Driverless Money
What is it worth to be the company that makes every other company more profitable?
There’s a story in Alice Schroeder’s biography of Warren Buffet, The Snowball. It features Herb Wolf, an investor in American Water Works back in the 1950s. Herb had studied the company so deeply that he could tell the trend in its earnings, to the tiniest fraction, based on the amount of water its customers consumed.
Buffett marvels at Wolf's meticulous tracking, saying, "Herb Wolf could tell the effect on American Water Works' earnings if someone took a bath in Hackensack, New Jersey."
I’ve always admired this deep, systems-level ability to “read” complex systems. To know which lever triggers what, where.
Financial services is an industry that embodies this kind of complexity in many ways. Having worked at a bank for a little over two years now, I’ve seen how the sausage is made.
You will often see beautiful designs of mobile apps online with a simple UI of a transaction history. Something like this:
The apparent simplicity of these interfaces hides the complex data processing required to generate accurate transaction histories.
Imagine sending a friend KES 1000 through your banking app. Seems simple enough, right? But under the hood, it's a whirlwind of debits, credits, general ledgers, and settlements between banks and mobile money operators. It's like a relay race where the money takes a few unexpected detours before reaching the finish line.
And if a bank opens up its systems to startups through APIs? Well, that's when the real fun begins. Every transaction needs to be tracked and reconciled with the precision of a hawk eyeing its prey.
To change money profitably, a bank has to track every shilling moved, between two different parties, and the fee they have earned from it.
So similar to Herb Wolf’s analysis of water consumption, banks must implement comprehensive tracking systems for all transactions.
They need an eye in the storm.
This eye in the storm is called reconciliation, aka., recon.
Reconciliation is the act of tracking a transaction as it moves from one account to another, as it transitions from one ledger to another. The ledgers are said to be balanced when all the transactions can be accounted for. When there’s no transaction lost in between.
With a reconciliation tool, you should be able to track every transaction that hits core banking, and make sure you can trace its source and destination. If it gets stuck in between ledgers, such as when there’s a system downtime, you unclog it, and complete it or reverse it, no in betweens.
In financial services, reconciliation is the unsung hero. It’s the system that ensures trust in the flow of money, the invisible infrastructure that makes it possible for a simple success notification on your app to hold true. It’s not flashy, but without it, everything collapses.
Lobsters are now off the menu…
In the book Unreasonable Hospitality, Will Guidara writes about his shift from being restaurant smart to being corporate smart.
His father encouraged him to consider working for a bigger restaurant group - one that would expose him to procedures and systems that run enterprises. He got a position as ‘an assistant purchaser and controller for the restaurants at the Metlife Building’.
“From six a.m to noon, I learned how to inventory a walk-in refrigerator, how to receive a delivery, how to calculate the cost of goods sold, and how to order food and supplies. After lunch, I would take off my whites, put on a blazer and tie, and start with the numbers in the accounting department upstairs.
It’s impossible to overestimate how important it was that I was doing both jobs simultaneously. Food and beverage costs average thirty cents out of every dollar a restaurant makes, and most of what lands in a walk-in won’t last more than a few days. Oysters weren’t theoretical to me as a luxury line item or a cell in a spreadsheet—they were the valuable, ugly little rocks I’d counted by hand earlier in the day, packed in ice, and nestled into their fish tub.”
Will Guidara. Unreasonable Hospitality
He spent his mornings making on the ground decisions. The rest of his day tracking the impact those same decisions would have on his company’s bottom line. It was bootcamp and business school, all rolled into one.
Hani, the guy who ran admin accounts, was so old school that he still used a leather ledger to track expenses. “In his office, “in the red” wasn’t an expression – it was ink.” He approached the financial side of the business with unreasonable passion and ingenuity.
One day Hani flagged a report prepared by Will. For the second month in a row, he’d noticed that food costs at one of their restaurants were way up.
Further investigation into another report revealed that the restaurant was selling a lot of lobster. Another report then revealed that lobster prices had skyrocketed.
