1998. Does that ring a bell?”
He, of course, is pointing at the U.S. economy after the subprime mortgage crisis.
But at the same time, he is quick to say that the comparison to the U.S. and Japan is not airtight, “because of its openness, resilience and entrepreneurship, it [the U.S.] always finds the means to reinvent itself in ways that Japan and much of Europe often lacks.”
I believe that is true for the mortgage industry in the U.S. Openness, resiliency, and entrepreneurship will dictate how competitive this industry will become as it rebuilds itself. Will it garner the trust and envy of the global community and its investors? I think innovation will play an important key in the market future success.
Technical innovation will come not from just from digitizing a paper-based process. Real innovation will come from using technology to turn the industry upside down. From people making decisions with limited information, transformed to data over the network, processing the decision itself.
People fill the gap because decisions need to be made on very little information – only a few loans in a pool are verified before being sold; underwriting decisions are based on a few submitted documents and a credit report; appraisals are accepted from standalone contractors; brokers and consumers are taken at their word alone.
The point of sale, the loan processing system, the pricing engine, the underwriting engine, the vendor services, and the network transactions themselves will morph into one. And this “one” will reside not in a single standalone lender, or amongst a limited consortium, but be readily available in the cloud. And in this way, the entire industry moves forward.
This move towards greater efficiencies through innovation has happened before in other verticals like airline travel, securities trading, and retail. These industries rebuilt themselves over the last few decades, and remain competitive globally today.
I’m not saying technology innovation will in itself create a stronger, more competitive mortgage industry. However, as Professor Garelli says, open and resilient entrepreneurs and leaders in any industry must willfully choose to innovate out of doing things the old way.
