Haordic Organization Visa (Part 2)

Chaordic (from the English. Chaos - chaos and order - order) - 1) characterizing the functioning of self-organizing and self-governing systems and organisms, organically combining chaos and order; 2) characterizing the fundamental features of natural systems.

Dear readers, so we got to the second part of the fascinating history of the birth of the world's largest financial institution, Visa. The narrative turned out to be quite large, so there will probably be more than two parts. As in the previous section, the quotes from the book “One from Many: VISA and the Rise of Chaordic Organization” are shown in italics.
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<< Visa Haordic Organization (Part 1)



By 1968, the young industry was out of control. No one could count the losses - it was about tens of millions of dollars. For that time, given the pace of the industry, it was a huge amount.

In the midst of the mess with credit cards, Service Corporation (Bank of America, responsible for the credit card program) convened a meeting of managers of license banks. There was a discussion of operational problems that suffocated the project. The meeting brought together 120 experts from across the country. The meeting was led by Hal and Don, nice people and good operators, whom Service Corporration commissioned to work with license banks.

On the first day, the attendees expressed acute dissatisfaction with the fact that BofA misunderstood their problems and did not want to deal with them. Representatives of BofA, in turn, attacked with a criticism of licensed banks. By the end of the first day, passions ran high - reproaches and objections were heard everywhere.

The next morning was no better. By the middle of the day, opinions sharply divided, and for what reason. Before lunch, frantically trying to cope with the situation, without agreement with the others, Hal and Don announced the names of the committee members who were to solve some of the most pressing operational problems. The committee included seven managers of credit card departments of license banks. My surname was named among others. The committee had to look at the problems and propose their own solution. It was assumed that if BofA deemed this decision acceptable, it would be imposed on the licensed banks.

This moment became a turning point in the history of Visa. Di Hawk did not want to participate in the committee, because he considered the idea meaningless. During the break, he went to the leaders and said:

“Listen,” I said, “I don't want to complicate anything.” If you insist, I will work on this committee, but better not assign me there. Do me a favor, find someone else.

Hal, almost interrupting me, quipped:

- Of course, each of you thinks that we are doing everything wrong. So take and do it right!

The more reserved Don also got angry:

“Dee, why don't you want to join the committee?” Do you not like the idea itself or are there any other reasons?
“Don, it's a waste of time.” By the time the committee meets and finds a solution, a dozen new problems will appear. No one knows how many they will be and how serious they will be. None of the decisions of the committee will satisfy all licensees. Your license agreements are written in such a way that if a bank refuses to obey, you have to give it to your ass. But BofA. never dare to it, and everyone knows it perfectly. Everything is tied to the relationship between banks, and BofA does not want to risk.
“If you want to create such a committee,” I say, “give it the authority to examine all the problems together.” What is the point of eradicating one problem, then another, without tying them together? After all, we ourselves do not know what to do next and how all this is interrelated. Why pound water in a mortar?

During the conversation, De managed to convince Hal and Don to create a committee that would solve all the problems in a crowd, rather than one at a time. A representative of BofA this decision was difficult.

After lunch, everyone gathered in the hall again and gazed in surprise at the stage, where, after a brief introduction of Hal, one of the participants rose, that is me.

I offered the newly created committee only one thing - to help licensees to rally and together overcome the difficulties that have piled on them. I offered to join the work of the committee to everyone, including Baku of America.
- What will it cost us? - Asks someone from the participants.
- Not at all. Just this will need to devote some time and make frequent flights around the country.
- What does this require us?
- To nothing.

And, as is usually the case, when there are disagreements in the team, but there is an illusory hope of doing something, not bearing any responsibility and not spending money, everyone quickly agrees with my idea. The meeting ends, and a committee of seven people meets in a meeting. The first takes the word Fred James:
“I don’t know what you threw us into, but you are the main instigator.” So be our chairman if no one objects, of course.

So I was forced to become a leader.

The first meeting of the new committee was held in Seattle.

We flew to Seattle with a rough concept. We decided to allocate seven independent regions, in each of them to create four specialized committees: operational, marketing, credit and computer systems, which will include representatives of banks issuing credit cards of the region. The regional executive committee consists of the chairmen of specialized committees and other participants of their choice. Members of the five national committees will be the chairmen of the regional specialized and executive committees. Thus, everyone will get the right word, and no one can put pressure on the rest.

