On Policy Advocacy

John Pitts is the co-founder of Open Banker. In his spare time he works at Plaid, where he spent 6 years as the Head of Global Policy and now leads the Industry Relations function. Prior to Plaid, John was the Deputy Assistant Director for Intergovernmental Affairs at the Consumer Financial Protection Bureau

Fellow wonks, I co-founded Open Banker in September out of frustration that there wasn’t a great place for people who care about financial regulatory policy to read and write great advocacy pieces. The places that existed were either behind a paywall, filled with more talking points than substance, or both. My hope was that others shared my hunger for something better. I never imagined there were so many of you, and every Tuesday I’m electrified by the number of people willing (eager?) to read 2000 words on the various arcane but important rules that underpin the most successful economic market in the world. 

Thank you. 

We don’t have a real piece today because I’m pretty sure even this august community has something better to do on Christmas Eve than read Open Banker. So, in lieu of an article, please enjoy what is probably a pretty bad holiday gift: my thoughts on what makes for great policy advocacy.

Rule 1:  Regulators and businesses have different incentives

In business, you get rewarded when things go right. Sure, you might get penalized if something goes wrong, but in general if you are in a business it is because you think that you are more likely right than wrong and that the expected value of being right is higher than the expected cost of being wrong.

Regulators don’t get rewarded when things go right. The bank you are Examiner-in-Charge for navigated Covid-era interest rate and inflation risk and increased its dividend? Congrats, have a COLA.^[1] But they sure do get punished if things go wrong. Pour one out for the Office of Thrift Supervision.

That incentive structure drives a lot of behavior. Businesses are focussed on the benefit, regulators are focussed on the risk. This often leads to businesses dismissing regulators (“Why can’t they see the potential?!”) or, worse, disparaging them. The better approach? Acknowledge that the different incentives are important for balance, and that balance is essential to long term stability. Take their focus on risk seriously, so seriously that you find the risk first and tell them about it and what your plan is for protecting against it. The balance between these incentives will always be wrong, but that’s ok because the constant tension between the incentives is a feature, not a bug, allowing the overall system of business and regulation to adjust dynamically and self-correct over time as the economy evolves.

Rule 2:  New risk is bigger than old risk, even if the old risk is bigger

I drive most days. I’ve seen a lot of things almost go wrong, and been fortunate enough to not get hurt a few times when things did go wrong. When I stop to think about it, I remember that more than 45,000 Americans will die in a car crash this year. But you know what? I almost never think about it. Because I drive every day and I know the risks well enough that I ignore them.

Yesterday, I got into a Waymo self-driving taxi. Boy was I paying attention to risk. Every move that robot made (at 5mph, in gridlocked San Francisco traffic) was liable to hurl me into the bay, lock the doors, and start a small electrical fire as we plunged to oblivion. Because I haven’t experienced the risk of self driving I have no context for it, which means that, to me, the risk feels essentially infinite. Now I’m pretty sure that my self driving Waymo was safer than the average human driving, but I’m damn sure that a business can’t survive when regulators think it has infinite risk.

This is playing out in financial services and AI. Regulators are pretty sure that AI is going to discriminate against people in lending. I agree, but I also know that traditional credit scores are discriminatory! So why is all the policy attention and effort going to making AI prove it won’t discriminate instead of fixing the discrimination we know is happening? Because the AI discrimination risk is unknown and, therefore, infinite. And because we’re so familiar with the discrimination in current credit scoring that we ignore it the same way we ignore the risk of driving. Add that to Rule 1 (policymakers punished for letting a bad thing happen, but not rewarded for improving things) and you’re going to face roadblocks.

I don’t have a solution to this, sorry. The best I’ve been able to do is be aware of this dynamic and try as hard as I can to find examples of “known” risks of old things that can contextualize the risk of a new thing. 

