Bill Erbey of ForumPay

[David] Listeners, I’m really excited to have Bill Erbey joining me on the Lykken on Leadership podcast. We’re going to get into his background, this is an individual that I’ve admired for many years. He thinks out of the box, he sees opportunity and he’s always on the cutting edge of what is happening, but there’s some that are on the cutting edge and fail. Bill seems to get on the cutting edge and succeed. So, it’s good to have you Bill joining us. Thank you so much, 

[Bill] David, It’s a real honor and pleasure to be with you today. I’m excited to talk about leadership, but to establish yourself, because this is going to play out there for many years to come, I think it’s important that we first of all, establish a little bit of your history in the industry, your background, and if you could cover that to get us from where you started to where you’re at today.

[Bill] Certainly my first experience in the mortgage industry was back in 1982, 83. I had been working for GE Capital at the time, and I was put in charge of Gemico. You remember some of these? Maybe remember back to the financial crisis, the one prior to the most recent financial crisis. Yes. It was really an interesting time that people thought Fannie and Freddie were actually going to fail. And then when they didn’t, that was really silly about us to think about it that way. I was surprised, I had no mortgage background at all. I was really out of commercial lending operations and GE and this is my first experience with mortgage. Obviously, it was a real foreclosure crisis at that time and what I was surprised at, is that the industry had virtually no technology to deal with that crisis, that the way in which they would resolve a loan was basically to call up people and threaten them that if you don’t pay, we’re going to take your house. We’re going to foreclose, the numbers when you looked at the individual cases didn’t make a lot of sense because the people were not paying because they didn’t want to, it was because they couldn’t and I tried to work with federal agencies, Fannie and Freddie, and they were dead set against doing any modifications at all. Basically they viewed it as being more hazardous. In fact, you were to give a people a break on their payments that in fact are forbearance for that matter at that time, if you people a break on their payments, everybody was just gonna go out and basically default on their mortgages. And I said, I didn’t think that would be the case. These people with families and, kids in school. 99% are not defaulting because they want to, it’s because they just don’t have the resources. The other thing at that time that I worked on with very proud of was really the advent of the mortgage backed security business GE.

[David] Yeah. It’s really interesting. Echoes. Yeah. Good back. By the way, at Gemico, did you work with Jack Welsh? Was that back in Jack Welsh’s days? 

[Bill] Yeah, he actually was the one who wanted to get into the mortgage insurance industry and I was the guy that got tapped to the shoulder to what at that time to Cincinnati, Ohio, where Gemico was first headquartered.

[David] I remember that. What was it like working for him? I had the privilege of playing golf with him and literally he joined our foursome in San Diego and it was an amazing experience. Quite an interesting character. Gentlemen, he was a real leader and I’d love to get your perspective on his leadership style.

[Bill] Basically, he helped my career dramatically because he said that if you have a younger employee that does a job as well as an older one promote the younger one. I mean it really helped me move through the ranks 

[David] And that was back in your younger days

[Bill] Yeah, that’s that was that’s when I was in my 30s or 20s and 30s. So I thought that was a good thing. It was a fairly tough relationship between Welsh and the Capital Corporation. Many of the leaders didn’t get along. If you look at all the growth at GE at that time period, it was all out of GE Capital. And there was a lot of, in many cases, Between went and Welsh, a lot of head knocking with regard to it. So it wasn’t the most amicable environment, if you will, with regard to that. 

[David]  If you’re one of Jack’s circle, so to speak, one of his favorite ones, things go well, if you’re not, it can go very difficult and many testimonies, but I appreciate your perspective on that. We’ll get more into leadership and I will ask it because I think that early on played a role. I’m sure informing what you think about leadership and how leadership should be done, but let’s move on to some of the mortgage backed security background is the fact that you were there at the ground floor of that Bill is just amazing. 

[Bill] Yeah. I’m more on how do you structure products than I am per se running day to day operations and I thought that was fantastic. We have a triple A credit rating. They’re housing revenue bonds. People starting to do mortgage backed securities. We should just kill everyone else in the space because we’d have a 25 basis point advantage over everyone else and they were basically a wrapper around, it came after the, the underlying mortgage backed security underlying mortgage insurance was utilized. So it was superior in the credit stack with regard to that. The one thing I did that was very interesting there is I went to the Louie Ranieri at the time. Keep in mind those bonds were all pass throughs and they were they were not tranched at all. And so I came up with the idea that you should at least time tranched them because, you essentially, the early on bonds should trade at a very low yield and the more senior ones would trade at a much higher yield. Overall, you could lower the effective interest rate and create a lot of value with regard to that. 

[David] Absolutely the time trance, that was your idea. Excellent. I remember that. 

[Bill] It’s now they ultimately went on it. I’d left after that period of time. And they also wanted to credit tranchee and everything else with regard to that.

