Legacy, Drones and Banking with Erik Åkesson

Speaker A: Welcome to Fintech Daydreaming, the podcast that dives into the world of banking technologies and the ever changing landscape of fintech companies. We bring you real life examples from global and local thought leaders, as well as experts working within the financial industry and seek out the best stories from the front lines of financial services innovation. Where dreams of industry pioneers meet reality. Hosted by Paul Krogdahl and Ville Sontu, this is Fintech Daydreaming.

Speaker B: Welcome back, dear listeners, to another episode of Fintech Daydreaming. We've got an interesting guest here for you today and, uh, I think it's going to be a good discussion. I'm Paul Kroghol. I'm going to be your host for this episode. But as always, and as we always say, this is not a one man thing. We always do it in a partnership. And as always, I've got my, uh, beloved friend and co host Villa with me. So, Villa, how are you on this, uh, beautiful morning? We tend to be recording on mornings these days, don't we don't know how

Speaker C: this happens all the time, but apparently we're not allowed to talk about the weather or we're not allowed to complain about work anymore. So now we have to find other things to talk about here in the beginning. And maybe I can say that, you know, now that we're recording in the mornings, it's, uh, sometimes a bit of a surprise when I wake up and I, oh, I have to be in a podcast in one hour, which was definitely the case this morning. So, uh, again, a bit of a morning feeling here. But I think it's going to be picking up quite nicely when we get to get to the, uh, our fantastic guest for today.

Speaker B: So it's a panic realizing you need to have a shower and brush your hair because you're going to be on

Speaker C: video, do a bit of a shaving or trimming or whatever. So again, trying to look at this a little bit more representable than I do when I wake up.

Speaker B: Okay, okay. But you know, this, this is going to be a little bit different because we, uh, have had so many fantastic guests that we've been recording with. So this episode, we're recording it now just before summer. It's not going to be published until after the summer, so we'll be bouncing a little bit backs and forwards in the discussion, uh, between current state and potentially when we're going to be publishing this. But you know, Villa, if, if there was one book that I would tell everybody to read in the area of progressive, particularly in banking. It would be my back book. Obviously. Rip out the Core would be the book that I would recommend you read. But if you wanted to read another book, then it would be the book called, uh, Callista's Paradox, which has been written by our guest here today, Eric, who is with us. Um, Eric, for the few people who don't know who you are, maybe a quick introduction on you, your history and uh, how you ended up writing this book.

Speaker A: Sure.

Speaker D: Thank you. First, uh, of all, I want to say, just like your show, Callista's Paradox is also not the one man show. It's. We are a team. And you know, the, the front core of that is, uh, Elaine Sterling, uh, an author from Canada, and myself. We have co authored the book. It's very important of course to say, and then there's a bunch of other brilliant people on board. Uh, the reason that we're writing this book, it is a, uh, follow on, on a, uh, publication by a company called BearingPoint. I have it here. Can download that report on BearingPoint's website. If you search on Bearing Point Legacy Study download, you can find it there. Uh, we wrote that about two years ago at work. And then we started a company called Kalista's Paradox, which is a separate entity, it's a standalone company, and we are writing a book based on the same topic. And the reason that we do it like this is that that report that I just showed you, basically that is for people like us, deep bankers that have a very sort of keen interest in the details. And it is for sort of professionals. And the language is very professional. The broad masses wouldn't enjoy reading that one. Uh, but what we have come across, and I had during the last year and a half, I've had more than 100 CEO meetings with that report. Then wearing a suit and a tie from Bearing Point, uh, together with colleagues from Bearing Point. And what we found there is that legacy is something that sort of has one context within. Banking is well known, but the broader masses have no clue about what that means. And what we want to do with the word legacy here is roughly what Sophie's World did for, uh, the word philosophy. It made it accessible to the broader masses, even the youth. So that's what we are aiming for.

Speaker B: Okay, very, very interesting. And you've got. Yeah, go on, Villa.

Speaker C: Uh, ambitious. If you want to kind of make this, uh, in any way understandable, relatable for the, for the common public, then it's a very ambitious goal. So again, let's get into this.

Speaker B: Absolutely. And I Think a good place to start then. Eric, you said that this is for the masses to try and get them to understand legacy. So what do we mean by legacy? Obviously for us with inside of the banking world we're talking about, our listeners are fintech nerds and banking executives. To them legacy is an anchor that they deal with on a daily basis. But if you're taking this to the masses, how do you define legacy?

