I watched a talk by Rory Sutherland recently that stopped me mid-scroll. If you know Rory, you know he has a way of saying things that sound provocative until you realise they’re just obviously true. This one hit home because it described something I’ve watched happen across the mortgage industry for years, and I suspect many of you have too.
He tells the story of what he calls the doorman fallacy. A consultant walks into a hotel and asks how much they pay their doorman. The consultant then defines the doorman’s role as “opening the door,” replaces him with an automatic door, claims the cost saving, and walks away. Nobody holds the consultant accountable when the hotel’s best guests stop coming, when vagrants start sleeping in the entrance, when the rack rate quietly falls off a cliff. Because the doorman didn’t just open the door. He hailed taxis. He recognised regulars by name. He made people feel like they mattered the moment they arrived. All of that value, gone. All of it invisible on the spreadsheet that justified his removal.
If you’ve spent any time in mortgage distribution, you’ve seen this play out. You know the pattern. Someone in head office looks at a BDM team, sees a cost line, and starts asking questions about ROI. How many cases did that BDM generate last quarter? Can we attribute this completion directly to that visit? If we can’t measure it, can we justify it? And before long, the team is halved, or restructured into something unrecognisable, or replaced with a webinar series and a shared inbox.
Then, slowly, the relationships cool. The broker who used to pick up the phone stops returning calls. The packager who always sent their complex cases your way starts sending them somewhere else. Nobody can point to the exact moment it went wrong, because the value that was destroyed never appeared on a balance sheet in the first place.
Peter Drucker had a phrase for this.
Rory references Drucker in the talk, and the quote is worth sitting with: “Because its purpose is to create a customer, the business has two and only two functions: marketing and innovation. Everything else is a cost.” Drucker said that decades ago, and it was considered a reasonable position at the time. Today, try saying it in a board meeting and see how far you get.
The reason it sounds radical now is that business has been gradually captured by what Rory calls the Chicago school mindset, the idea that customers already know what they want, that markets are efficient, and that the only job of a business is to deliver the thing at the lowest possible price. If you believe that, then marketing is a cost, salespeople are a cost, BDMs are a cost, and the only question is how quickly you can automate them away.
The alternative, which Rory attributes to the Austrian school of economics, is that value is subjective. That the person who sweeps the restaurant floor, creating the environment in which you can enjoy the food, is creating just as much value as the chef. That a BDM who builds trust with a broker over years of consistent, honest engagement is creating value that doesn’t fit into a quarterly reporting cycle but absolutely shows up in completion volumes, retention rates, and market share over time.
I’m an Austrian, by the way. Always have been. (Still not a Red Bull fan though, no disrespect.)
The human element trumps everything.
Rory tells a wonderful story about the Royal Mail. They spent a fortune improving operational efficiency and delivery reliability. It had zero effect on how people felt about the brand. Zero. When they dug into the data, they found that what actually determined whether someone liked the Royal Mail was whether they liked their postman. You could have a terrible service, but if your postie left your parcel in the back porch when you were on holiday and told you about it with a smile, you thought the whole organisation was brilliant.
That resonates with me because I’ve seen the same dynamic in every distribution business I’ve worked in. The lender with the best rates doesn’t always win the most business. The lender whose BDM answers the phone on a Friday afternoon, who remembers the broker’s name and knows their book, who picks up the pieces when an underwriter makes a mess of a case, that’s the lender who gets the loyalty. And loyalty, in a market where brokers can place business with dozens of panels, is everything.
The AI question.
This is where it gets timely. Rory’s prediction for 2026 is that AI will initially be sold as a cost reduction tool, because that’s the easiest business case to make. Replace headcount, reduce cost, claim the saving. The doorman fallacy at industrial scale.
He’s probably right about the first phase. But the opportunity, for anyone brave enough to see it, is in the second phase: using technology to make the human experience better, not to replace it. The mortgage firms and lenders that work this out first will have a genuine competitive advantage, precisely because everyone else will be busy automating themselves into mediocrity.
The online travel agent in Rory’s talk converted website visitors at 0.5%. People who phoned up converted at 30%. And yet the entire business strategy was focused on driving everyone to the website. Because the website was cheaper. Because the cost was measurable. Because nobody was held accountable for the sixty times higher conversion rate that happened when a real person picked up the phone.
What marketers know that the rest of the business doesn’t.
Rory’s final point is the one that stayed with me longest. He says marketers shouldn’t sell what they do. They should sell how they think. Because the real value of having a marketer, or a salesperson, or a BDM in the room is that they see things from the customer’s perspective. Without that voice, perfectly rational people make perfectly stupid decisions. I think about this every time I see a lender or a network restructure their distribution team around cost metrics. Every time someone decides that a CRM and a chatbot can replace a relationship. Every time the spreadsheet wins and the people who actually understand what brokers need are shown the door.
Peter Drucker understood it. Sam Walton understood it when he said there’s only one boss, the customer, and they can fire everyone in the company just by spending their money somewhere else. The best leaders in financial services understand it too, even if they don’t always have the language or the air cover to say it out loud.
So here’s my question to you: are you an Austrian, or are you a spreadsheet jockey? Because if you’ve ever built a relationship that turned into years of loyal business, if you’ve ever saved a deal with a phone call that no algorithm could have made, if you’ve ever known instinctively what a broker needed before they asked, you already know the answer.
The spreadsheet just hasn’t caught up yet.
Inspired by Rory Sutherland’s talk on AI, cost reduction, and value creation. Watch the full talk here: https://youtu.be/6SXCJhqXubU