[David] Get the chance to work with Lou Ranieri, another legendary name. And I think many people accredited him to be the father of the mortgage backed security.

[Bill] Absolutely. Very interesting gentleman. I think he only has a high school degree. I know he went on to be head of systems or something for his brothers. And then he said mortgage-backed securities are the way to go and took over that operation. So, he was he was quite a character to say the least. 

[David] He was brilliant and a character. Yeah. I had the privilege of meeting him. 

[Bill] He’ll go in his office and he had one of these meat hooks at a butcher shop with that he had one of those meat hooks on his credenza sort of sets the tone for the discussion. It’s interesting. And, over that time we took in 12 months, we took GE mortgage insurance for a number of the smallest firm in the industry to be the largest firm in the industry.

[David] Exactly. Very tremendous. Very successful. 

[Bill] And what benefited us besides the AAA was also the fact that all the other ones were struggling with their large troubled portfolios, which we didn’t, we had a small troubled portfolio, not a large one. We could grow that. Went, left GE at that time and became a partner in merchant banking for a little merchant banking firm. And one of the acquisitions that we did was actually IMI. If you remember, IMI from Boston. And we looked at that, and at the time losses were continuing to rise. 

[David] What year was that? 

[Bill] That was probably 84, 85. And losses were continuing to rise, during that period of time and the owners thought that would continue. And my wife and I spent a lot of time and we actually came up with the first utilization of loss curves. It looks like a polynomial distributed lag losses rise for a while and then they basically tail off. What was interesting about that is they had 200 million dollars of really liquid net worth, they were willing to sell it for a hundred million dollars. The company we actually convinced Drexel Burnham that we were right. And they lend us 99 of the 100 million dollars. And ended up with being a very attractive business as a result of that. And it’s that point really, whereas I started developing the tech to try to figure out more effective ways to resolve loans since IMI similarly had a very large portfolio of troubled assets at the time. 

[David] That’s amazing. Your background, having been at such instrumental places, working with Jack, then working with Lou Ranieri, what was your educational background to position you for this? Or did you just have an analytical type brain, but how was it? I think anyone listening to this ago, I want to be like Bill Erbey and I want to have the career path that Bill had. So someone new in the industry. What was your background to get you into those positions? 

[Bill] Undergraduate school basically was econometrics. And it’s like optimization forecasting, and then I went to the Harvard business school after that. I remember that which is more of a, it’s very good training ground, but it’s also a good passport to get into a right out of school because people give you credit this deserved or not is another matter. But that company that was a partner ultimately split the arbitrage business stock option arbitrage with the traders went that way. I went the other way with basically all the companies we had purchased in the merchant banking business including some thrifts, make some, pretty good money by being able to buy, basically bankrupt thrifts and turn them around. But often. Yeah. 

[David] And that brings you to Ocwen and I love the name. Your wife came up with the name. So first of all, let’s start with the origin of the name of CJ de Santis. I don’t know if you remember his name back. He is a dear friend. He was at Merrill Lynch and he banked you at one point in time and he was impressed with the Ocwen business model. And he said, even the name is innovative and it’s new co spelled backwards. I love that. And your wife came up with that.

[Bill] Oh, yeah, she was helped us name a lot of our acquisition targets and things like that. So it’s she’s very good or ever at the name of a company. I go to her. She should go into that business because it’s amazing. Some of these big companies pay millions and millions of dollars for somebody to come up with a name for them. And most of the names aren’t that good. But Ocwen had two primary businesses initially. It was in the mortgage backed security business and was also in non performing loans with regard to that. I remember that. What we did in mortgage backed securities was rather interesting. Remember, I spoke initially about time tranching. Now they’re basically, they had credit tranching. And so that you would have, if you will, a quasi equity piece at the bottom of the credit stack, right? and they were called residuals. And we wanted to be as capital efficient as we could. And so we kept trying to figure out ways to shrink the residual and actually buy it, having to pay less and less because it’s a smaller part of the credit stack. Finally, I came up with the idea is let’s have nerd, a non economic residual. I don’t know if you’ve ever heard of those. 

[David] I didn’t realize that was your creation.

[Bill] Yeah. Every single mortgage backed security has a nerd. At one time along with our major competitor, if you looked in the listing of who owned Fannie and Freddie securities, we owned half of them. All because of the nerds, if you will. In other words, we didn’t have any investment, the reason a nerd exists is that again, when you go back to the time tranching, the early years, the mortgage backed security has an interest rate, has a yield that is less than the underlying value of the mortgages, right? And later on, the mortgage backed securities have a yield higher than the underlying mortgages. So that creates what’s called fanta income in the early years. So basically somebody has to pay the tax on that. What we did is said, okay, let’s create a nerd. We absorb that tax payment, the structure then will pay us the cash upfront on the net at the net present value of that tax impact. So we collected large amounts of cash, but we actually had tax liabilities with respect to that. And so, what we did is we became one of the largest players, if not the largest player in low income housing tax credits to offset that tax liability. 

