The Doosra

Working in an investment bank over the past decade has provided the opportunity for many interesting conversations around what the value to society of an investment bank represents. Often the model of a “zero sum game” is proposed which suggests that finance often doesn’t add much – in terms of the transactions that banks facilitate, someone is a winner and someone else is the loser, there is no net gain to the world. Other purists would argue something along the lines of efficient allocation of resources. That initially sounded a bit too creative for my more linear reasoning, but after years in the trenches, it has developed an intuitive ring of truth to it.

Working in an investment bank over the past decade has provided the opportunity for many interesting conversations around what the value to society of an investment bank represents. Often the model of a “zero sum game” is proposed which suggests that finance often doesn’t add much – in terms of the transactions that banks facilitate, someone is a winner and someone else is the loser, there is no net gain to the world. Other purists would argue something along the lines of efficient allocation of resources. That initially sounded a bit too creative for my more linear reasoning, but after years in the trenches, it has developed an intuitive ring of truth to it.

Similarly, digital disruption suffers a questionable motive. For some enterprises, such as Uber, it may appear that the shiny plaything of some young geeks on the west coast of america has been allowed to plough through the livelihoods of real people with real jobs and families around the world. When applying such thinking to digital disruption in the realm of investment banking, the question arises as to whether there is any real value that this rather obscure digital offspring of an already often questioned enterprise can produce.

At times this line of thinking led me to check my own passion for this “new vector of commerce”. How do I ensure that my natural fascination with some “new and shiny” geek toy is not diverting what should be a cold, objective application of technology to investment banking, rather than being an excuse to pursue disruption for its own sake. How do we ensure a golden thread of validity and meaning to this exercise.

I started thinking about Google, and how I could justify what value they might have brought to the world (and not just their shareholders). I won’t pretend that I spent much time on this question, but I did come to the following example. Google maps is a fantastic application, and I probably initially loved it more for the fact that in this we have an application that is bringing the real world (travel, maps, my phone, my car) together with the digital world (the internet, GPS technology, cloud based algorithms).

However, it is a tool that many people use, and its value extends beyond that initial fascination. I have considered that in a very real way there are likely to be hundreds of millions of people that might use google maps every day to guide them on an optimal route in their cars. And, true to form, it manages to do this: either by advising detours around potential traffic jams, or by merely showing quicker routes that save time.

That extra time in traffic that has been avoided represents a very real saving in carbon emissions into the atmosphere, and real energy that would have been wasted pumping cylinders up and down in an idling vehicle. This is not a zero sum equation where google benefits and many small companies lose out. This is a very real benefit to the world where increased efficiency reduces the amount of wasted energy, and wasted time of humans. This is a net positive game to the world. In some respect the world of humans win, and the domain of entropy loses – if we are forced to put a name to it.

Personally I would feel deeply gratified if I could produce such a result that created a new benefit to either the world, or at the very least some small piece of it.

Interestingly enough, this speaks to an underlying theme which appeals to many people that are attracted to incubators of disruption, such as the Foundery. Many people do really feel that they would like to be part of something that changes the world. Perhaps this is because such incubators invoke the perceived “spirit” of Google, Facebook and other silicon valley heroes as an inspirational rally cry. I believe that the example of google maps does show that the present opportunity of disruptive technology can represent a possibility for such very real efficiencies and benefits to be created. Perhaps those seemingly naive passions that are stirred in the incubatees are valid, and should be released to find their form in the world.

So how do we harness this latent energy? Where do we direct it for the best chance of success?

Some of the technologies to be harnessed, and which represent the opportunity of disruptive technology:

  1. IoT (the internet of things):

At its most simple, this means that various electronic components have become sufficiently small, powerful and most importantly, cheap. It can become possible and economically viable to monitor the temperature, humidity, soil hydration of every single plant in a field of a farm. To measure the status of every machine on a production line in a small factory in the east rand, without bankrupting the owner with implementation costs.

Apart from sensors, there are actuators in the world such as smart locks, smart lights and the smart home which enable real-world actions to be driven and controlled from the internet. Together these provide the mechanism for the real world to be accessible to the digital world.

This extends beyond the “real“ real world: there are changes at play, not too far under the surface of the modern financial system, that are turning the real world of financial “things” (shares, bonds, financial contracts) into the internet world of financial “things” (dematerialised and digitised shares, bonds online, financial contracts online).

There are also actuators in this world, such as electronic trading venues and platforms which enable manipulation of digital financial contracts by digital actors of finance.

  1. Data is free:

The cost per megabyte of storage continues to drop exponentially, and online providers are able to offer services on a rental basis that would have been inconceivable a decade ago. The ubiquity of cheap and fast bandwidth enables this even more so.

  1. Computation is cheaper than ever, and simple to locate with cloud based infrastructure:

Moore’s law continues unabated, providing computational power that drops in cost by the day. Notwithstanding the promise of quantum computing which seems around the corner

  1. The technologies to utilize are powerful, free and easy to learn:

If you have not yet done so, have a sojourn on the internet across such topics as python, tensorflow, quandl, airflow and github. These represent free, open-source (largely) capabilities to harness the technologies above and make them your plaything. Not only that, the amount of free resources “out there” which can help you master each of these is astounding.

A brief exercise into trying to automate my house using python has revealed hundreds of youtube videos of similarly obsessed crazies presenting fantastic applications of python to automating everything from their garage doors, fishtanks, pool chlorine management systems, alarms etc. These youtube videos are short, to the point, educational, free and most importantly crowd moderated – all the other python home automation geeks have ensured that all the very good videos are upvoted and easily found; and the least fit are doomed to obscurity.

This represents another perhaps unforeseen benefit of the internet which is crowd-sourced, crowd-moderated, efficient and specific education. JIT learning (“just in time learning”) which means being able to learn everything that you need to accomplish a task five minutes before you need to solve it, and perhaps to forget everything almost immediately once you have solved it…. (That is an interesting paradigm to counter traditional education).

( P.S. if you have kids, or want to learn other stuff, checkout https://www.khanacademy.org/ )

Given the above points, it has never been easier for someone to create a capability to source information in real time from the real world, store that information online, apply unheard of computing power to that information using new, powerful and easy programming languages which can be learned online in a short period of time.

It might be a moot point that is valid at every point in time in every generation, but it has never been easier and cheaper to try out an idea online and see if it has legs.

So we have identified people with passion, a means of delivery and so now … what?

Those of you that are paying attention would realise that I have skirted the question of whether we have added any real value to the world, or feel that we can? Time will tell, and I would hate to let the cat out of the bag too early. But there is one thing that is true: if you are one of those misguided, geek-friendly, meaning-seeking, after hours change agents, or if you have an idea that could change the world, come and talk to us … the door is always open.

by Glenn Brickhill