Appetite for Disruption: The Business and Regulation of FinTech

Alternative data can help us answer questions.  The world of data is a lot larger – and a lot more powerful – than many suspect.  As Adaptive Management’s CEO and a longtime data junkie, Brad Schneider (no relation) spends his time thinking about sources and uses of data so Adaptive can provide useful datasets and analytical tools for its financial services and other clients.  Adaptive’s clients can access and piece together all sorts of novel data to better understand what’s happening.  The expectation is that better data will result in better decisions.  The normalization and standardization of data is key so that the data can be easily read, compared, and integrated – in other words, so that the data can be used effectively. 

Since we recorded with Brad, Adaptive was acquired by Knoema, a knowledge management company.  Brad has started NoMad Data, which focuses on helping investment firms and corporations find and use novel sources of data to improve their visibility and efficiency.

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Bringing blockchain to securities settlement isn’t easy.  As we discuss with John, a couple of years ago, it felt like everything would move to blockchain in the near future.  As Bond.one realized it would take some time, the business has shifted focus to doing the hard work of education and learning how to integrate with legacy technology systems.  The combination of legacy systems and heavy regulation have led Bond.one to focus on developing centralized blockchain solutions, although John likes to follow the DeFi movement for its innovations.  John also talks about other industries where he sees the potential for blockchain.  Troy and Lee chat at the end about some ideas from John’s remarks.  AfD Conference!  Troy and Lee are going to host a conference in late April or early May!  Details to come, so please check afdfintech.com regularly.  You can also follow us on Twitter at @AfDfintech.

John Mizzi is the Chief Strategy Officer at Bond.one, a technology company helping to revolutionize settlement of debt securities using blockchain.  And it’s not easy!  John explains how their original vision became more realistic to incorporate blockchain and smart contracting where they decided it was most practical and sensible given many pragmatic issues.  John sees blockchain as the future of back-office infrastructure, although it will take time to get there.  To move things along, they are focused on education and taking concrete steps to improve things but without trying to do everything all at once.  It’s an interesting take on how to think about real-world applications of distributed-ledger technology.  AfD Conference!  Troy and Lee are going to host a conference in late April or early May!  Details to come, so please check afdfintech.com regularly.  You can also follow us on Twitter at @AfDfintech.

We continue unpacking with Dr. Mitchell the concept of intelligence and the importance of justice and ethics, including when it comes to computers.  In working on her book, Artificial Intelligence: A Guide for Thinking Humans, Professor Mitchell had a few surprises about both the successes and limits of AI, and offers some cautionary notes as we increasingly look to machines for answers and to do things for us.  Computers do things by brute force computation whereas humans use analogies, that is, drawing from prior experience to inform other judgments in different contexts.  One way to think about this is that hard computations are easy for computers; but easy things for a person, like describing what’s going on outside your window, is very difficult for a computer.  Plus, just because a computer does one thing exceptionally well, it may do other things poorly.  Troy and Lee share some of their own thoughts at the end.  AfD Conference!  Troy and Lee are going to host a conference in late April or early May!  Details to come, so please check afdfintech.com regularly.  You can also follow us on Twitter at @AfDfintech.

 Maybe humans do too sometimes, but we are still way better than computers at common sense.  Dr. Mitchell, a computer scientist at Portland State University and the Santa Fe Institute, defines common sense as understanding the world around you by drawing inferences and making associations from other experiences.  Common sense, in other words, is associated with the ability to analogize – something humans do all the time but that computers aren’t particularly adept at ... yet.  Professor Mitchell’s new book, Artificial Intelligence: A Guide for Thinking Humans, helps the world grasp the current state of AI and what machines are (and not) good at.  AfD Conference!  Troy and Lee are going to host a conference in late April or early May!  Details to come, so please check our website afdfintech.com regularly.  You can also follow us on Twitter at @AfDfintech.

We discuss with Jon his experiences in different roles in the financial markets, and how, as CEO, that has informed how he motivates his team.  He offers interesting insight into how a team is built and managed effectively, including adding emotion to people’s work.  Let’s high five when it’s a good day, and let’s evaluate what happened on a bad day.  There are parallels to sports and how teams pull together and learn together.  Troy and Lee even high five!   

Buyers and sellers want choices regarding what to buy and sell and where to buy and sell it.  Trading stocks for investors is no different, as choice matters there too.  We talk with Jon Clark, the CEO of Luminex, about his efforts building a company with the mission of affording institutional investors another choice centered on trading a large block of shares, rather than accessing the moment-to-moment liquidity of stock markets.  Luminex, which actually is owned by institutional investors, is a stock trading venue for blocks of at least 5000 shares traded by institutional investors.  Luminex’s business is one part of equity market structure, which needs to keep up as technology and market conditions change. 

The secondary market for mobile phones is enormous, and Flavio believes that putting that market on a blockchain-based open platform is the future.  We discuss his thoughts on deploying a permissionless blockchain not only for his own company’s business, but to allow an entire ecosystem to develop that offers all manner of goods and services on a B2B, B2C, and C2C basis.  If mobile phones – the most successful consumer electronics device in history – are any indication, the possibilities seem endless with platforms that leverage the right tech and have the right features.

Flavio’s vision is a peer-to-peer open platform for buying and selling used mobile phones – of which there are millions around the globe.  Flavio shares his take on the mobile phone industry, including existing inefficiencies in how used phones are graded, priced, sold, and delivered to the next owner, all of which he’s hoping to disrupt with blockchain technology.  His plan is to use blockchain to fix informational asymmetries, reduce transaction costs, and promote pricing efficiencies.  Flavio’s ultimate goal is for a platform that fosters a marketplace that is open to everyone and not limited to mobile phones. 

As Dale explains it, our brains have been practicing how to respond to stimuli for millennia. While humans have been around longer than computers, computers can “practice” harder and longer than humans can. And so, through practice, computers can get really good at what they do really quickly. Interestingly, according to Dale, different computers may learn differently, and so machine learning may yield different results by different computers – sort of like how different people learn differently and thus make different decisions. Where will it all lead? Troy and Lee’s wrap-up conversation explores some of the themes they discussed with Dale.