[David] That it was extremely innovative at that time. Again, this is one of those examples, the nerds that you created, that you looked at something where there was a void or a vacuum where there was an opportunity and you recognize it and you capitalized on as a result of it, you owned, you ended up the owner of half of Fannie, Freddie securities, that’s extraordinary. 

[Bill] Yeah. We were making enormous rates of return on equity. Whereas in the thrift, we were making three and 400 percent returns a year on equity. 

[David] Oh my gosh. That’s amazing. Unheard of. 

[Bill] The other thing we did, the other half, which we’re much more well known for is really performing loans. As I said, there was a thrift crisis. We bought a number of thrifts during it throughout that period. And so we’ve had very interesting war stories about that which we can go through later. And we also went into purchasing non performing loan portfolios. So we did the whole stack of different types of credit. We had single family, multifamily, small com, large com. We did work internationally for Goldman Sachs, for Merrill Lynch. We work for the country of Jamaica and the country of Mexico. So we were a pretty good size player in the nonperforming loan business. And the reason we were able to make a lot of money in that business is that we were the first firm ever to do modifications. So we did initially principal mods and then finally, during the financial crisis, we actually did interest rate mods with respect to that. And so in order to effectively do deal with a modification or a create one, you had to get the bar on the phone. So we actually created our own psychology department. We had almost as many PhDs in psychology as a university. Because the key was how do you speak or how do you communicate with that borrower to let them know that you’re not trying to take their property because their reaction was. Banks calling I’m delinquent. I’m not taking a phone call because they’re just going to take my property.

[David] They go into avoidance. Exactly. So to approach it from a psychological standpoint of how to communicate. Again, very innovative. Was anybody else doing that at the time? 

[Bill] No, they weren’t. And really the industry looked at it. You need to have somebody with experience to talk to these people on the phone. And what we found is that the human error was at astronomical. What we wanted to do was to try to basically take that out by doing champion challenger, how you do it today on any selling any product. If you say it A versus B, does a get more people on the phone? A B analysis. Yeah, that’s all we did was continually try to improve the means of communication that we had with the consumer so we can get more people on the phone. We were doing more than double the amount of modifications of any seriously delinquent loan, our reinstatement rate was more than double the industry. As a matter of fact, 

[David] You attribute that, did you attributed that to the psychological analysis or application of how people think, how to reassure them to get them to talk to you? Is that big part of it? 

[Bill] That, and the other thing is that we did a lot of what’s called optimization analysis, in other words, trying to understand we had an obligation to only do modifications or forbearance or anything that actually would increase in that present value for the whole credit stack. What we did is we actually created optimization models to see what is the percentage likelihood of someone accepting our mod and it’s still at the same time, generating net present value positive outcome for the investors. We use both the psychology, which is in many cases, statistics as well as using statistics and optimization analysis to basically come up with the best offer. What we found is generally, if you had an LTV above 115, the person’s going to default. And so you had, you needed to get that LTV down. So they feel view. That they had some equity in the property, people always overestimated, almost always overestimated the value of their home. They were somewhat upside down. They would view that they actually had equity in that home and also they didn’t want to move. Okay. So during HAMP, we did 40 percent of all HAMP modifications, home affordable mortgage program. 

[David] Yeah. I remember that. Yeah. I remember HAMP real well. 40%? You did 40% of all that? And you did that at Ocwen. That was one statistic when I read this in your notes that I was not aware of, and there’s so many things that you’ve done well, but that’s extraordinary.

[Bill] Yeah, I think over time I remember the first meeting we had in Goldman and the person was running the meeting was first of all, was a college professor the day before and he viewed all of us as being the same, whether you’re Chase, Wells ourselves, you know, NationStar, he viewed us all as being monolithic in terms of how we approach the world. Ultimately, we convinced them to do a program very similar to what our math would do within the optimization. It was much more simplistic because it was like, do this. Go to point a, if it’s better than this do B, et cetera. It’s very mechanic mechanical. But, yeah, I think we did more than Chase, Wells. And B of A combined. 

[David] Wow. This career journey you’ve had, and we recently recorded a podcast and released about another innovative thing. Let’s touch on that, and then we’ll put a link listeners to the interview we just did. Again, innovating and doing something very exciting. And just touch on that briefly to teach people to want to go back and listen to that podcast. So again, the link of which will be in the show notes of this podcast. Bill, since Ocwen, you’ve continued to innovate. You have done a number of companies. You’ve continued to do things that oftentimes are quietly behind the scenes. That’s one of the things I respect about a leaders when they’re not out there beating their chest and saying how great they are. You have always been one of the great minds behind so many great ideas and companies out there since Ocwen. What has been your path in your journey.

