What game are you really playing? How the number eight nearly destroyed Wells Fargo.

Imagine that you are Dennis Rodman. It’s 1997. You have four championship rings at this point. You are mentioned in the same reverent breath as Michael Jordan and Scottie Pippen. You are part of basketball’s Holy Trinity. One day, you will be in the Hall of Fame. 

Imagine that your team, the Chicago Bulls, is kicking all kinds of ass. Dynastic, world-dominating amounts of ass. You’ve won back-to-back championships, and you’re on your way to a third. Suddenly, your salary plunges to the ground with the ferocity of the meteor that killed the dinosaurs. Wait, what? 

Because in this bizarro world where you are Dennis Rodman, your salary suddenly becomes tied to your Player Efficiency Rating. Let’s say it was a decision handed down by the league. It’s ludicrous, of course. Utterly daft. No one would ever lock something that important to such a flawed metric. Let’s imagine it anyway. 

We talked about Player Efficiency Rating and Dennis Rodman last time. Michael Jordan had an elite career PER of 27.91. By default, the league average is 15.00.

It’s the 1997-98 season, and you have a PER of 12.4. You, Dennis Rodman, are one of the greats because you create more opportunities for your teammates to score. Player Efficiency Rating doesn’t measure that.

In this ludicrously nonsensical alternate universe, you are now making somewhere around the league minimum. You might actually owe the Chicago Bulls money. 

What would an elite, professional athlete like Dennis Rodman do in this situation? What would you do?

This new metric fundamentally changes what you care about, so you change your game. You pull down fewer rebounds. You start scoring points, which is not something you cared about before. You do exactly what you need to do to become a more efficient player. The problem is there’s only one ball, and everyone on the team is doing the same thing. 

So you stop playing like a team, and you start playing like a group of guys competing against each other to be the most efficient. Or, you work together to maximize everyone’s efficiency, so everyone gets paid about the same. Maybe. Either way, playing basketball is no longer about winning games. 

The philosopher C. Thi Nguyen calls this “value capture,” which he talks about in his deeply brilliant book The Score: How to Stop Playing Someone Else’s Game.

“Value capture,” he writes, “happens when you get your values from some external source and let them rule you without adapting them.” You get handed a metric from on high. You’re told that this is what’s important now. This new metric forces you to care in a new direction. Sometimes it’s a better direction, sometimes not. Regardless, this new number becomes what you care about. 

In basketball, winning matters. Getting to the playoffs matters. Championships matter. No one really cares how you get there, just get there. Just do it. But if every player’s salary depended on their Player Efficiency Rating, winning would no longer matter to the people who go out on the court and compete to win. 

Nguyen goes on to say that, “Metrics are shaped by institutional forces and subject to demands for fast, efficient data collection at scale. And what’s easily measurable is rarely the same as what’s really valuable.” Emphasis his. 

That sure sounds like hippie-adjacent philosophy professor nonsense, right? Yes. After all, what would a philosophy professor know about institutional forces and how they shape what people care about? Other than being a philosophy professor in the philosophy department of a large institution, such as a state university. You know how the business school gets a new building, like, every three years? The philosophy department never gets a new building. 

Let’s talk about Wells Fargo Bank. C. Thi Nguyen does not talk about Wells Fargo Bank. He talks about Charity Navigator and U.S. News & World Report’s law school rankings and grades and many other things in his delightfully insightful book that you should absolutely read. We’re going to talk about Wells Fargo Bank.  

In his book “Good Strategy, Bad Strategy,” Richard Rumelt writes glowingly about Wells Fargo Bank. Rumelt admires their “coherence.” He loves how everyone is rowing in the same direction. In hindsight, this is hilarious. Rumelt, however, was not writing with the benefit of hindsight. To be clear, we love “Good Strategy, Bad Strategy.” After all, strategy is about making choices. Strategy is like jazz, if jazz is about the notes you don’t play. Maybe. Don’t overthink it. Regardless, you can’t do everything, but you have to do something. What Wells Fargo chose to do was bonkers. 