A week later, the concept was framed, and a committee, which included representatives from banks — licensee BofA, gathered at a meeting in Atlanta, Georgia. After a one-day discussion and agreement, it was decided that there would be eight regions, not seven. We all go to our regions and, having convened meetings of representatives of license banks, will present our concept. If we are supported, we will help create regional committees. If any of the regions does not agree, we will give up the idea. But with a positive outcome, the regional committees themselves will choose the chairmen, who will be included in the national committees, after which our committee, created with the participation of Vapk of f Atherica, will resign.

We hoped that such a structure would help us not only to gather first-hand information on problems related to fraud, lending, operations and technology, but also to find a solution to the most painful ones. In turn, BofA was to participate informally in the work of each of the five national committees. As the owner of the brand, that is, the franchise company, the bank had to take responsibility for the implementation of the proposals of the committees. Whether BarqAmericard will agree to this and how it will look, no one imagined.

For half a year all regional and national committees were created. Hawk was asked to chair the executive committee of the northwest region. It was ungrateful and nervous work, moreover, it was not paid for and took a lot of time.

For all its complexity, our system of committees had one big plus - we could get comprehensive information about the problems that arise. Two series of meetings were enough for us to understand: the problems are even more serious than we imagined. They grew like a snowball, and the existing licensing system, and indeed the structure of the committees did not contribute to their decision. Losses were calculated not in the tens, as we thought, but in hundreds of millions and threatened to become even more significant.

And suddenly a diamond flashed in the mud: I saw a solution! We need a new idea of ​​organization, a tiny clue with which you can start all over again.

What is the essence of the operation, when the buyer, in order to pay for the service or product, pulls the plastic card to the seller? The seller wants to sell something to a potential buyer, and the buyer wants to buy something. This means that a plastic card can be equated to a driver's license, social insurance card, identity card, etc. Therefore, the main function of a credit card is to serve as an identification document for the buyer (for the seller) and for the seller (for the buyer).

A credit card guarantees that both parties can safely exchange value: the seller can sell goods and services for which the buyer will be billed later in the currency of one state or another. Consequently, the second function of a credit card is to guarantee the reliability of information on the value equivalent.

In addition, a credit card guarantees the buyer and seller that it is not necessary for the parties to know the exchange rates, language, laws and cultural traditions of the other party to launch the commodity-money exchange mechanism.

Any organization that can guarantee the transfer and settlement of transactions in the form of ordered electronic particles twenty-four hours a day, seven days a week, across the globe, will have a market — every exchange of value in the world. Not one hierarchical, joint-stock organization can not do it. In fact, none of the existing forms of organization that we might think about can do this.

I have a hunch that if the financial resources of all banks in the world, together, they could do it, but how?

DiHock goes to Mr. Carlson (President of NBC), describes the situation - the management of the committee takes at least a quarter of the working time, and if something happens, it will take up all the working time. If the program turns into a collapse, the bank will suffer huge losses. At the same time, managers are not paid salaries, and each bank copes itself as it can. To his great surprise, Mr. Carlson leaves Dee as vice president of the bank and director of the credit card department, retains his salary and permits use of the bank’s resources, while not requiring any special relationship with the committee to NBC. “Sometimes we have to act simply as good citizens”, “I hope I was useful to you?” Mr. Carlson concludes the conversation.

So, I had a passionate desire to create a new organization. I had some idea how to do this, and I had complete freedom of action. I wanted so much to look into the future, but it was necessary to create conditions for work in order to formulate a new concept.

For a long time I went through all the members of the national committee in my mind and stopped at three candidates - decent, intelligent, generous people who know how to treat work with humor and, most importantly, not following the crowd and not having a herdial feeling. Each of them had a special spiritual attitude.

After exchanging thoughts on how we would solve the problem with the credit card business, I said that I had invented one interesting thing that would take a week or ten days. Namely: to hide from everyone, forget about their difficulties and ask one single question.

Assuming that the unbelievable is possible and that there are no barriers, what is the ideal global value exchange system?

All three agreed nodded their heads, rounded their eyes, but agreed only on the condition that I would be with them. If they had not called me, I would be very upset.
They decided to “hide” in the old hotel “Altamira”, located on the hillside in Sosalito (California).

On the fourth night, Monkey and I woke up again, started thinking about the same thing, and suddenly realized that no bank could create an ideal global value exchange system. Not a single hierarchy, not a single joint stock company will be able to do this either And not a single state. And no organization. And what if we use to implement this idea at least a small fraction of the resources of all financial organizations and a little human talent? Together they would have managed, but where to start?