[Bill] You’re right. I’ve basically started four tech companies and invested in a fifth one. And all of them basically use statistics and mathematics generally to solve a problem that people thought were physical problems. So just a different perspective on how one looks at something. The one I didn’t start that’s really huge is my nephew’s company, which is the first known therapy for kidney disease. 

[David] Oh, wow. So I’ll try to find it. Wow. 

[Bill] Yeah. And what’s interesting about it is. If you look at the way kidney disease, first of all, kidney disease is an epidemic. More than 10% of the world’s population has it, and it’s growing at 16% a year. In terms of the federal budget. More money is spent on kidney disease. 1.6 times is spent on kidney disease what they spend on national defense. That’s some rough idea that, what they spend, on, let’s say in the Ukraine is like a couple days of kidney disease. When you cover it and do it. The kidney is a filter and it’s high pressure at the top, low pressure at the bottom, the thought process was if the kidney is failing, the pressure is degrading and the pressure gradient degrades, put more pressure at the top of the kidney. The problem is the kidney auto regulates and pushes back. So, it doesn’t work because people are dying of kidney disease. So he said, let’s look at this. Let’s put a small negative pressure at the bottom of the kidney and that had changed the pressure gradient. It’s a very simple concept that actually just revolutionizes the way in which people deal with kidney disease.

[David] So, that’s another one of the ventures. I’d love to get into that. Anyone who’s doing innovation in medicine is oftentimes the simplest solutions come back to be sometimes one of the most effective. 

[Bill] Almost all of them, my philosophies, you look at the big problems in the world. I have a company that were doing a new managed routing protocol for the Internet. Everyone says the Internet doesn’t work, right? there’s latency, it’s low bit rates, it’s congestion, all of that stuff. And the reason it is because of what the way in which the routing protocols work. It’s called border gateway protocol. It’s philosophy is the congestion occurs on routers, so you should send the data over the route with the fewest number of routers. At one level, that makes sense. The problem is everything gets routed over the same shortest route, which actually exacerbates the problem. The routing protocol for the internet was actually developed back 40 years ago, when they sent the first email with regard to it. So what we’ve done is we used, again, we use the same optimization technology that we used over at Ocwen or other places to try to come up and say, this is really a transportation problem. It’s the same thing as the Amazon delivers packages. AWS delivers data packets. No one would ever think of sending the Amazon trucks out with having to optimize the route. We send data packets out without ever thinking about that. And again, it’s a problem. You read there’s a thousand articles over there that say border gateway protocol doesn’t work. And what they do, though, is say, let’s just make all these incremental improvements as opposed to saying border gateway protocol, the writing protocol doesn’t work. We need to think about it another way. Trying to incrementally improve something that is broken. Is not going to get you to your optimal answer and most of my companies that in the tech, we’ve taken that approach. We’re taking a different perspective on the problem than people have historically done. The other one is we have and I’ll get to the last one ForumPay. The other one is Alpha controls, we’ve developed a control system that reduces energy loss by 50%, it uses transportation optimization, multi-variate optimization determine to make that improvement. And the last one, which is I think very relevant to the mortgage space is ForumPay. I’ve always been a skeptic of crypto because you couldn’t really spend it on anything. It wasn’t fungible. On every other characteristic, it was much better than fiat currency. But on fungibility. So, we set out to build and make ForumPay. It’s objective in all of our products is to make crypto or tokens fungible so you can buy something with it has real world value that the problem you had with crypto was there was a delay in the blockchain. So if you were to go buy a McDonald’s hamburger. You wouldn’t know what you paid for unless you stayed at the counter for an hour which screws up the business model for significantly. So, what we did is we figured out mathematically how to eliminate that and give price absolute price determination so there’s no uncertainty. There’s no quote volatility that people speak about and the other thing we did is it was also a huge number of walled gardens. You can have a point based wallet that only really interfaces with people that were in point based. So we’re integrated with all 575 million wallets in the world. And the other thing is we’re the only company that’s actually the tech stack for major payment processors for crypto. It took two and a half years of vetting for us to get that approved. 

[David] That’s a major accomplishment. Again, listeners check out the link in our show notes. We go into this in great depth. Very innovative. Let’s shift over to the topic of leadership. One question I like to ask people that have extraordinary background and track record that you have Bill is how do you define leadership? 

[Bill] Yeah, I think the most important thing about leadership is to really have a vision that be able to articulate a vision that inspires people that   they really, they got excitement. They have pride. They really buy into it. 

[David] It’s creating excitement that is effective. When you say excitement, put more meat on that statement? 

[Bill] They have a vision about what you’re trying to do, they think it’s meaningful, you’re actually doing something that matters. You’re not doing something every day that everyone else can do 

[David] Would another way to say that you anchoring to a substantive why.