Somewhere, somehow, someone very high up at Wells Fargo Bank decided that cross-selling was the way forward. Never mind that trying to get your loyal customers to buy even more of your stuff is not a path to growth. Ever. In any category. Ignore that entirely for now. Cross-selling becomes Wells Fargo’s guiding principle. Fine. Not fine, but at least it’s an ethos. You get it. 

(To be clear, there’s nothing inherently wrong with cross-selling. Should bank associates sell banking products to people who want and need them? Yes. Is that the only thing they should care about? No. Cross-selling only becomes a problem when it becomes the goal. Spoiler alert.)

Rumelt describes it like this: “Chairman emeritus and former CEO Richard Kovacevich believed that the more different financial products Wells Fargo could sell to their customers, the more the company would know about that customer and its whole network of customers. That information would, in turn, help it create and sell more financial products. This guiding principle, in contrast to Wells Fargo’s vision, calls out a way of competing — a way of trying to use the company’s large scale to advantage.”

This sounds reasonable, right? Sure. It turned out to be a catastrophically, cartoonishly terrible idea, and here’s why … 

Someone decided that every Wells Fargo customer had to have eight or more different Wells Fargo banking products. Saving accounts, checking accounts, a mortgage or mortgages, auto loans, credit cards, retirement accounts, CDs, etcetera. Eight? That’s a weird number of banking products. That sounds arbitrary. It sounds like way too many banking products. A mathematically ludicrous amount of banking products. 

Why eight? Someone else calculated that customers with eight or more banking products were 5x more profitable than customers with three banking products. That’s a fun little number. Clean and simple. Sticky. Inspiring, even. It gives you a nice target, something clear to aim for.

What everyone failed to understand (or willfully misunderstood) is that customers with eight or more banking products are profitable because they have more money. They have more banking products because they need them. A college kid working a couple of part-time jobs might not be all that profitable, but selling her more banking products isn’t going to change that. Correlation is not causality. Extremely weak correlation is extremely not causality. 

Selling eight or more baking products to every single Wells Fargo customer was not the C-suite’s problem, of course. If you were a Wells Fargo Bank manager, it was going to be your problem. If you were an associate who wanted to be a bank manager, it was going to be your problem. 

Imagine having to sell mortgages and CDs and auto loans and credit cards and savings accounts and life insurance and a Roth IRA to every single Wells Fargo customer who walked through the door. Retirees, college kids, ordinary folks going about their day, it doesn’t matter. It became about aiming for a number. It became about raw survival. 

That’s value capture. You’re not there to help someone open their first savings account, withdraw $50 for their grandkid’s birthday or buy their first home. Maybe you used to care about those things, but the goals have changed. The rules have changed. You’re playing a different game. Sell, or you’re gone. Coffee is for closers. Second prize is a set of steak knives. 

Nguyen writes, “In value capture, you’re outsourcing your values to an institution. Instead of setting your values in the light of your own particular experiences, instead of adjusting them to your particular personality, you’re letting distant bureaucratic forces set them for you.” 

Okay, this sounds a bit like a hippie-adjacent philosophy professor telling you to fight the power or something. He’s not wrong, but the word “values” is a little loaded.

So let’s use the words “expertise,” “judgement” and “accountability.” With value capture, we’re outsourcing our expertise, judgement and accountability to metrics, to numbers, to a particular story. Or our expertise and judgement get traded for clarity, for certainty. Instead of playing the game we want to play, we’re letting some new metric take the wheel. Okay, back to Wells Fargo. 

What does winning look like with this new target? It’s worse than Alec Baldwin in “Glengarry Glen Ross” screaming at you every hour on the hour. It’s the Rolling Stones at Altamont. It’s the opening six minutes of “World War Z.” It’s a massive meteor plunging through the atmosphere about to vaporize some hapless, unsuspecting dinosaurs. Everything is fine until the moment it isn’t. Hyperbole? Sure. Let’s recap:

1. Someone very high up at Wells Fargo decided cross-selling was the way to go. 
2. Someone else put a number on it.
3. Everyone agreed this number was the thing that mattered. It became the only thing that mattered.
4. Everyone involved in this decision was mind-bogglingly wrong. 
5. Everything went to hell. 

