A journey of a thousand miles begins with a single step
A few insights to share from recent work with financial institutions on how to take steps toward change in the world of digital assets. In the halls of these august, large institutions, there is often talk about whether to be a first mover vs. being a fast follower. You might call this a head vs. heart debate; the heart does not want to miss out, but the head thinks it could probably sit on the nice comfy sofa on top of the fence, wait, watch and then catch-up quickly. As we move to set out the foundations of tomorrow’s financial market infrastructure, beating inertia and creating momentum will make the difference. 
Now although we have all heard that Chinese wisdom and we have all heard that Rome was not built in a day, the standard expectation inside banks is that businesses who are going to pay for change want to see payback in under 2 years, so my own experience is that very often, that fixation on the short term, the what’s in it for me now, gets in the way of the first steps. 
This is particularly true in the area of infrastructure; all that plumbing and operational stuff. It’s quite usual for there to be a disconnect between the principal investment folk who put up the investment money for a project idea, the senior managers who smile and say nice things about strategy and intent and the folks down at the business unit level, where decisions have to be made about priorities. Three different planets. It is at a business unit level that decisions get made about those first steps of that thousand-mile journey.
We’d all love to have the certainty of knowing precisely how things will pan out. But sometimes, we don’t know and that leaves us to focus on the first principles and be alert to the possibility. I really believe that in the area I work in, financial services, there can be advantages to being first, getting into the flow and imagining how you can help your organisation benefit from change. This is particularly true in operations, the plumbing part of banks where we are hugely reliant on collaboration in order to deal with the daily interactions of settlement of trades. 
My own experience highlights the value of getting involved and then maximising the utility of that involvement. Some years back, our industry created CLS Bank. I led the work at Credit Suisse to join CLS. One afternoon, in the early planning phases, myself and another senior member of the team Nick Orchard, were thinking through the expected impact on the existing process flow. Well down in the weeds we were looking at the confirmation process: I send you a note in electronic form of the deal I think I have done with you and you send me your version, we each reconcile and then follow-up on any differences of opinion. All done via SWIFT and some reconciliation software. And there is a fee for the SWIFT part, though it is small. In the new world of CLS, the computers at CLS were going to do the same thing; take in two messages about the trade and match them. The two of us then had an “aha moment”; we don’t need to do this matching routine twice. The old SWIFT process, involving something we call an MT300, was going to be redundant. 
We easily identified how we could change the Credit Suisse systems to not send things out and to not expect to do a reconciliation. We needed one more thing though, since we did not want arguments about whether we had to send these old MT300 things to our counterparts. So, whilst we arranged the work to change the systems, we set about having a rule added to the CLS rulebook that said that no member could force another member to send one of those legal confirmations and that all that was required was matching inside CLS. We were successful at that. Now, using some very approximate numbers, the saving in message cost was about CHF 0.15 per message, CS volume will have varied somewhat, but 30’000 trades a day is a decent proxy and that over the last 18 years. Paid for the project at CS a few times over. CLS processes abut one million trades per day, so our change might have paid for everybody else’s projects too.
Now, when Nick and I were handed the job to do this “CLS thing”, we had no idea of exactly what was needed. All we knew was that the world was changing and that CS was going to be a part it. We just got stuck in, applied first principles, did one thing at a time and made a great discovery.  Actually, more than one, but that would be a story for another day.
We were able to do something truly good because we were first movers. Had we been fast followers, we would not have been re-writing the rule book and in all likelihood would have been doing just enough to catch up. And by being early, we were able to drive the collaboration it took to make a material process and cost improvement. 
Which brings us back to late 2020 and the vision of tomorrow in a world of “digital assets”. The journey will be a thousand miles; we have to take the first few steps, even if those steps themselves do not move the metre massively. 
I am indebted to Nick Orchard both for his masterful role in that very successful project of yesteryear at Credit Suisse and also to my colleague Patrick Stettler, the head of sales at SDX, the SIX Digital Exchange. Over a late October lunch in Zurich, our chit chat focussed in on exactly this challenge of making the case to be a first mover.

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