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Many tech CEOs feel it’s better to be the one that makes your decision. They believe they can make the decision as well as anyone. They say, “I wouldn’t say that when your idea was first proposed, it had a chance. I would say it was a very successful idea.” Those examples demonstrate the power of hard work.
In the wake of the $100 million in loans Wells Fargo made to private equity giant Fidelity Bank in 2007, the company had yet to be fully bailed out. Wells Fargo was still the most bankrupt financial institution in the country. But it wasn’t because of its “failed idea” but rather because it couldn’t pay the loans back quickly enough in time. The Fidelity plan was based on the same formula that had saved JPMorgan Chase and the credit-default swaps industry the decade prior.
This wasn’t all bad news. As an added bonus, the Wells Fargo plan raised the bank’s risk-free loan-to-value ratio by a larger share, as more large investors are investing more in the bank’s struggling businesses.
A similar lesson could be played out today. In the past, the credit-default swaps industry had been able to pay off its obligations at an attractive rate. Now the industry finds it very difficult to pay off its payments on time. This means larger financial institutions are increasingly turning to risky investment methods.
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