Speaker D: That's uh, a very good question. The way we define legacy in the previous sort of in this report is the situation you are in because of the history you have. So legacy can be many things. Well, first of all it can be negative or positive. Legacy can be backwards or forward looking. Uh, if you ask the broad, you know, if you ask a general person on the street that doesn't have a sort of fintech or banking touch to it, they will most often start to talk about what a king or somebody great of a historical person left behind, like King X sort of increased the size of the his country by four times and that will be his legacy. So what they will be remembered for, that is sort of how the word is most commonly used. Uh, when you mention legacy to a consultant or a banker, you immediately get people thinking about that stack of old IT that nobody can work with, that is undocumented and it's a spaghetti of systems that nobody knows really how it works. Um, so that is how we would, so there is no clear cut definition in that sense. But we, we talk about the situation you're in because of the history you have. Uh, the interesting thing here is this, that applies to any, first of all, it applies to any kind of company that is sort of a little bit obvious. And in the report that I just showed you and also in the book we have got many sort of contributing authors apart from me and Elaine that write the bulk of it. We have a general from the Finnish army, Yuri Raitasalo. So he's a one star or a one lion in Finland. Uh, one star general. Uh, and he is writing about military legacy now. What we don't think about, but what I know a lot about now is the enormous time spans in which the military operates. When we started to work with him and we said, oh, core systems are difficult because they can be 20 years old. He laughed at us and said that you have luxury problems. Uh, we have a lot of material stored that we, if we have to fight today, we will pick up the guns and ammo we have and that will be out of the mountain sort of rooms and that will be up to 40, 50 years old. And if you look at Ukraine today, they are taking older and older material, sometimes up to like 100 years old. But the thing is that the human body does not know if it get killed by 100-year-old bullet or a hyper modern space rocket, they will still do their job. And uh, the enormous time spans of military planning and capacity planning is about legacy management. So what Yuri told us is that uh, as a senior military planner my job is 90% about sort of legacy management and to think about the path dependent and the path dependency is a very interesting word here. Once you lock into a certain thing, you look into many sub decisions in that direction that exclude other options. So for example, when Finland as a country, for those of you that don't know Finland is a country, we have this rave neighbor called Russia. So we have good reason to be ready to defend ourselves is needed if needed. When a country like Finland decides to go for the F35 jet fighter like they did two, three years ago, they basically define Finland's capability and what to defend themselves with 40 years from now. Because the F35 is not only a jet fighter, it's a weapon system carrier. It's part of an integrated platform of communications and a million other things that most of us civilians don't think about. But legacy comes into the military big time then. Another author that we have is Mika Styrkinen, uh, the former CFO of Finnair. For those of you that don't live in Finland, Finlayer is the national flag carrier of Finland. So the aviation company, um, Mika has brought to our attention many things that is special with aviation. And there is one thing with aviation that stands out that we can recognize from banking. They have a cultural legacy. I wouldn't call it a cultural legacy problem, but it's a cultural legacy situation at least. When you fly in any flight operations, there is one culture that rules them all and that's safety culture. And that's for a good reason. We don't want to hear when we get into the flight in the morning that good morning everybody. Today the captain and I will try something new. We'll cut a bit of corners, we will fly a little bit, fail fast style today, startup mode and try a few new things. You don't want to hear that when you fly you wanted to follow that checklist like they have done a thousand times before. The problem is that that culture rules the entire company culture. So somewhere else in Finnair or any other company aviation company, there will be somebody working In IT development that develops the app where you buy the tickets, that's really just any other software company, but they will have to buy by the same rules. So I know uh, somebody else in another company, that aviation company had three guiding principles. Number one, safety. Number two, punctuality. And three, service. That makes a lot of sense when you fly the planes. But for her trying to do the service modules in the website, it was very hard that uh, every time she had to do an A B testing on a new way of buying tickets, suddenly the security people showed up and said we need to do a safe work assessment here. That really delayed her ability to do it. Now where do we recognize that uh, for those of us have been, those of us that have been in banking for a long time and by background. I didn't introduce myself, but I have about 20 years of banking. I started in London 2001 and then I was with HSBC which is one of the world's biggest banks, maybe second biggest. They are everywhere in the world and they have 300000 employees or something like that. Then I was withdrawing back of Scotland, similar beast. And then I went to Nordea, which we all know. William maybe knows it really, really well. You work there, don't you? Uh, I was in the trade for in Copenhagen and after that I was in Dansky bank for 10 years. So 20 years of banking experience. Then I have done a fintech startup myself and then I work for Bearing Point now part time and part time I have this thing called Eric Ventures which is a small venture capital fund which is my own. And the third thing I do is that I write this book that we talk about today. But if we look at this safety culture, where do we recognize that from banking? Well, compliance, compliance, rules, everything. That's also the way you want it. Because the bank system is fundamental to society or at least parts of it. The payments, credit to consumers and the mortgage books to all of us that have house that has to function at all times, especially the payment system. Then you have other parts of banking like corporate finance that is actually really consulting. But within banking that can fail. Nobody cares if Coleman's go suck. You know, if the M and A guys goes bust, then there are other M and A guys and you can delay your merger if worse. But the payment system have to work. So compliance credit and legal rules, banks hard. All of us that have ever worked in a bank, we know you never ever, ever, ever launch a product without having all the ticks in the boxes. And that's for A good reason because society, just like society doesn't want planes to fall down. You uh, don't want the financial system to store. But just like in the banks, like in the aviation, the banks have other people doing other things that are not as crucially dependent and they could afford some more trial and error, but for the same reason they can't. I have an example of that. I worked once in a place where uh, well we don't have to go to the details to reveal people and who they are, but there was this special product that somebody had a monopoly over. Ah, so all the other Sales guys, the 100 salespeople that did this product, they couldn't really do this one little niche because you needed some special skills. And there was only one person that knew that special skill. And that person, she guarded that fiercely. And I said hey, that special skill isn't that it's actually a glorified administration, uh, that we can write a little book and then just simply have that information available or a searchable website. Then all the 100 salespeople can sell this product easily too. It was a no brainer. All the other banks did it. And I uh, said I'll do it for free on the evenings just because I want it done because I'm so fed up with not having that information other than what this person dictates. Guess what this person did ran to compliance label. Little compliance risk. That's. But you managed to delay that publication of that by three years so probably was overpaid for another three years. So well done that person out there for the, but really bad team play and quite weak management also to not see through that. But that's uh, this spillover effect of something that is positive in one context and needed that rules every aspect of that industry is one of these things that comes deep into legacy and from above management, uh, have to know that in this part of the organization that is crucial. It's even a license to operate. It's a comply or die thing but we need to limit it to here and have another slightly different playbook for these guys over there. And to have this dual segregation thing is very important.