Under intense pressure from these completely unhinged sales goals, employees either quit, got fired or opened millions of fraudulent bank accounts, credit card accounts and life insurance policies. They created fake emails, forged signatures and transferred funds without authorization. In order to hit impossible numbers, thousands of Wells Fargo employees opened millions of ghost accounts that eventually triggered a $3 billion DOJ and SEC settlement and a parade of multi-million dollar fines and penalties.

Wells Fargo also took a massive cap hit, and it cost them a decade or so of growth. 

This was a very extreme example of value capture. By focusing on the number eight, Wells Fargo forgot about the customer. They forgot why banks exist. Yes, banks exist to make money, but they also exist to help grow personal wealth and the local economy. They exist to be a better, more convenient and safer place to stash your money than a mattress. 

Wells Fargo completely forgot the One Absolute and Possibly Uncomfortable Truth of Marketing. If you need a reminder, here it is. Ready? No one gives a shit about your brand. You care deeply about your brand. We care deeply about your brand. Consumers do not care. At all. That’s not precisely true, but it’s true enough to be the One Absolute and Possibly Uncomfortable Truth of Marketing. We’ll discuss it more in a future Dispatch. If your brand is not available, consumers will choose something else. That’s the game we’re all playing. 

So what does this mean for you? 

In The Score, Nyugen spends a lot of time talking about the difference between games and institutional objectives. Games have goals. They have rules about what you can and cannot do to achieve those goals. Basketball is both a game and a multi-billion-dollar business. The rules for playing the game of basketball determine the shape and flow of the game. The rules of basketball are entirely separate from the rules for owning and running a team. 

To build a championship team, for example, you might get really good at drafting and developing players like the Oklahoma City Thunder have been doing. Or, like the L.A. Clippers, you could spend a lot of money on superstars. You cannot, allegedly, circumvent the salary cap by allegedly giving Kawhi Leonard a secret, $28 million, no-show endorsement deal with a carbon credits scheme/company called Aspiration that you also allegedly invest in. Allegedly. That’s against the rules of basketball ownership. Anyway …

The rules of business and the rules of brand growth are different. It’s fairly easy to tell if your business is winning, just look at your P&L or EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) or Economic Value Added or Free Cash Flow or Operating Cash Flow or whatever metric you care about. Just make sure it’s a metric worth caring about.

We can’t escape metrics. We can, however, be aware of their effect on how we play the game. For example, the bottom of the funnel is incredibly seductive. Platforms like TikTok and Meta have incredibly clear, almost addictive scoring systems. 

You put a dollar in, you get more back. ROI looks good. Cost Per Click looks good. Your Customer Acquisition Cost looks great. The numbers are easy to understand. The results are obvious. All that first-party data is squeaky clean. The dashboard is giving you all kinds of gold stars. We get it. It feels like finally clearing level 5936 of Candy Crush. Ask us how we know. Actually, don’t ask us that. It feels like winning, and when you’re a very small, very new brand, it is one of the only ways to win. 

But if you’re not new anymore or small anymore, there’s a bigger game to play. It’s a more uncertain game to be sure. It’s played out in the real world where the people are, where the metrics are fuzzy and third-party data has, like, dirt and twigs in it.

Growth is really hard. It’s incremental.  It’s experimental. Brands cannot get there by playing an efficiency game. Brands grow by reaching more and more people. There’s a massive difference between winning the “make ROAS go up” game and growing a brand. 

Obviously, efficiency matters. But when brands play small, they stay small. What got you there will, at best, only keep you there. When you’re ready to make the leap, we’ll be here. We can help. 

We’ll see you next time. 

Sources!

1. The Score – C. Thi Nguyen
2. Good Strategy Bad Strategy: The Difference and Why It Matters – by Richard Rumelt 
3. “The Wells Fargo Cross-Selling Scandal” – The Harvard Law School Forum on Corporate Governance 
4. ”Clippers’ Ballmer aims to dismiss fraud suit over Kawhi Leonard’s pay” – Baxter Holmes, ESPN