[Bill] Yeah that’s right. You give people an idea of why this is important, right? 

[David] I think a lot of people struggle with getting to a why that they could communicate because there’s nothing more effective than communicating your core mission in a why. I think that’s excellent. What are some examples of leaders that have inspired you along your journey? 

[Bill] Yeah, the other thing that’s important is you being willing to do anything that you ask them to do. You can’t ask them to do stuff, you’re unwilling to do. That doesn’t mean you should be every day cleaning out the garbage can pails. But at least, you should be willing to do it, from time to time. Yeah, I think two of the best leaders I ever had were GE Capital. GE Capital today is a former shell, a shell of its former self. At the time, it was the largest financial institution, the most profitable one in the world. So it was a wildly successful, very dynamic organization. Larry Bossidy and Gary Wendt, two senior leaders there that work for the GE capital had the utmost respect for both of them, quite different people.

[David] That’s what’s so interesting because I did some research on these two before we got on a call. They are quite different yet you found attributes of leadership in both of them that you respected and adopted, compare and contrast a little bit. If you can, what did you pull from Larry’s leadership which is quite different from Gary’s.

[Bill] Yeah. Larry is very smart. And both of them had integrity. 

[David] That’s a core to be a good leader. That’s got to be at the core, I would say. 

[Bill] Yeah. And Larry was a nice guy. He could basically tell people where he’s laying off 800 people. And then say, thank you. He was, big, like a big teddy bear that everyone just adored, and is, brilliant, but also very extensive interpersonal skills. And he was a very charming individual with regard to that. Yeah. That’s a rare combination to have both be that bright and then have those kinds of skills people skills. but come contrast him to again, Gary, a little bit from what did you, yeah, 

[Bill] Gary was as hard as nails.

[David] He had polar opposite when they come to the people friendly side or people sensitivity. 

[Bill] But he was very smart and he basically would, help you get ahead and help you win in that. Very tough, he liked me for some unknown reason but I really respected his ability, his intellect and what he was able to build a business. 

[David] Talk about Jim for a minute. 

[Bill] Yeah, Jim Fischel is my first manager at GE Capital. And he really, he rode me like a rented mule. It’s funny. But I think he made me a much better manager as a result, and I got promoted in GE Capital very rapidly after I was no longer working for Jim. My first day in the office, he said, I realize that you graduated from the Harvard Business School and with distinction. Let me just tell you, you don’t know anything. And he didn’t use the word anything. Yeah, that’s just welcome. Yeah. Welcome to G capital, and he really was an extension of the management style taught at the Harvard Business School at the time. The first day, the dean asked you to come in sit in Baker auditorium, and he said, you are the dumbest class we’ve ever had to admit. Now, keep in mind, this is after the Vietnam War. So they had 4 times the number of applicants they’ve ever had. And he said, look to the right, look to the left. You guys won’t be here at the end of the year, which wasn’t true at all but he did explain the philosophy that he thought the best management training program in the world was actually the US Marine Corps. And basically said that they break you down and build you back up. So you then have a great deal of pride of accomplishment because you succeeded within that environment. That was the B schools philosophy as it was GE at the time, and that doesn’t probably play very well today. 

[David] If you it says it would not play well. Yeah. Merrill Lynch was very much like that. You could not go above a certain level in Merrill Lynch unless you came with a Semper Fi degree. 

[Bill] Yeah. they liked the way the Marine Corps, you know, 

[David] There’s good reason for it. There’s good merits for it. The training you get there is outstanding, but you weren’t in the military, you didn’t have that. 

[Bill]  No. both at HBS 

[David] And you could  say GE was a little bit of that though, that experience. 

[Bill] They very much were. And also, you had the same grade, levels equal to the US government grade levels, It was a very disciplined professional organization at the time. And you really picked up a lot of management skills just being there. They didn’t say do it this way. You just happened to see how it was done and you picked it up. You picked it up through osmosis, as opposed to sitting in a classroom where someone telling you how to do it. They just showed you every day how to do it. And, young people ask me if they want to be entrepreneurs. I say, the first thing you should do is go out and work for a really good quality company because Jim said, you don’t know anything.

[David] And you can graduate from Harvard. I’ve heard so many Harvard. MBA business grads say, you know what, I came out thinking I had this and then I realized when I went to work for a first class company, because like you said, the Harvard graduate program gives you a great passport into some great places. But I think it’s really good to get level set. Okay. That was good. You were a great high school player. Now you’re in the pros or you’re a good college player. Now you’re in the pros. It’s a different game here. 

[Bill] And it’s just, so you get that discipline through those organizations, not only through education, but also through the organizations that, young people that come out of college today and want to work for a startup, they may get lucky. Okay. Most startups fail. They may get lucky, but they’re not going to be picking up skills from some other persons who’s 28 years old, never worked for a real company in their life, but had a great idea and is moving it forward. So I think that’s the difference. 