Speaker C: I love the uh, broader kind of definition of legacy that you started from here and you also touched on many topics that are quite close to my personal history as well which I want to kind of walk through quickly here. So first of all we in the fintech bubble or the banking bubble, we always think about legacy as something bad. I think the framing that actually legacy can be something strong, can be Actually something that you can be proud of as well is important to remember because that really is the original definition of the word. Now applying that forward, uh, uh, the military example also quite interesting, even if you might not believe by looking at me, but I actually used to be military police when I did my military service in uh, uh, Finland. Uh, and uh, one of the things we did is that we actually we patrolled these kind of caves where they stored the uh, you know, the ammunition and the old weapons and things like this all around the Helsinki metropolitan area. So these are kind of hidden places all around. Well, not that well hidden but you know they're closed and um, very, very kind of secret places, you know, in a certain way. And uh, we patrol this and you go in there and you see these massive lines of old crates and you know exactly what's in them. But then you don't really think about them in the context of legacy, which actually is exactly what it is. And that uh, took us to the comparison uh, of F35 modern systems in military. And how do you then integrate all of this? So when you use that 100 year old ammunition on the ground while you're flying this space age F35 on the sky, and how do you make it all work together and still kind of complement each other in terms of the uh, power that they have? I think that's uh, that's a very, very interesting parallel. And the um, and then I'm leading into something with the aviation because another thing that I investigated some, some years ago, uh, as a hobby almost was that I started to figure, I want, I wanted to understand how do the airlines work because I mean if you ever, every time we book a ticket you get like this very kind of cryptic lines of code almost in your ticket, which is kind of codes and numbers and things like this. And where is that coming from? Well, it's coming from the legacy booking system. I think it's called Amadeus or versions of Amadeus, which is kind of very, very legacy from almost like COBOL type of code, uh, that runs the aviation ticketing system, uh, globally. And then you have all these fancy apps and things integrated on top. Actually the parallels are quite interesting. And then the planes, when airlines buy planes, uh, I heard that they get like a crate full of paper of all the paperwork, all the maintenance that has been done and that is still physical paper to a large extent. And even though digitizing that has started, it's still becoming a bit of a problem and so forth and so forth. And now this is into an Actual question, which is the uh, sometimes, uh, the common thing with all of these kind of legacy stacks, uh, and the modernization of that is that we tend to lean into consultant jargon and uh, snake oil many times. Uh, the uh, snake oil used to be blockchain. Blockchain was supposed to solve all the legacy problems, all the problems we had in the world. Then we had robotic process automation for a while. Now we have AI and lately, uh, gen AI and large language models. That's seen as almost like a miracle key to solve all the legacy problems. What's your view? I mean you worked in the world of legacy. I mean you've seen a longer time span of these kind of different snake oil salesmen, uh, coming over and take a new technology will solve all the legacy problems. Uh, how do you see this snake, uh, oil and does it actually help or is it more of a problem when uh, a new technology comes around?

