Smart, Stupid, Redundant

‘Ideas worth spreading’ is the seductive logo of TED. For those unfamiliar with the acronym, TED stands for Technology, Entertainment and Design. If you go online and type in TED, just above reviews of a film about a degenerate talking teddy bear, you’ll find a link to a compendium of talks on a staggering variety of topics by scientists, authors, entrepreneurs and others of similar ilk.

The Guardian started the year by co-opting an enlightening, if mischievous, article on the TED talks by Benjamin Bratton. Bratton’s argument is that TED and by extension a great deal of literature on technology exhibits “too much faith in technology and not nearly enough commitment to technology.”

He accuses the TED constituency of deliberately neglecting the complex dynamics of problems in favour of smart aphorisms and of attempting to delegate the time required to understand difficult issues, to multiples of processing power. The implicit assumption underlying such behaviour, he argues, is that as, “our machines get smarter…we get stupider.” With the recent announcement of branch closures and job cuts in retail banking being blamed on digital and mobile technology, it’s behaviour that financial services seems in danger of replicating.

Over the last five years, unless you live under a rock, or have been locked in an investment bank for sixteen hours a day, you will have noticed a frenzy of articles on how Algorithms, Mobile technology and Big Data are transforming financial services. Algorithmic trading, loosely defined as “using programmed systems to automate all or some part of the trade cycle” is nothing new. Renaissance Technologies, one of the world’s largest hedge funds has been employing algorithms for profit for over twenty years. What’s new is the scale and speed offered by the latest technology.

Mobile technology refers to the provision of financial services to phones and tablets. If we consider the increase in mobile phone usage across the globe in the context of the “democratization of credit” , the next step in a 200-year continuum that has included tallies, gold coins, cheques and credit cards. Then the onward march of financial serves to mobile is inevitable.

Meanwhile, Big Data holds out the promise of a data nirvana. That all the data captured by social media, ecommerce and the sensors that surround us as well as the bits and bytes currently sitting idle in redundant databases can be aggregated, analyzed and pummeled into information that can provide business advantage.

Its an easy assumption to make that if algorithms are automating the selection and process of trading then there is less need for portfolio managers and operations staff. If customers are accessing their bank balances and paying bills using their mobile phones and tablets then there is less need for branches or customer service staff. If Big Data means more information as well as quicker and better analysis of it then this can be translated into less managers and staff required to gather that data. As machines ‘get smarter’ not only do we ‘get stupider’, we also become redundant.

Mike Ogazi




Unlimited Liability

During this interminable crisis, few banks globally have managed to thrive. One of the few happens to be Hoare & Co in the UK. Last year, Richard Morais did a little bit of a hagiographic spread on them for Barrons.

However, he neglected to provide much detail on the bank’s most interesting trait, unlimited liability. Forget banker bonuses and returning to the gold standard, I doubt we would be in the middle of this mess if every banker, auditor, lawyer and compliance consultant had to put their house, car and cufflinks on the line when signing off a new product.

P.S. if you ever have the chance to visit Hoare & Co’s Fleet Street offices, they are remarkable. Forget the cold glass and steel of modern architecture in the City; it’s all wood paneling and guards in top hats, enjoyably reminiscent of the Ministry of Magic in the Harry Potter films



What Money Can’t Buy

In the midst of trawling through research for a new book project on finance and technology I’ve started re-reading the work of Michael Sandel.

In ‘What Money Can’t Buy’, Sandel posits that the post-communism world of the eighties and nineties was an era of market triumphalism. In which market values and reasoning spread from beyond business and into almost every area of society; schools, sex, hospitals, police etc. He argues that society needs to debate about the morality and consequences of this including greater income inequality and a corruption of values.

This is significant because it corresponds with the current debate about morality within financial services. It implies that the debate should be about more than one individual sector; it should be about our judgment of a way of thinking, which he describes as “market reasoning”. A way of thinking that implies it is objective by considering everything from the perspective of “how much” and “where is the harm if someone is willing to sell and another is willing to buy”.