In a new and regular feature, our guest NRI columnist talks life, education, technology, culture, career, sport and Brexit from an ???almost Indian???s??? perspective. Opinions expressed are quite clearly his own???.
Almost a year ago, I walked away from a successful business and an industry in which I???d spent almost three decades. I walked away because I could see external events unfolding that would gradually and fundamentally alter not just our business model but also our very way of life. Changes driven primarily by technology. Technology is asking, nay pushing us to change how we work, transact, allocate resources, consume, learn, interact with each other. Change, brings not only challenges but also opportunities. I think change is exciting.
I believe technology is sending us a very clear and stark message. That we humans have properly cocked-up the running of planet Earth. Our world is polluted, at war, largely impoverished and professedly coming apart at the seams.
To the naked eye it looks to be getting only worse. I believe this stems from the fact that when we humans consider issues related to resource allocation (be that land, water, food, fuels), we tend to think with our hearts and our stomachs. For most people, more is always better than less. Machines, on the other hand, only think with their brains. Pure, unadulterated logic.
Theoretically, if we relinquish control of the resource allocation process to the machines, presumably food, water land etc. would be handed out on a need per individual/ family/ community basis. A technology driven reorganization and liberalization based purely on fairness (is tech pushing us toward a form of Socialism? A rather big argument for another time I think).
So, the world is in chaos because for far too long we have been following a greed based resource allocation system. Middlemen (salespeople, brokers, bankers) play a central role in this system being the facilitators of movement – impeding or allowing transactions based on profitability, performing no other apparent useful function. I believe that brokers in the financial services sector have been particularly influential in effecting outcomes as the banking system sits at the core of all economic activity. It was Disraeli who said: ???a middleman is a man who bamboozles one party and plunders the other.??? Rather strong to be honest but the essence is there.
You see, banks and brokers like many traditional businesses have essentially made money by arbitraging information and relationships; by being the middlemen between buyers and sellers, lenders and borrowers. We only bring parties together and share information when we can make a few pennies out of the situation. If there isn???t any money on the table, we let the opportunity lie, irrespective of the societal benefits of the transaction closing.
Now technology is enabling buyers and sellers, borrowers and lenders to find each other without the help of a broker or advisor. Information that???s available to one party is now generally available to all interested parties. Technology is trying to join the dots that we brokers have been trying to keep apart all these years and in doing so is creating the Perfect Market that economists have been dreaming of since the idea was first popularised in the late 1800s.
The enforcement of greater transparency should lead to bid-offer spread contraction (making it cheaper for customers to trade) and will also probably lead to a rationalization of the market. Ultimately, technology will ensure no one has to pay for simple facilitation. Capital, information and goods should move freely and unhindered. Good for customers and the economy (supposedly), not so good for the brokers.
As a result of the above, the financial community is under increasing scrutiny from both regulation and technology to change. To innovate, automate and streamline. People intensive, overhead laden brokerage and sales platforms are going to find it harder and harder to add value and hence get paid. Not since the Rothchild???s invented modern banking in the 18th century, has the sector come under such heavy and sustained fire from society.
The banking meltdown of 2008 set in chain a political reaction (right or wrong) that has culminated in some of the most far reaching changes in how we conduct the modern business of finance. The third revolution, the Technology Revolution (the first two being the Agrarian then the Industrial Revolutions) has arrived bang on time as this backlash hits the business community to promote greater transparency and social good across all sectors of the economy. I believe, businesses and individuals that refuse to embrace the new philosophy of openness and adopt new technologies that promote transparency will find it increasingly difficult to manoever. Look at Facebook. Across many jurisdictions, market rules are being introduced that aim to provide investors and the market with complete information.
In the EU, for example, rules are being implemented that stipulate all brokers must report all client related bond trades via live, online platforms so that the entire market can see full trade details: size of trade, what price was paid for bonds and what price they were sold at (the so called bid-offer spread) and the name of the broker facilitating the trade. This all might sound reasonable and not a big ask but it???s a fundamental change for the securities brokerage industry, which has always enjoyed the benefits of discretion.
Importantly, this is the first stage in eventually automating ???over the counter??? business across the board. More generally speaking, there are a whole spectrum of process changes that technology is going to bring about in finance. AI and machine learning is being used to predict future stock price movements and changes in market sentiment. Indeed, programme (bulk repetitive) trades are being turned into algorithms and automated. The whole lending platform is undergoing the massive overhaul too. Now a borrower doesn???t necessarily have to go to a bank for funding. There are a plethora of crowd funding options now for businesses or even the crypto-currency route. Slowly but surely, the old banking revenue model is being chipped away.