Speaker D: Yeah, M. That's a good one. I'll get back to that. Please remember that if I forget, because when you talk now, I came up with one story that I got from the general related to what you started to talk about how to make all of it work together that has a parallel to that question that you asked. Now here's the very interesting thing then. Uh, so AI is hot. Oh yeah. It will rescue all of us that we know right now. So now it's, you know, uh, April, mid, April 26 and we are all in a hype. We understand that it's an AI hype. Um, now here's the thing. How to deploy AI. As a consultant, everybody talks to me about how to deploy AI. Now in a military context, the military guys have been under a lot of critique and they say, why did you buy F35? It's an old system. Look at Ukraine. Now they have drones. Ah, the drone sister future. Now the thing is, the problem is the following with the drones. The consumer grade drones that we see in Ukraine right now, they have a technical lifespan of very long. As long as you fly. Like I have a drone myself, a DJI is four years old. It flies, it works fine. But in the war zone, if you, if you have a new type drone and send it out, the max or the maximum lifespan will be three months. Not because it gets shot down, but because when a new drone type is out, then the other side doesn't know how to disturb it electronically or to take it down. And that only works for like a month or two tops. Three, Then they, the other side has a way to just disturb it and it falls down or it flies off or something like that. So on one extreme you have very short lived capacities. New novel technologies that will have a maximum lifespan of three months. Now that means that all these people that say, and people do say that and you can read it about the news all the time. We should buy drones and store them. Yeah, well done. Buy a lot of drones, store them. And if work comes in three years, 100% of them are useless. So it's no point to stock up on that. From a military point of view, that means that they need to keep budget in reserve to buy that kind of future technologies then and not now. But that doesn't help if you can't produce them. So the whole sort of, the whole integration chain back to the production of these things is really important too. But the important thing is this. So you have these novel technologies and it makes great cinema. It is quite, uh, quite terrible actually how war is now. Real time entertainment. You know, they do a movie on some guy dies. Yeah that's, you know, it's Russian soldier, but it's also somebody's son, uh, and a father of some kid somewhere. It's terrible how that becomes entertainment. However, it's good entertainment for YouTube. So these drones we. But if you think about it, you have that drone, it flies out, drops a grenade and it films it. And so you kill a soldier. Now what? But you don't, you have limited capacity of them. But what you have very much of is old artillery pieces from 1970 that are super analog and not digital at all. And you have loads of artillery shells for them. And an artillery shell is sort of a 10 kilo bomb compared to a hunger aid. I have thrown hand grenades. So for those of you that don't know, I'm Swedish. So I have done like villa, I've done the army as well and I have thrown a hand grenade. It's really scary stuff, but stainless compared to a 10 kilo artillery shell, it's nothing. So now if you would take, if you take the drone out of the picture for a second and you say we're going to battle an enemy over there and you take the old cannons from 1970 out, you get some uh, coordinate from some guys that are in the front line and say shoot roughly here and you do it, then there will be a distribution where these grenades start to fall. And if you're lucky you hit somebody, but they can lily be all over. So the impact of these artillery drones will be X. Because in war you need to kill economically terribly Cynical. But you need to, uh, be economic with the resources that you can kill. You need to kill as many as you can with the limited resources. Or better yet, uh, injure them severely because then they tie up a lot of resources in the back end now. So you have a number of cannons from the 70s that will shoot a little bit all over. Now you take that drone up, take a picture and down and feeds automatically to these cannons. So all of these cannons shoots. Right. The improvement in fighting power and killing power from that drone in flying out, dropping a grenade on one guy, flying up, taking a picture and having 10 cannons shooting right is a thousand times higher. So how you use your future novel technologies in enhancing the legacy stack is crucial because your choice is this. Either you have a thin sliver on the battlefield that looks good on YouTube but actually doesn't really make a difference, or you have that one increasing the entire legacy stack by 3%. That's an enormous improvement in fighting power. Now where is this relevant to banking? Well, I think the AI is a bit similar. So you can. Because what we see right now is that people develop. People are under so much pressure to develop A.I. ah, fast. So it becomes cinematic in the same way. Let's do something that we can post on YouTube and LinkedIn now. So we are ahead of the game, or at least people believe so. And then you end up in these really thin slivers of use cases with AI where you do a chatbot in the help desk or something like that. But when, if you really want to maximize the value of your AI investment, aim for something that improves the legacy stack. If your new AI can make the credit decisions 40% better for every credit decision there is, it's an enormous improvement from that AI investment. But it's really hard to make good LinkedIn posts about it. So you rather go for that chatbot. And I think that's a really, really wise parallel from the military guys to the banking. Use the AI more to enhance the legacy than to create fancy use cases. You can do fancy use cases too, because promotion is important. But be aware which one of it is that you do. Uh, there is one other thing with the military guys that's very, very important that they do when it comes to legacy management. If you look at banks, what you have, and this is possibly True, I worked 20 years for banks and so my career was so that I have been a trade floor guy 17 years or so on trade floor. Yours, foreign exchange derivatives, interest rate derivatives, commodity derivatives, sales structuring, a bit of trading and Then a lot of management of, of that.

