Maxed Out: Hard Times, Easy Credit. James Scurlock D.
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the Great Depression. If anyone besides Hock believes that credit cards have contributed to the harmony of their spirit and the biosphere, I have yet to meet them.
So what does Hock think of the credit industry he helped to create? That’s a difficult question to answer, because Hock does not wish to discuss the past with me. When I requested an interview, he declined with a succinct note: something about no longer doing those kinds of things. Today Hock lives on a small farm in Northern California where he spends his time tilling the soil, discussing philosophy with his tractor (which he has named “Thee Ancient One”) and his subconscious (which he has named “Old Monkey Mind.”) He is a grand philosopher, the kind of guy who can write something like “Until our consciousness of the relational aspect of the world and all life therein shall change, the problems that crush the young and make grown people cry will get progressively worse,” as though it were self-evident. Like Ross Perot, he likes to state his beliefs as facts. And, also like Perot, Hock never thinks small. His latest hobby is leading a movement he calls “chaordism,”1 which will remake corporate America in the image of Visa International, and, by doing so, save the planet from rigid, hierarchical, oppressive, and bureaucratic organizations. This is not a joke.
For all of his eccentricities, one cannot deny that Hock was a great visionary, and, like all great visionaries, Hock found himself surrounded by doubters at a time when he himself felt absolute conviction. The year was 1968 and Hock, who had been fired from several jobs and was facing an increasingly desperate financial situation, talked his way into a job at Seafirst Bank in Seattle, Washington. For some time the bank’s president shuffled him from department to department, because there was simply no work to be done and no job for which Hock was particularly qualified. He recalls one task—digging through the garbage of a branch, looking for a lost deposit—with particular bitterness. So when the bank decided to become a licensee of the “BankAmericard,” the country’s first bank-issued credit card, Hock was tapped as one half of a two-man team overseeing its rollout. It was a job that no one, including Hock, wanted. Banking was then about servicing large corporations. Consumer credit was left to the loan sharks and pawnbrokers. Yet, as Hock rolled up his sleeves, there was something about credit cards that instantly seduced him. Perhaps it was the magnitude of the task (which roughly matched the size of his ego), or maybe it was the new technology, which fascinated Old Monkey Mind, or perhaps it was the fact that Bank of America, the card’s creator, was the embodiment of everything he hated and the antithesis of everything he stood for. In Hock’s eyes, Bank of America was not just bigness but management charts, uniform standards, titles, stupidity. In his new role working with this organization, Hock would get to be an agitator. He would have a platform to try out some of the philosophy he and Old Monkey Mind had been discussing on their long walks in the lush, soggy hills of Seattle. In other words, he would be able to cut the largest bank in the world down to size. David versus Goliath.
As Hock tells it, the Bank of America turned out to be even more incompetent than he could have dreamed. Thanks to the mess they’d created, Seafirst, like the other BankAmericard licensees, was losing vast sums of money on the credit card business. Why? The banks were being defrauded by customers, merchants, and criminals alike. The technology was primitive and the accounting was, by all accounts, a nightmare. This was back in the days when every transaction was recorded by hand on extremely thin strips of carbon paper, which were then sent to a warehouse to be sorted and reconciled. Inevitably the warehouse became a paper jungle, many of the receipts were lost or illegible to begin with, and reconciliation was wishful thinking. Bank of America had promised its licensees access to the future of banking, but most of them—like Hock’s boss at Seafirst—had signed up mainly to preempt their competitors. Now they had simply saved their competitors a huge amount of money and time. Credit cards had become their albatross.
Within a year of rolling out the credit card for Seafirst, Hock was dispatched to a BankAmericard convention in Ohio, where two Bank of America executives were supposed to give a pep talk to their disillusioned—and angry—licensees. Or so thought the licensees. Not only did the Bank of America execs on the stage offer no insights as to how they might fix the crisis, they wouldn’t even acknowledge a problem existed. The situation came as close to a riot as bankers get—that is, until one of their own, Hock, took to the stage and, with the now terrified B of A executives’ blessing, promised to clean up shop.
Hock created an advisory committee composed of his fellow licensees on the spot. Within a few years he had formed a cooperative owned by all of the banks that issued BankAmericards, which became the organization that would blossom into Visa International, which would become the most ubiquitous organization in the history of capitalism. It was a brilliant idea, a company devoted to issuing credit as quickly and as efficiently as possible: instantly was the ultimate goal. This company would be composed of its members, the banks, so that there would be no infighting or other conflicts to slow Hock’s grand plan. Finally, Visa would exist not for profit but ultimately to fulfill Hock’s vision of a world where tangible currency (Hock was one of the first to see paper money going the way of stones and beads) was replaced by trillions of electronic signals moving through his mainframe computers. In theory, Visa would become the ultimate store of value. In practice, it was nothing more than a massive marketing campaign and an electronic switch that routed money from the bank of the payer to the bank of the payee. For practical purposes, Hock had two main priorities: one, that Visa would truly be ubiquitous (“everywhere you want to be” “life takes Visa”); and two, that transactions would occur with lightning speed (“faster than cash”).
Looking back in his memoir, Hock professed feelings of reluctance and even fear that day in Ohio, but he was clearly the man for the job. Hock wasn’t a bureaucrat, like the banking guys. He wasn’t scared of challenges. He was obsessed with the technology that would be needed to process small transactions on a grand scale. But, most of all, he truly believed that the credit card would empower the masses, that it would give them a freedom they had never known. They could reserve hotel rooms and rental cars without sending a check in advance! They could buy things instantly without waiting for funds to clear! They could hand over a card and get something in return and get their card back to use again! Best of all, they would no longer be forced to interact with nosy, judgmental bankers! Credit cards could indeed create a new currency—an abstract currency of numbers that only existed on statements, a currency that flowed through computers without ever being touched or felt, a currency that no government or central bank could control. Dee Hock saw the big picture.
In other words, Hock was the industry’s Moses—and he knew it. He would lead the trembling bankers, so comfortable in their suits and corner offices, to the Promised Land, a place of infinite possibilities and untold progress. He would not waver or compromise, but he was bad at compromise anyway. His vision was absolute, his conviction was absolutely convincing—if misplaced. Visa International, would, as his mission statement put it, become “the premier store of value in the world,” even though Visa never stored anything: It simply routed transactions from one bank to another. Had the bankers known that Hock’s vision was about creating a twenty-first-century society in harmony with the human spirit and the biosphere rather than about making them boatloads of cash, they might have balked. Luckily for Hock, and for them, he kept that grandest of notions between himself and Old Monkey Mind. If the bankers ever wondered if the guy was a little different from them, they kept their mouths shut.
Indeed, the suits whom Hock longed to replace with mainframes worried far less about technology and grand visions of the future (which they probably didn’t understand anyway) than they worried about the past. What they knew (and what Hock’s theory failed to appreciate) is that banking is about selling a single product: debt. That product can be packaged a million different ways—car loans, mortgages, lines of credit, overdraft protection, credit cards, cell phones, etc., etc.—but, in the end, the product is an obligation to be repaid, with interest. And the price of that product is however much interest and fees can be charged on the original amount. The more interest and fees a bank can charge, the more profitable the product. This is a fairly academic concept.
When Hock had taken the job at Seafirst, banks were in the business of borrowing money from individuals (this is back when people actually saved) and lending that money to corporations at a slightly higher rate. Consumer lending was not profitable for two major