[David] Yeah, really great point. What are a few of the characteristics or traits that you believe every leader must possess? 

[Bill] First of all, I don’t think everybody’s cut out to be a leader and I don’t think 

[David] It’s a great point. Yeah. 

[Bill] And I don’t think it’s something necessarily you’re trained at doing.  I’m a big believer in personality profiles. In other words, 

[David] It’s good to hear that say that, is there a particular one that you like using more than another Myers Briggs has been around forever. A lot of people use the DISC, not one of my favorite ones because it doesn’t do enough deep dive in with the number of questions that typically are asked. Do you have a favorite? 

[Bill] Yeah, we use personality index. 

[David] Oh, very good one. Excellent. Excellent. 

[Bill] That was a grandfather of them all. They all were driven. 

[David] Which really, there are derivatives of Socrates is really, is the founder of the whole concept of the four personality, the four humors as he referred to it as, but it was, it’s such an important principle. So you did use that effectively in assessing who could be a potential leader at some point down the road. 

[Bill] We use it even in hiring everybody, It’s amazing how many people have profiles that are in conflict with what they do in their life. And that’s like a lot of people like, young adults today say, I have to have work life balance was because you look at it that way because you’re doing something that you don’t like to do everyday. 

[David] Yes. Yeah. That’s what I like. I really like Patrick Lencioni’s of the Six Working Geniuses. It’s because he talks about two things. There’s working geniuses that which gives you life. And you’d love to do all day long, as long as you’re awake, then there’s the working frustration and then there’s the middle one is working competency. And I think oftentimes people get caught up working in the things they shouldn’t be doing. And I think using these kinds of assessments is so key to identifying things as you became a leader, you raised up some phenomenal individuals. Do you think it’s because of this personality assessment? 

[Bill] I think we do. First of all, I think interviews are a waste of time. All the statistics show that the most people have a mindset that when someone walks in the room in less than a second, they make a decision whether they like the person want to hire them. And what we do is we use the personality index to actually do probing questions with regard to how people behave in certain situations to understand that and then we use something called Wonder lick, which many major corporations use it. The NFL uses it. It’s a 50 question IQ test. But it really is very helpful in size. one time we’re looking to hire a guy from I don’t wanna use the name of the company. He was the associate we were looking to hire general counsel at Ocwen. This gentleman was associate general counsel with very large food company, provided Okay, good. And and all great questions. Great questions. But he had one thing in there, which was called a low D doesn’t, it’s a lack of attention to detail or don’t follow rules. Okay. I’m like, you could be a criminal and criminals have low D’s. Okay. Anyway, great interview. And I asked him one question. Have you ever done anything that upset your manager or other people within the organization? And he said, Oh, yes, I did. I know this guy was an attorney and he wanted to protect the trademark of the company, and the more items that you use the trademark are, the stronger the trademark is. Okay but he tried to put it on cigarettes. All sorts of other products that were the antithesis of what this company stood for, he said, the head of marketing had an aneurysm. I said, yeah I can understand that. We didn’t hire, but we had a great interview up until the point that was identified that he would do a little bit harebrained at particular points in time. I think we were very good at selecting. We’d look at 1,000 resumes to hire 1 person. Hiring was a major effort, so we wanted to hire people with very high IQs. Okay. And had the right personality profile for the job that they were going to do.

[David] I have such a passion to go into this in much more depth, but we have so many great other areas who want to go to. What today are the biggest challenges facing leaders in your opinion, because you’ve been at this for a game, you’ve watched all the changes that’s been going on in our industry. And just generally in society, what are the biggest challenges today. 

[Bill] One of the biggest challenges is just the new workforce that’s coming in, but it’s always been there, that challenges, I can tell you a story about maybe 20, 30 years ago, we were in the process of always hiring, trying to hire graduates from top Ivy league schools. I was sitting in my office late one night and I got a call from the mother of a young lady. Very bright. She went to Brown university, undergraduate math and econometrics saying that my daughter’s not happy with her manager. She said she thinks she should be promoted faster, she’s only been in the company for a month. Okay. And she should be promoted the job, the task she has, is beneath her. She can actually do a lot better than that. I said that was a lot more in my younger days. She doesn’t like it here. She really ought to quit. I can’t deal with this kind of an issue that you have an entry level employee does not like their manager, not because the manager was doing, I was afraid it was like sexual harassment or something like that. They said that basically they made her do too much work and the work was beneath her. That’s not, I’m not going to deal with that. Let me put it to you that way. Your daughter has a problem. First of all, I asked, did your daughter ever go speak to the manager? No. Okay. If she’s unprepared to go speak with the manager, I’m not going to deal with it. Yeah. And I think that’s true today, though even more so that you cannot use the HBS, the GE, the US Marine Corps method of bringing people along, even though I think it ultimately will be down to their benefit. If you actually brought a new employee into in this day and age, even if they didn’t go to HBS and told them that you don’t know anything the first day of employment, I think you’d have somebody running out of the room crying. 