Speaker A: Um,

Speaker D: now I lost my thread here. What was I going to talk about? Can you guys rescue me now?

Speaker B: We were talking about snake oil and, and modern technologies and, and integrating to the legacy. But I can actually divert this a little bit. You were heading back towards banking. We spent a lot of time talking about war and killing people and everything. We are focused on fintech where we hopefully don't kill people. Uh, we may be inadvertently end up with people losing uh, money or a, uh, payment not quite going where it's going. But one of the things that you sort of brought out in all of this, both of you, is the coexistence between the legacy and the new world. And one of the things that you said, Eric, quite early on, particularly when you were talking about the army and the fact that you know, the, the soldier doesn't actually know or potentially care whether he was killed by a 50 year old bullet or a uh, super duper new rocket. They both do the same job. When we start looking at legacy in banking, there tends to sometimes be this notion that all legacy is bad. But in reality there are parts of the legacy that are actually working very well. It's stable, it's running, it's keeping the bank. You don't need to run lots of innovation on it. It's just there, it's part of the machine room. So when you look at legacy, uh, one of the things that you talked about was legacy can be both good and bad. In a banking position, do we want to see all the legacy as bad or can we see the legacy also as good?

Speaker D: Yeah, we can definitely. You know, one of the biggest, you know, so the positive effects of legacy, there is of course this, that the consumer deeply trusts us. The banks, they may hate us, but they still are very happy that it works. And one of the things when it comes to at least, you know, I don't know to what degree your audience is global or Nordic here on the show. Is it what?

Speaker B: Very global.