Thus, the first postulates of the new organization were born:

What if ownership is inalienable and will be realized in the form of participation of members of the organization in its work, and not in the form of ownership of shares?

If this right is not alienated, put up for sale, bought and sold? If it will be implemented only through membership in the organization and participation in its activities?

What if such an organization is self-governing, that is, its members will be able to make organizational decisions at any time, for any reason, at any level and have the inalienable right to participate in management at the highest level?

What if its functions are distributed among members in such a way that any of them can perform any of the participants at any level?

What if the management function is distributed among the members of the organization in such a way that no one person or institution (and above all, no manager) can dominate the discussions and control the decision-making process at any level?

What if in such an organization cooperation will flow into competition and vice versa, so that each of its parts will compete in its own way with others, while remaining ready to give up, if necessary, its interests for the sake of cooperation and the common good?

What if such an organization is flexible and, at the same time, extremely stable, so that its components can constantly generate new forms and functions without detrimenting their essence, their main goal and principles, contributing to the emancipation of talent and the human spirit?

Months passed before licensees accepted the principles we developed. And then the discussion began. These principles were not rejected only because no one, including myself, believed in the possibility of creating such an organization.

After that meeting in Sausalito, we worked for three months day and night - we met with lawyers, accountants, committee members, desperately trying to formulate our principles in accordance with a specific concept. Created, dissolved and re-created dozens of teams. Questions grew like a snowball. There were no answers yet, but the main things were more clearly outlined. In order to form a self-organizing institution, a consensus was needed on an ongoing basis, but a consensus not in the sense that it is embedded in this concept today. Unanimity of a deeper character was required. A common platform was needed, acceptable to all, so that everyone could act according to a common goal.

On June 24, 1969, a two-day meeting of the national executive committee of license banks was held in San Francisco, at which the concept of the project was considered. On the third day, Fred, Sam and Jack and I went to Ken. To move on, we needed to know the opinion of BofA.

At the end of July, the answer came: “The bank treats with understanding the proposals formulated by the executive committee, namely: to create a nationwide organization that would meet the collective needs of all licensees, but ...” And then the position of Bank of America was set forth. They wanted to have representation on the board of directors of the new organization in accordance with their share in sales. This went against our principle: no one was to dominate the management of the new organization. In addition, they wanted to be a managing partner for at least five years. It was further stated that BofA, as a managing partner, should retain ownership, control all trademarks, while remaining the only impartial and objective licensor (that is, they believed that the board of directors of the new organization was not able to perform these functions!). All the above contradicted our concept.

At the next meeting of the committee, when the principles of the new organization were being discussed, Di Hawk telephoned Ken and clarified whether the bank was certain about his decision. Ken was unmoved. To which Dee stated that he would recommend the committee to abandon the project and they would have to inform the press about their decision, where the BofA decision would be presented. I received the answer: “Come to San Francisco, talk to Sam Stewart, vice chairman of the board of directors, better”.

A well-known lawyer who won many trials, Sam Stewart was the second person in the largest bank in the world. The conversation with Sam began with the fact that Sam began to state the position of the bank, thereby making it clear that Dee was not invited to talk, but to read moralizing.

- Our bank is a pioneer in the credit card business. It was we who created the BankAmericard system! and suffered huge losses before they began to make a profit. We have created a license system. With such business expansion, difficulties are inevitable. Banks agreed to take licenses only thanks to the authority of BofA. At the same time, the reputation of the bank was at stake - after all, our project is called BankAmericard. We supported the spirit of cooperation and made many concessions. So do you really think that now we are klyuyu on some other, untested idea, and even under the guidance of no one knows. It would be wrong of you to abandon our program and blame all the failures of BofA. Listen to us: keep working with us, solving the problems that our system faces.
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In early 1970, everything began to fall into place. It is time to remove the most important obstacle. At that time, there were 200 licensee banks in the country issuing their own credit cards. Each of them could provide sublicenses to other banks so that they could find new clients and new enterprises in the sphere of trade and services for the credit card business. Thus, another 2.5 thousand banks received sublicenses. But the fever associated with credit cards, has not subsided. All new and new banks were connected to the business, fearing that the traditional methods of work would become obsolete. And the problems are growing and growing.

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