Rule 3:  It is your job to explain, not their job to understand

My favorite drinks conversation is listening to someone bitterly complain that the government just doesn’t understand their business and making a mental “do not hire” note next to their name in my mental rolodex. It is hard to understand how a business works. Wall Street analysts get paid millions because they are slightly better at understanding a public business with lots of public data than everyone else. And they still get it wrong. A lot! And you want the Legislative Director to get it right? The Legislative Director making $113k that is meeting you for 30 minutes, between the 15 other 30-minute meetings they have today with completely different businesses with their own complex asks? Go perform an anatomically impossible act.

Saying the government doesn’t understand your business is saying you aren’t good at your job. Because presumably you do understand your business.^[2] Which means that, if the person you are talking to doesn’t, you either haven’t worked hard enough to meet them where they are and teach them what you know or you are too arrogant to think you should have to do that kind of work. Time and attention are scarce–other people’s, not just yours–and people tend to allocate it to the things that they find personally resonant–emotionally, intellectually, politically, or a mirepoix of each. The core job of any advocate is to create that resonance for their audience. 

Policy makers genuinely want to do a good job, and they believe that the best way for them to do a good job is to understand what they are working on. But they also have a lot to cover, limited time, and, again, know that it is really hard to understand how things work from the outside. They want to understand it, and you should want to help them rather than being annoyed that they don’t already.

I love explaining things. I also work damn hard to get better at it. My poor kids were my trial audience starting around age six. If you can explain it to a six year old, you can explain it to anyone. And if you can’t explain that The Clearing House is likely correct that fraud involving digital wallets is actually a series of authorized transactions followed by an unauthorized transaction, and that as a result the Senate Zelle Report is slightly off, find a six year old and get practicing.^[3]

Rule 4: Earn credibility, and don’t lose it

Your company isn’t perfect. The thing you are asking for is going to benefit you. The people on the opposite side of an issue have good arguments, and some of them are undoubtedly right. You know this. And yet so many people advocate as if the person they are speaking to doesn’t know this. It doesn’t work, and it kills your credibility.

I find it much more effective to be as fluent in your flaws as you are on your merits. Ask me and I’ll tell you exactly why my argument benefits me, who else I think it benefits, and whether someone loses some value if you take my recommendation. I might not even wait for you to ask me. I’d rather give a policy maker the best information I can, whether helpful or harmful, and have them say no than hold something back and have them always assume I’m blowing sunshine that they need to debunk. And believe me, there are people out there happy to share the stuff you are hiding.

Say when you are wrong. Say when you don’t know. That makes it more powerful when you say you are right. And at the end of the day you can live with a no on the facts. No on the facts lets you come back with better facts, or decide you are wrong and come back on a different issue later. You can’t live with a no on credibility. That no lasts forever.

Rule 5: Relationships don’t matter

Ok, I’m trolling a bit. Relationships do matter, but not in the way most people talk about them. In my experience when most people talk about having a relationship they mean they know a person and can get you a meeting. But getting a meeting is easy–you can always pay for one, whether through a donation or by hiring a lobbyist who already has a “relationship.” But the meeting isn’t the goal, the substantive result is. And from what I’ve seen, those shallow relationships–either your own or one you borrowed from someone else–don’t get you results. They can even backfire, because policymakers generally don’t like to be perceived as doing favors for friends. When I look closely at relationships that got results, almost universally what I see is that the relationship was the byproduct^[4] of building credibility and trust. Substance and credibility win the day in the end. See rule 4.

The opinions shared in this article are the author’s own and do not reflect the views of any organization they are affiliated with.

^[1]  Cost-of-living adjustment, but spelling that out in the main text ruins the “Have a Coca-Cola” pun.

^[2] Though I do see all y’all out there that actually don’t understand your business and are jazz-handsing your way through the meeting anyway. I assume the stress of that is why I find you at the bar for that drinks conversation in the first place.

^[3] Yes, we had this conversation over dinner. Yes, for several days. Until I got it right. Yes, I expect them to go no contact after college.

^[4]  To the people who work closely with me and are rolling their eyes at me loosely describing friendships as a “byproduct,” I see you.

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