Speaker D: Very global. So for those, you know, so the Nordic region is different from the rest of the world. You know, I have lived in eight countries, I've lived a little bit all around and I've traveled everywhere and I work for really global organizations. One of the things that is a fact, um, is that the Nordic countries as a region are very digitalized. Um, uh, you know, my German colleagues will be shocked when they try to do their tax return. It's apparently like a several week job where you need to hire somebody. I did my tax return in Finland last year, it was three months. It was one click. I got from the tax authority that said, it looks like these are your numbers. Is that true? And I was like, yeah, that was it. Ah, same in Sweden when I lived there. So the entire digital backbone of our societies is very, very highly matured. Ah, and so the banks are on a similar level. Uh, and so we have the trust of the societies. That makes it sort of very hard. If you think about banking, there are sort of two fundamentally different ways. One thing is that when you want to give your money to somebody to take care of it, asset management or saving. The other one is when you want somebody's money because you need to take credit. Fundamentally it's either to give money from the to a financial institution or you have to have them. Um, so when it comes to giving your money to somebody, or the easy one is I want money from someone. Then you will basically go, who is the cheapest credit? And I'll take that. You don't really care so much if it's Nordea or if it's the hot new crowdfunding thing because if they go bust, you don't care. Maybe you don't even have to pay the money back then because if they forget about it. But if you're going to give your money to somebody, you really care. And people are not at all very inclined to give the money to funny new solution dot com. No, then it's the dead safe solution. That's the legacy playing out to the advantage of the existing players. I started my own company a couple of years ago when I was a startup founder. I have done more companies since then and I remember I was actually doing a little bit of research on what banks that were available and I was thinking, and there were some really hot cool solutions that were cheaper, but their websites had teddy bears on them. Seriously, Teddy bears. Uh, and I was thinking, no way I'll do my banking with teddy bear company. No, I want. And then I went for, uh, op bank. Actually in that case, you know, is opium dramatic and fireworks? No, but I had very basic banking needs. You know, payments in and out and a couple of accounts. And if I was lucky and made money, I wanted to put them on as management. And they have 100 funds available. So, you know, for my needs I would go safe because what I really don't want is to risk the entire operation to save a few bucks with a teddy bear site, no matter how fancy they are. So I think that plays to the bank's advantages. That's a sort of collective legacy now that comes in when it comes to. So two things came to my mind now. First, I remember what I lost a few minutes ago. So I will get back to that. Uh, it's about how the military people manage legacy because it's such a big thing there. They rotate, yet segregate. Very interesting. That's the one. Uh, let's not talk about that for one second. Um, whether this is by design or by evolution and accident is sort of not. We don't really know. But what we do know is this. The military guys, you know, I have to say this. I did the army in Sweden, 1994. That's like a long time ago. Let's say that the captains that I had just about me, it was not so that they would sort of, you know, they were, they will not get the Nobel Prize in physics any day soon. You know, they were not the most brilliant people. All of them, um, the low level military people that do professional soldering and stay there. You know, some of them are really smart, others are not. But, uh, the generals are smart. I have worked a lot with uh, Yuri now, so. Hi Yuri. And um, you know, credit to you, but I have to say I sleep a little bit better now after having to work with them because we have really intelligent people at the very top now. Uh, what they do to make sure that they manage these legacy things that are so important for them is that they actually, and it wasn't designed by that, but that's what has happened. They actually have a special think tank working on the really long term, really big things. Uh, so do the banks and possibly all companies. So my, my, my uh, career in banking was sort of 17 years on trade floors. And then I took a whole year paternity. So for those of you that don't live in the Nordics. In the Nordics, it's possible I took a whole year off. You don't get paid much, but at least you have your job when you get back. Or another similar job. So when I got back, I became head of strategy for part of Downskill, like head of a digital transformation project. And I did that, uh, now then I worked in group strategy in the bank. So I came from the production line. 20 years of Frontline. 10,000 client meetings in 20 years, at least. And then I moved into group strategy. Group strategy was like a think tank of 100 or so consultants or actually worse, ex consultants. They were sort of the BCG McKinsey reject club. So the people that couldn't move up Ended up there. And then they were thinking, sitting there, producing an endless amount of slides. There was no limit to how many slides they can do on stuff that they vaguely understood. And uh, they would also think for very long before they came with that conclusion. And more importantly they would never ask the business because by the definition they thought the business don't really get this stuff because they aren't consultants. So they would produce very big, uh, very, very well prepared, very kind of sort of intellectually thought through very complex frameworks. After three years of thinking by then it was two and a half years too late. And the business that would then receive this hated it because they were never asked. So you have this segregation of these think tank ivory tower people thinking about stuff they have never worked with. Now in the military it's different. Every general, every single general has always started with boots on the ground somewhere, with a gun in his hand as uh, with no stars or stripes or anything in the business of military carrying mines around, digging holes in the ground, doing whatever you do. And then they have been promising. So they move up and by the time they are sort of major or something like that, after like 10 years, somebody points at them and says that's a promising guy, let's move them to headquarters. So headquarters for the military is the same ish as a strategy department for a company. It's a segregated think tank somewhere else that think about the long term questions. The difference is that these guys have actually been in the production line, every single one of them. That is not the case in the corporate strategy departments, that is for sure. Now the interesting thing is that they don't just go oh you are great. So you stay there now and you plan legacy. Like legacy, the long term decision forever. No, after three to five years in some job they are sent back in the field and say well done for being head of how to deploy the drones or whatever. Now you get promoted to like a colonel out there again and you are now a commander of another unit in the field out there in the woods. And after five years of that they might say well done back in the headquarters and then out again. And then you are a brigade general, you know, you're a BRIGadier General, a one star. And if you're really good there, you might be back in the head office once again as uh, head of something bigger. So they have the segregation so that these people can focus on the long term thing. But they have no ivory tower think tank people there because they are always back in the woods with the five year horizon. You can go and look at the LinkedIn profile of the top Ross. I have started to do it now since I have spent the last two years talking legacy all day, every day, half day of my work has been legacy for two years now. Uh, go check out the LinkedIn profiles of all the generals in any country and you will see that most of them have actually been in our in and out of operative roles. That is something that I think that all companies, certainly all banks should look a bit closer into. Now the problem with that is the following. If you are at the top and you say let's take some of the top production guys out of production and have them in strategic role for a while now, uh, you will take people from your business and put them in the strategic thinking box for a while. Are you going to pick the bad or the good guys to define your future? Or probably the good guys. Well they happen to be the same people that makes the most money now what are you going to do? So you try to take somebody immediately that business line will shout, you can't take that guy. Come on, he makes all the money here. He m. He's like the top performer. Okay? That the business world is too short sighted. So that is really hard to do. And instead you end up with either the consultants or the low performers that are put there until we hope they live. That's really bad because they define the future. I think that's a really interesting observation. How the military have sort of. Because legacy management is so important for them that they dedicate the smartest brain and they even top up on that. There is another thing with the military that's different. They can never recruit from anyone else. They can only hire graduates. Imagine if you would tell that to a corporate HR head of HR at any corporate or a bank and say actually change now as of today you can only recruit graduates first year people. Never ever again can you? Not even the CEO can you go and ask from some competitor. And that is the reality for the military people. They're taking conscripts that move up but they can never go and say oh we, we sort of made a mess of their. We don't have any kernels now and let's hire them from Sweden or let's go to a consulting company for a while and have a temp kernel. No. If that would be told to any head of HR that you can only hire graduates, I think two things would happen real quick. One, you would hire more graduates to be on the safe side. Two, you would put a lot more emphasis on the talent management so that you are sure to get the right people up, uh, and you invest in them because you can never hire from another one. And I think that's an interesting. There's no lesson in that other than that's really thought provoking I think.