Banking is not the only sector where automation is impacting headcount, turning business/ operational models upside down, putting pressure on fees and enforcing greater levels of disclosure. The legal and accounting professions are similarly under pressure to automate and apply AI tools to all templated activities, services and functions.
In the medical profession, AR and robotics is revolutionizing the way in which surgeries are carried out. Even the charities sector is having to rethink its marketing and fundraising strategies, as we head into a cashless world. Retail and Amazon? Nuff said I guess. There???s nowhere left to hide from the footfall of science.
Of course, the changes that I???m talking about will take time to take full effect. Suffice it to say, the business I left behind is doing just fine and dandy without me and will continue to do so for the foreseeable future. Also, I???m not sure that Asimov was entirely correct when he said that ???computerization will eliminate the middleman???. There will still be situations and roles where human intervention will be required. Even in banking and securities brokerage, some transactions are so complex and the stakeholder relations so sensitive that careful handholding, not straight through processing, will still be requisite.
The trick is to find those niches that will need this support and to keep the business model nimble enough to react to the ebb and flow of customer interests. Away from that, anything that can be automated will be and firms who have deep pockets for tech spending will be the ones who reap the lion???s share of the spoils. As far as the banking industry goes, it???s core to facilitating global liquidity, so it???s here to stay. The only question is, what will ???banking??? look like, in say, 10 years time?
So, while the resource allocation process has been undergoing its tech liberation, I???ve had my own little personal epiphany. Ten months ago, armed with the strength of my newfound convictions, I resigned from my position as Partner in a financial services firm which had I co-founded. It???s a move that sparked great surprise and debate amongst friends and business associates. Who leaves their own business? That too with no definitive plan? ???Are you nuts???? asked one colleague respectfully. Naturally, everybody thought I was having some sort of mid life moment. It had nothing specifically to do with my business, per se. I???d spent almost three decades, man and boy, as a broker in the banking industry. I???d witnessed some of the biggest boom and bust periods (debatably in the history of the industry) and survived. I???d had a great run and I???m grateful for the experience. I could easily have carried on but the unfolding tech disruption, not just in banking but across the board, had seismically altered my world view and within that context, my potential path for self-realisation too. It was time for me to boldly go and see what else was out there.
So, I decided at the ripe old age of fifty to reinvent myself. Luckily for me, technology is not ageist (or sexist or racist for that matter). In a world where choices are made on logic, opportunities should be there for all those who are willing, able and have imagination. My good friend and well known AR and tech wiz, Rish Mitra, said to me, ???there???s never been a better time in history to create IP. People who develop product that make the quality of our lives better will be rewarded handsomely.??? All around us IOT, computer vision and Big Data is causing disruption. In future world, as I like to call it, healthtech will help us live longer and better, AI and machine learning will free us from repetitive, mundane work and AR/ edtech will help us rise to higher planes of thinking. This is the space that is going to create opportunities for all.
Do I consider myself a grey haired millennial? I don???t know about that but I do draw inspiration from the young. Millenials are the first generation to grow up with mobile phones, the web and social media. As a result, they are refreshingly open. Not just to new ideas and a way of life but to openness itself. Yes, an openness to openness (eh?). They are far more forthcoming and eager to link ???the dots??? that we traditional players have kept separated for so many years. In a recent conversation with a bright young tech ceo, who???s company I was looking to help finance, I was told, ??????we don???t do NDAs (Non Disclosure Agreements) in our space. That???s a throwback to your banking days ???Uncle???.?????? Go figure.
It???s always darkest before dawn. At the moment, it may feel like technological change is creating more problems than solving them but I do firmly believe the end result will be a more open and efficient business ecosystem. Moreover, as current jobs are eliminated, new (and hopefully better ones) will be created.
The expectation is for technology to free up our time for us to redeploy in more creative pursuits. Isn???t it surprising that we are still listening to classical music from over a hundred years ago and watching plays that are three hundred years old? Yes, we???ve made great strides in science in last fifty years but where???s our generation???s Shakespeare, Mozart or Tagore? It???s a human heart and not a machine that creates the joy given by a piece of poetry or a beautiful painting. Maybe a chance is coming for us to return to the simple pleasures and let somebody or something else do the heavy lifting? Certainly, the disruption in banking has given me cause to reassess my personal aspirations. I feel I???ve been offered a second bite at the cherry. What should I do with my new found freedom? Perhaps I???ll focus on finding the cure for cancer, negotiating world peace or becoming an astronaut. I thought of becoming a cabbie but the impending arrival of driverless cars put me off! May be I???ll just start simple, dust off my guitar and finally learn how to play Greensleeves. The main thing is that I can do what I want and learn new skills, within reason. It???s an exciting prospect to be honest. Mid life crisis? Nah. I think I???ve finally woken up.
Comments
Post a Comment