So they make a call to the chef. He confirms they were indeed undercharging for the dish, given what they were paying for the ingredient. Yet the chef couldn’t raise the price high enough to get the cost of lobsters in line without shocking their guests. So the only solution was to get lobsters off the menu. As popular as the dish was, it had to come off the menu.
This then cascaded to figuring out which other restaurant in the group was selling lobster. And just like that, after a series of phone calls, Lobster season at Restaurant Associates was over.
Hani saved the company an untold amount of money, within 20 minutes, without leaving his desk. This was all made possible by the systems of reports he’d put in place to keep a watchful eye on the business.
Creating Driverless Money
Great financial systems empower companies to make informed decisions that safeguard their financial health. Whether it's a 1950s investor tracking the tiniest fluctuations in water consumption, a modern bank reconciling thousands of transactions per minute, or a restaurant manager spotting inefficiencies in a food supply chain. The common thread is that there’s clarity provided by well-designed workflows that surface accurate information.
It’s not that software businesses don’t recognize the opportunity here. They do. But I think these opportunities are - or have been - notoriously difficult to exploit.
Companies in this vertical, have previously not gone full circle in the market's job-to-be-done. Even the way modern expense companies track spending is a bit generic. The right solution is the one that offers a super granular level of clarity for each point of spend in the business. With such a system, Herb Wolf should be able to see impacts of water usage on earnings in real time.
What if it didn’t have to take two months for Hani to know that the restaurants were overspending on Lobster? What if the moment that first batch of lobster was overpaid, Hani got to see an alert with projections that they’d either have to raise the price of the dish or lose money?
Few spend management or expense tracking products that offer this level of granular detail. For the ones that do, the world is their oyster.
Try Ramp
Lately I’ve been looking into a company called Ramp. It sells itself as a company that offers corporate charge cards, expense management, and bill payment software. But if you really dig into Ramp you find that it’s not just the usual spend management.
There’s a detailed post from Not Boring, where Packy McCormick writes about Ramp and the AI opportunity, alongside its recent launch of Ramp Travel:
If Ramp is able to keep growing and keep shipping simultaneously, and if it can fold all of its products into a clean, comprehensive offering that saves time and money for customers automatically, it has the chance to own and finally bring intelligence to the most valuable real estate on the internet: the transaction. That’s more valuable than search. That’s a trillion dollar opportunity.
Ramp has this wonderful product that is deeply embedded into the spend and expense tracking workflows for startups, businesses, and full-fledged enterprises.
Let's be honest, expense tracking isn't exactly a thrill ride. It's more like that mandatory compliance training – necessary, but not exactly the highlight of your day.
We’d rather focus on other things if we could avoid it. It’s a lot of work to keep track of the “thousand cuts” that make up a company's expenses, for both the employee and the employer. Gets worse the bigger the company is. It’s hard even when it’s automated. You need to follow up, you keep limiting card transactions, you keep making phone calls to track requests for spend, and you have to go through these checkpoints for spend approvals, some of them manual.
Then at the end of the day, you need to have a Hani, checking expense reports, leafing through them to see whether there’s a leak in the company’s finances.
So, this is where Ramp comes in. It makes it easier to track all the company spend in real time, and for employees to log their expenses very easily, then it infuses AI into their product to create a pleasant experience that removes the tedium out of the process.
This is where AI really shines. It makes it possible to track an enterprise workflow in any vertical from end to end - such as reconciliation, which has previously been long and tedious. There’s a future where an AI agent will do reconciliation for you in real time. There will no longer be chunks of a workflow interlinked by a human. You can just have one human covering the entire length of a workflow.
Ideally, designing such solutions, now changes primary views where chain of thought reasoning replaces the tedium of navigating tables and porting data through excel sheets. The solution that will succeed, is one that has the highest level of real time fidelity/transparency.
The company that truly makes every other company more profitable is the one that empowers them to deeply understand and optimize their cash flow. By providing the tools and insights necessary for real-time tracking, proactive decision-making, and continuous cost savings, these companies offer immense value.
Whether through advanced reconciliation tools, AI-driven expense management, or comprehensive financial platforms, the ability to unlock granular financial clarity is the key to driving sustainable profitability for businesses of all sizes.