Speaker C: Yeah. At uh, this point I'd like to give a shout out to my friends and colleagues at the group strategy office.

Speaker D: They are amazing dudes, all of them of course.

Speaker C: And um, they are all listening. I know. But uh, over to you Paul.

Speaker B: I was just going to say that there is a fundamental difference here though. To a certain degree most if not all banks are private companies with shareholders. The armed um, forces are not really a privately owned corporation with shareholders. They are there to protect the citizens. So therefore some of the elements here when we're talking about legacy and managing people fall um, on slightly different metrics. The army is not measured by shareholder value on a quarterly basis whereas a lot of banks are. And therefore that drives an awful lot of decisions they make, whether that is with legacy or strategy or new views. And let's be honest, most senior leaders in the um, armed forces are there for the long term. Whereas in banks you put someone in the role of a CEO or something senior, there's an expectation that they're lifespan in that role is, is three, two to maybe five years.

Speaker D: It's 4.7.

Speaker B: Well there you go, three to five years, 4.7. I was quite close.

Speaker D: Right.

Speaker B: But when we're talking about legacy and we're starting to run out of time as always very quickly. But one of the things that I was thinking about as we were talking about legacy, protecting legacy, making the legacy work. We also have corporate examples of where protection of the legacy has actually turned into a bad thing. Um, Nokia is a great example. Um, Kodak is another one. We're talking about banks or some time ago banks facing their Kodak moment. So there was also cases where seeing the legacy as good and protecting the legacy actually could be a bad thing.

Speaker D: Yeah, and I think it has a lot to do with what uh, you just said earlier. So here's the thing. If you want to redefine, you know, if you want to seriously do something about your legacy situation, it's a very long term thing. Now I think that the banks that are collectively owned, that are not, that don't have to go and report to the shareholders every quarter, they have an advantage here because they can take these long term, more, more long term view. Now uh, if we think for a second and sort of, I Think that the average lifespan of a CEO is 4.7 years apparently. Exactly. Uh, and board members is roughly around the same. Imagine if you are now a CEO, a newly baked CEO, and you have a four and a half year left. And that's sort of how you can expect it to be. It takes roughly about a year to figure out what's going on. You know, you're in a new job, it's a big job, you're figuring it out, you get help from consultants, and after a year you know what to do. Now there is three and a half years left. Uh, your payment will be dictated by the shareholder. Performance in the short term is maybe a few years up. And then you conclude that we should really do this massive piece of legacy work here. And it's a seven year thing, but I have three and a half years left. And if I do that seven year thing, there will be lots of cost in the beginning and then there will be some payouts like at the far end there. Uh, let me think a second. Should I, uh, ruin my old compensation scheme entirely so that the next CEO can cash in and nobody will understand out there that uh, he takes the job and the magic happens. He will of course go, look what magic I have done. He will not go, look what that previous guy did. And I am now cashing in. No. So it's a massively bad trade for a CEO to take all the costs on his career stint to give the benefit to the next guy and so they famous kick the can down the road. Happens every time. Uh, and it always worked in the short run to do that, but tomorrow will still kind of work. So I think, uh, one of the fundamental questions is then, okay, we all understand what legacy is. Now it's this sort of glue and this stickiness that makes it very difficult. But how to deal with it? Well, uh, the first thing is that you need to recognize that it's there. And one of the big problems, speaking as a consultant and the next banker, what I have noticed now I have been a banker for 20 years, I have been a startup dude for some years and I have been a VC for some and a consultant for some. And I'm still a consultant. But the heart, my corporate identity for me will always be banker. Now I think that to take this long term view or the number one thing is to look into your legacy and know what it is. Because as a consultant, you know, whenever any consultants come in, they will always say, oh, let's look at the, you will have a current state analysis and it's usually quite shallow and that's that. And we are here, but let's not talk more about that because we are here to talk about the future. So that thing is sort of done a little bit like with the left hand. Some sort of current state analysis is always done. But it's like this is what it is. It's a problem. Here we are. And so we are like somewhere here, basically like in this region. But you don't really go. We are there for these reasons. You're like somewhere here, but a lot of time and money goes into. Let's define a target state. We have to get there. Millions of bucks is spent on that. Once you have defined that you want to go there, then comes strategy. How to get from here to there. Another million bucks is spent on that journey. Now the problem is that are you there? What if you're like there, uh, there and you, you go here, you end up there then. So I believe we believe that there is relative terms. Spend somewhat, you know, we are not saying sit around forever and talk about where you are, but spend a few like 5% of the money that would go into target state definition and strategy. Reallocate that to a proper legacy analysis. Know where you are and why, number one. Number two, you need to have a very long term view on this. You know, I can talk. We don't have so much time left, but I have a lot of things to say about this. But to we, I believe that in rel on a relative basis, people are underestimating the importance of the current state. And why? Because only with the deep understanding of that can you make the right decisions about where to go and how to get there. And I think that that is, um, easily brushed aside as some mumbo jumbo. It's not. Um, yeah, that's what I would say.