[David] It’s so true. We have so many snowflakes out there we oftentimes refer, one thing that Herb Keller said, I really enjoyed what you’re really talking. What you say to that mom, maybe she should quit. Herb Keller received a complaint letter from one of the passengers saying that the flight attendant was being flippant in the way he or she was doing the safety check at the end of the day, how. Southwest Airlines is famous for being entertaining about it. So they pulled up and someone had recorded a video. In fact, this person, I think even sent in a video and Herb read it and she says, check check. They covered all the things. They were just trying to make it fun. And this person was just so serious. They weren’t. And Herb says, What do you have to say for about this situation? He says, we will miss you at this airlines. Hope you find another airlines that will meet your needs. I think we have to be prepared to say those things to people. And that’s one of the things that I think people are ready to do today.

[Bill] Yeah. That’s a great employee that she made it interesting. People probably listen. Most of the time cities and go, Oh my God, I’m bored out of my mind. This person’s actually entertaining, makes people listen to it. And most people would have a better experience as a result of that. 

[David] That’s so good. We could go on and out and I love that sort of stuff. What is one of the mistakes you have witnessed leaders making more frequent than other mistakes? 

[Bill] I think they don’t give their subordinates the credit. In terms, they’re insecure.  Again, that goes back to do you have a vision? do the people for being creative, get credit for it. That’s in many cases, studies show that’s as important as what you pay though. 

[David] I agree with that. When you say that’s one mistake, is there another one that comes to mind? 

[Bill] I think the other ones is people not willing to address the deficiencies of their employees because they don’t want to basically have the hard discussion 

[David] Avoiding conflict, avoiding the hard conversation. I agree with you. Yeah. What behavior or traits have you seen that derail leaders? Probably down the same lines, not willing to have the tough conversation.

[Bill] Yeah, I think it’s the same issues. They don’t give credit and they don’t basically mentor the people mentoring stuff, because nobody likes to tell somebody that you’re not doing a good job. You don’t go into the office unless you’re like, psychologically impaired, you don’t go into the office every day. I’m just going to make somebody miserable today because, in terms of telling them why they don’t do a good job.

[David] All right. Very good. There is a place of compassion, but there’s a place of passion to be passionate. I love what you said. Jim said right out of the gate. You don’t know blank. Those are the points where it’s gets your attention. I had the same thing happen when I started my first bank job and it was one of the best places I could ever go worked because of the frankness I think that’s just an outstanding thing. 

[Bill] The other thing is you also though you need to sprinkle in what they do.

[David] Exactly.  It can’t be just bagging on them all the time. It’s degrading. There’s gotta be a building up. When you think of something like a SWOT analysis or those various tools, there’s 365 analysis that is, did you employ any of those or do you employ any of those in the companies that you have been associated with or now managing?

[Bill] No. I think it’s hard enough for a manager to do what we just spoke about anyway. And then if you basically give the ability to have negative performance review because they did what you really want them to do. I think it’s productive. 

[David] Okay, Let’s talk to the next generation that is listening to this interview and they go, I want to get into a leadership position and what advice would you give someone seeking to go into a leadership position for the first time?

[Bill] First of all, if they had access to the tool, they’d probably ought to take a PI to see if they really want to be in the leadership position. And a lot of things, I like to play in the NFL, that’s just not going to happen and I’ll probably end up being dead. Okay. So if you’re not suited for it. Probably the best thing is for them to understand that they’re not, and to try something else, they won’t be happy. They will be horrible leaders. I think you get training, but you have to have the fundamental personality building block for you to be successfully trained. We all have different personalities. I’m slightly more outgoing than average, but, compared to a salesman who has to basically stick their nose out there every day and get it punched. I do it, but it takes an enormous amount of energy to do that. So it’s very hard to train people to do something that they’re not psychologically predisposed to do. 

[David] That’s excellent. What resources would you recommend someone? Looking to gain insights into becoming a leader use any books, any particular inspirational things or education. HBS, Harvard business school. Excellent. But not everyone can get in there. Would you recommend as resources? 

[Bill] I have a whole resource list. I can send you, off the top of my head right now. I’ve looked at it in a while, but things related to very interesting, different types of things. There’s one on the goal, which tells about how you optimize it, about optimizing the factory. I like the ones on thinking fast, thinking slow. So you understand how people react. I there’s a whole list of ones that I’ve read. I just can’t right now. 

