Every industry evolves. It evolves or it dies. In the music industry records evolved into cassettes, cassettes into CDs, and now CDs into mp3s. In the communications industry wireless gave way to radio, radio to T.V., and now the T.V. is giving way to the Internet.
While these industries have had mutated offspring, Beta max and laser discs to name just two, the strongest survive and the industry gets stronger. One could easily argue that communications today is much stronger, and more evolved than in Edison’s day.
Unfortunately the same cannot be said about banking. This is because banking has long be suckling at the teet of government which protects it and helps the weaker ones along. Leahman’s not withstanding, banks have not been allowed to collapse and die the same way other companies have. This current credit crisis is a perfect example. Rather than allow nature to take it’s course and allow companies like Wachovia and AIG to collapse the government is only adding fuel to the fire by giving them a bail out. (Not to mention AIG spent almost half a million dollars on a spa resort for executives after the government bailed them out.)
Where all this will lead is to forced evolution. And like the music and communications industries will come through the Internet. The Internet forces the music industry to change the way it does business and in return has given rise to iTunes and down-loadable music.
Within the banking industry it will lead to people removing their money from banks and putting it into social investing and social lending sites. For example, zopa.com or prosper.com through which people can borrow and lend money to other people. While these might be slow in uptake and more complicated than older banking customers want, they are very interesting propositions.
With better rates than banks, these companies will take those bread and butter transactions from traditional banks. If you doubt the solidity of these companies consider that many people never set foot in a bank. You can now open accounts online, and through automatic deposit and online bill payments never need to actually meet anyone from a bank.
Change is coming. The bailout only delayed it. And it is going to hit like the meteorite that killed the dinosaurs.
I can’t wait.