Speaker B: Well, we are running out of time very quickly. One thing I will say, which will have to be for a future discussion. Uh, you and I differ very critically in our viewpoints here. Uh, I think that defining the target state is more critical than analyzing the legacy. You have to analyze the legacy, but the analyzing of the legacy is to help you to start the journey after you have defined where it is you're going. Because if you have no direction of where you're going to any endpoint is a good endpoint. But we rapidly.

Speaker D: Does one exclude the other?

Speaker B: Um, no, it doesn't. It doesn't at all.

Speaker D: No.

Speaker B: It's about where do you start? It's about where do you start?

Speaker D: Yeah, well, yes, or no, let's say like this. You have a. What, you have 100 resources available to make it simple to think.

Speaker B: Yeah.

Speaker D: Right now, 50% is put in. Well, 49 and a half percent is put into thinking about where to go. 49 and a half is thought into how to get there. 1% is thought about where we are. Because it's sort of look like I talk about the future. Let's move on. Now, what, you know, what you are saying is that's really important, and I say so too. What I say is this, instead of 49 and a half percent on that target state, spend sort of 45 and then 45 on the journey, and instead of 1, spend 10 on that. Because if you get, if you, if you agree that you want to get here and you're right, and you agree that the journey is in this direction because you assume you're here, what if you're there? Who will end up here then? That's what I'm saying.

Speaker B: Like I said, we can continue this discussion. We absolutely will do, but we are running out of time. Uh, going forwards. Now, Villa does this at the beginning of the episode, I do it at the end. But we always like to lighten the mood a little bit, and we ask our guests to share a joke. So, uh, Eric, do you have a joke for our listeners?

Speaker D: I was gonna say, unfortunately, I'm boring, so. But yes, I do. I have a fintech joke. Uh, so there was this young banker that, it was his first job in banking, and he decided he needed a tailor made suit because he went down to a tailor and he had a suit. And then the tailor said, come back in a few weeks and we will have a fitting. So he came back in a few weeks and then he put the suit on. It was like, perfect. And then. But he said, but there are no pockets. And then the tailor said, well, you don't need them. Who has ever seen a banker with his hands in his own pockets? Oh, sorry, I think it's one.

Speaker B: Oh, uh, that's very, very good. I like that. Um, that's. That's very good. So now I know, V, why it is that you don't have any pockets on your suits.

Speaker C: That's true, because I don't wear suits. But anyway.

Speaker B: Yeah, exactly. Yeah, yeah, yeah. Now, Eric, uh, as we round off, if people want to find out more about the book, they want to buy the book, they want to talk to you about the book, uh, how can they reach you?

Speaker D: Yeah, that's a good one. So the book, Callista's Paradox will come out first of May. So by the time this comes out it has been out for a few months already. Amazon is the uh, first hopefully one day bookstores but Amazon is the place for now. You can almost all of you are welcome to connect with me on LinkedIn and DM me and I will then let you know where it is. I would also like to say I have talked to Paul, I've known Paul for a long time and uh, I will immediately buy rip out the core first thing I do the moment I can uh, for anybody because we, we come at the same thing. It's about legacy management, the sort of how to fix the old dirty stuff. And I think Paul's book will undoubtedly give a fantastic viewpoint of that, albeit immediately. So that one for you, wonderful.

Speaker B: Thank you very much. And to uh, all of our listeners out there, if you are still with us on this episode and I hope you found this discussion as ah, riveting as we did. It was maybe sad that we got to the conflicts at the end between Eric and I, but we will continue the discussion in a different media and you can join into it as to whether the target state or the legacy as a good or bad starting point. I don't think it's binary, it is somewhere in the middle. It's more about how do you manage those two relationships. But we'll talk about that more. If you uh, are still with us, please hit the like button. Leave us a comment, let us know what your view is on legacy. How do you see legacy and how do you believe that legacy transformation should be done in a good way? We will be back in two weeks time. We will have uh, Yana with us as always for another episode of Nordic FinTech highlights and then some guests again after that. We would also appreciate if you wouldn't mind just introducing some of your friends to uh, the podcast so we can get some new listeners. We like the growth and we like uh, having new uh, listeners join us and share with us their insights and experience. But until next time, hope you've enjoyed this. This has been fintech Daydreaming.

Speaker A: This is fintech Daydream.