[David] You have a list, if you did have that, you want to share that. We’ll attach that to our show notes. Bill, what a delight to get to know you better. I have admired you for years. We’ve been in the industry about the same amount of time and you have just a stellar background and having done some of the things I want to thank you so much for coming on and sharing with us your thoughts and leadership and really your extraordinary background was so fascinating to hear. I had one last question I was going to ask that when you look at the innovate, the need for innovation we look at the S curves, the adoption curve what’s going on, for example, if you look at how rapidly ChatGPT got to a hundred million users, we’re seeing so much innovation coming out and available to us now, artificial intelligence, et cetera. What would you recommend on people sorting through all the new bright, shiny objects that are out there to be the one that they should look at and use or adopt? 

[Bill] First of all, AI is basically statistics. It’s correlation analysis. It’s basically correlation analysis when you look at it. I think the winners there are going to be the ones with the large databases. They’re going to be Google, Apple. All data. The other ones, there’s so much money being thrown at AI. I think AI is going to transform the world. But I think there’s going to be a hand as in any of this tech companies, there’s going to be two or three that are winners and everyone else is going to be a loser. A lot of these applications for, I’m going do X, Y, Z better than anyone else, I think they’re going to end up being roadkill ultimately with regard to that, AI is going to change, even put aside leadership, the jobs that are available. The vast numbers of jobs are going to simply be whole swaths are going to be eliminated. And most people are not well trained enough, sufficient to actually operate in that environment. 

[David] And that’s going to have some significant societal ramifications when you look at it. Mustafa Suleyman wrote a book, The Coming Wave. And I’ve read that now three times and every time I read it, it just accentuates as the point you just said, and that is the change and transformation in what jobs are going to be here and which ones are not is pretty astounding and how to prepare for that. What would you say for those that are reading that book or coming to the realization AI is going to change the world?

[Bill] I think, to have a very strong mathematical background and statistics background to be able to understand what’s going on many jobs. Take people who basically do a radiologist, highly trained individual many years of experience. Those jobs are going away because AI, which actually they use since the AI already does it faster, better, cheaper, and you actually have to make the machines. Dummy it down. So the radio actually read it, so it’s actually, they’re creating negative value in the whole system. I don’t think you’re going to have an actually Miley chairman of chiefs of staff, like five or 10 years. There won’t be any pilots left in the world. That’s right. It won’t be sailors. There won’t be soldiers who have, it’d be autonomous. Yeah. They’ll have, robots basically that do a full. A far better job. You don’t have to worry about, somebody shoots off one of their quote limbs, you don’t ruin a life and spend millions of dollars repairing it with regard to that, the taxi drivers, delivery van drivers, and I’m looking at this from Alpha Controls. There are 32 million delivery trucks in America. Okay. Just think about that. That’s 1 in every 10 population. There’s a delivery truck. Okay. 

[David] And Amazon has only added to that number. 

[Bill] Yeah, because everybody gets their food delivered to homes and all that doesn’t even deliver delivery truck. Most of those are cars. Okay. So you think about the fact that a delivery trucks in the next 10 years are probably going to be autonomous.

[David] It was fascinating. I was listening to Elon Musk’s shareholder meeting here just recently and where this thing is going with robotics and autonomous vehicles it’s all very exciting. I’ve, I choose to say I’m excited about it. But I know this is going to bring a lot of concern, Bill. I just want to say again, thank you for coming on the podcast. Anytime you want to come on and share more with what you’re doing and the assignment, I would be honored to have you back on. Thank you, sir wery much for your time. 

[Bill] David, it’s an honor to have you for you to invite me. Thank you so much. Have a great day. 

[David] Yeah. I’m excited for listeners. What is the best people that want to learn more and follow you LinkedIn? I’m assuming. Do you have a webpage that you’d recommend people go to Bill? 

[Bill] Yeah, I’m on LinkedIn quite a bit and we have, different articles that I put out there.

[David] Good. We’ll put a link to that listeners. Be sure to do it again. Bill. Thank you so much. Can’t wait to meet your wife one of these days. She sounds like she’s just another brilliant individual that has been involved in so much of your successes. 

[Bill] She is, definitely.

[David] You had a smart partner like that. And it just accentuates you. And it’s a multiplier that’s, it just can’t be calculated. 

[Bill] And she lets me be as crazy as I am doing all this work. 

[David] The fact that I admire most is you, you’ve done extraordinarily well financially with careers and all that, but you’re still at the game. I think that’s so much what I learned from Jack Guttentag, who just recently passed away met him at 85 and worked and helped him build a company until he is the 90. And then he went on and lived another 10 years after that brilliant individual. And I think it’s staying active, I think will keep you healthier and will keep you alive in a healthier, more productive way. So keep doing what you’re doing. I can’t wait to stay in touch with you and hear more about your successes. 

[Bill] David, same here. Thank you so much. Have a great day. 

[David] You too, sir. Thank you.