Why Frank Matters.

When we began working on what would become Frank I kept a small green notebook that I used to jot down my thoughts and reminders. Most of it was the day-to-day nonsense of a over-stretched founder trying to keep everything in order: call potential engineer, fix onboarding language, figure out legal thing, etc.

I was flipping through that notebook last week and stumbled on a page with "does it matter?" written at the top.

"Does it matter?" is a question I ask myself whenever I think about working on a new project. In this instance I was trying to figure out whether Frank mattered. I knew two things: (1) for this to be successful I was going to have to put a lot into it and (2) I wasn't going to be able to do that unless I felt it really mattered. So one day I sat down and scribbled out my answer.

I wanted to share it with you because it reminded me that the why matters. Companies often get so excited by a new product feature or use case (the what and the how) that they forget that part of what initially drew them to the product was not just super cool features, it was the chance to be a part of something that really mattered.

(Ed. Note: I was recently put onto Simon Sinek's wonderful TED talk that articulates this far better than I could ever hope to.)

The first time I used Uber they had almost no drivers in NYC and it was actually harder to get an uber than it was to get a yellow cab. But I was so annoyed with the yellow cab cartel that I was willing to wait. The why mattered to me as a customer.

Not only do we usually forget that the why matters, we almost never share it with users/clients/customers. As I read through my old notes I noticed myself being re-inspired by Frank. We thought it made sense to share that with people who might not be as familiar with Frank why it matters to us.

So Luke, Tommaso, and I each sat down and described why Frank inspires us.

1) Luke: Because it's a profoundly simple solution

Luke Coffman, Chief Behavioral Officer

When I was doing my PhD, on my way to dinner every night in the basement of the HBS library, I'd pass by a 19th century gold frieze on the wall (did I mention this was HBS?). It depicts two laborers shaking hands, with the sanguine caption, "Credit - Man's Confidence in Man". It had never occurred to me before how simple and social the origins of finance must have been. The contrast between that handshake and modern credit strikes me even today every time I walk down that hallway.

This is how Frank initially appealed to me: elegantly simple. It breaks down finance to only its most essential elements -- trust and support between people.

And I believe in Frank beyond a romantic notion of how things should be. It will work. The stars are aligning in a few ways.

First, we're at a point in history where we have the research and technology to support the idea. We know how robust trust is, and how to nurture it. And we have the technology to leverage these understandings in just the right way to keep things social but not at all awkward.

Second, as trust in banks is understandably low, the opportunity, or even obligation, to rethink the complexities of the system is here. Think about how the food industry became industrial and complex, and we're turning towards local, simple, unprocessed alternatives. Or consider how the convoluted and costly ways of donating to the poor overseas lead to the elegantly simple solution of simply sending cash.

The simplest solution is often the best. With the complexities of finance tripping us up recently, we're at a time where we shouldn't look at that golden frieze simply as a quixotic ideal; we should consider how much better off we are than those two guys shaking hands.

Is Frank going to end the banking system as we know it? No, of course not. Is there a simpler solution to credit that we can use in most situations? Yeah, absolutely.

Simplicity matters - that's why Frank matters to me.

2) Tommaso: Because it's like a new version of an old and successful practice

Tommaso Vaccarella, Head of Growth

I'm from Italy and, despite its sometimes frustrating flaws, it's a country that maintains a close relationship with its heritage. When the majority of your city is 2000 years old, it helps keep the past in perspective :)

While Italy hasn't always gotten it right, I firmly believe in the idea that we move forward most effectively when we build on the foundation of what has worked in the past.

That's why I was so excited by Frank the first time I heard about it.

Lending and borrowing from friends and family isn't a new idea. In fact it's a really, really old idea. For centuries it was the only method of financing. Whether it was a neighborhood banker or a wealthy uncle, you lent to and borrowed from the people within your community. People would be offended if you went outside the community. Friends and family lending might be the oldest financial product in the world.

And for centuries it was incredibly successful. Defaults were kept low because (i) people within the community had excellent information on the credit-worthiness of the people around them and (ii) community-norms and reputation costs kept people from acting like deadbeats. And when something did go wrong there was a real person to work it out with, instead of robo-signers waiting to foreclose on you.

Even in the modern world the evidence on the efficiency and effectiveness of the community-based lending groups is astounding.

It was only from the second half of the 20th century -- as anonymous banking systems grew to be a dominant intermediary -- that direct lending has come to be seen as a relic of a more primitive era.

But as we learned in 2009, the modern banking system has its own set of flaws and weaknesses. Conflicts of interest, insanely complex structures that can even confuse "experts", and an increasing number of middle men have left many of us wondering whether there isn't a better way.

Well maybe the answer is to devolve the system so that it's closer to what it used to be. Let's draw on what was sustainably successful in the past to guide our future.

And when you can combine the foundation of a system that has been successful for centuries, with the advantages of modern technology (e.g., mobile payments, social graphs, etc.) you have incredible potential.

A proven concept married with modern technology - it's the ultimate opportunity. That's what Frank represents to me and that's why it matters.

3) D'Arcy: Because it's proving you don't have to sacrifice efficiency to promote values like community and fairness

D'Arcy Coolican, CEO

Those were the actual words that were scribbled out in my green notebook.

We're often presented with the supposed trade-off between economic efficiency and values: do you want something efficient or do you want something equitable? Do you want to increase the size of the pie or do you want to make sure everyone gets a piece?

In the last few decades globalization and technology have kept us focused on the efficiency side. Our productivity has gone through the roof, but embedded in that growth has been a somewhat apathetic attitude towards fairness and inclusivity. We were told there were trade-offs that had to be made, and to sacrifice overall growth for a "fairer" distribution was selfish and/or foolish.

I strongly believe this trade-off between efficiency and values is false! Frank is proving that, and that's why Frank matters to me.

I don't mean that the trade-off is false in that a successful company can fund a corporate social responsibility office or organize as a B-Corp (although I think those can be great things if done right).

I mean that the trade-off is false in the sense that we can design products that not only increase productivity and efficiency but also -- a result of the product itself -- create outcomes that are fair, inclusive and just.

And often the devil is in the details of the product design.

Etsy created an efficient online marketplace that not only increased productivity, but also created a fair and equitable distribution. Amazon created an efficient online marketplace that is designed to undercut and eventually replace their best vendors.

Until we produce more examples of products that show this trade-off to be a false truth, companies like Amazon and uber will continue to use it as a shield.

That's why Frank matters to me!


Frank: D'Arcy

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