The Art and Science of Banking

My journey to master the business of banking.

The gig was up for me in 2006.

It would have seemed like I had everything in line.

I graduated from college and law school with honors. I served a federal clerkship. I was halfway through an advanced law degree.

But then something unusual happened.

I was struck by common sense.

If I didn’t want to have a real job, I reasoned, then shouldn’t I create a cheaper cover story?

Making my parents, God bless them, pay $40,000 a year in tuition for an advanced law degree, which I still don’t know what the acronym stands for, was too much for even me.

So I sold an investment in a privately held bank, moved to Washington, D.C., and got a job at a bookstore earning $7.44 an hour.

I would read until my money ran out. Then get a real job.

Well…

…eighteen years later…

…I’m proud to report…

…my plan failed.

I still don’t have a real job.

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I’m writing from my room at the Indigo Hotel in downtown Los Angeles.

Outside the window is a dark glass building which obscures the true objects of my desire, the city’s second tallest building, U.S. Bank Tower, which is a stone’s throw from the former headquarters of what was once Security Pacific Bank.

I droned both buildings at sunrise after driving from San Francisco yesterday. I had driven there the day before from Portland. Later today I’ll drive to Phoenix. Then East.

I’m on a road trip.

Capturing imagery with which to tell the story of American banking.

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The American banking industry is misunderstood — both by those within the industry and those outside it.

Outsiders see bankers as greedy fat cats, while insiders lack the knowledge to combat this misperception.

Even more importantly, we have all misunderstood how the American banking system works as a system.

Bankers.

Investors.

Analysts.

Regulators.

Everyone.

We have never truly understood the forces that cause the megacycles in banking.

The scholars for over a century told us it was one thing, but when you compared that to the data, you saw they didn’t match.

You could choose the data. Or you could choose the scholars.

I chose the former.

That is what I have spent the last sixteen years of my life studying.

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I love to learn.

Not just learn.

I love to master subject matters, which I define as the ability to distill a subject matter to its essence — a single, simple, underlying principle robust enough to explain everything that happens in that environment.

I’ve done this with multiple topics.

Geopolitics is about access to and control over natural resources. High altitude mountaineering is about recognizing and responding to one’s intuitions.

So when the financial crisis of 2008 hit, I figured it would take six months at most to understand why it happened.

Sixteen years later, I’m only now concluding my studies.

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I teach a class every year at the Pacific Coast Banking School.

It’s called The Art and Science of Banking.

I use the class to teach how the banking system works, as a system.

Every banker, investor, analyst and financial commentator should have this knowledge. Yet it is knowledge few possess.

I use art to teach the underlying concepts — beautiful charts, videography, etc. — as I believe art represents the purest distillation of knowledge.

Thus the title of the class.

More importantly, I teach students that it is okay for them to love their jobs and feel proud about what they do each day.

We all have but one life.

How we spend it matters.

We should spend it doing things that make us proud.

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Over the next two weeks I’m going to write every day, telling the story of banking and explaining how the American banking system works.

You’ll learn about America’s best bankers and banks.

You’ll also learn about the worst banks and bankers, as failure pervades the history of banking — it has proven to be five or more times more prevalent than success.

And I’m going to supplement it all with beautiful imagery and the story of my roadtrip across the country.

I want banking to be a fun and beautiful thing to learn.

So that is what I will try to do for you…

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My goal over the next two weeks is to teach my paid subscribers the most sophisticated banking philosophy today, told through stories of this country’s best and worst bankers.

Please subscribe.

You will receive an abundance of value in return.

John