Crossroads in Technology
As both a technology enthusiast and an associate involved in investment consulting at a firm called Cambridge Associates, I cannot help but think about where the two collide. Technology has provided us with a perfect gateway to mobilize people and share information in unprecedented ways.
By sharing information, I’m not referring to the sharing of tweets, photos, and videos. Rather, information can become more complex in nature because it can be calculated using human intellect. Interestingly, the advent of the discipline of computer science has led to the attempt to organize, calculate, and automate complex types of information. It is at this crossroad between technology and, in one example, information that changes begin to occur: society is reshaped, whole industries alter and perhaps new billionaires are minted when reshaped industries reemerge.
The existence of Cambridge Associates, McKinsey, Bloomberg, Capital IQ, and the numerous other knowledge/service companies out there is based on finding and retailing calculated knowledge. Many of these service-type companies first seek to answer the what questions, which then aid in synthesizing answers for the why and how questions. Essentially, these companies exist to extract meaning from vast amounts of information, often times with the help of mathematical models.
A generation ago, some of us might imagine somebody spending hours on a calculator punching in numbers to calculate and answer the what-type questions. A financier might ask, what is the price-to-book (P/B) ratio of this company? Yet today, our calculator is infinitely more powerful, permitting us to ask deeper questions. How does this company’s P/B ratio compare to those of its peers? How can we leverage an opportunity, if any?
As technology and computer science become increasingly advanced, focus is shifted to a higher level of thinking and productivity. Moreover, while technology has the ability to enhance the computational power of many knowledge-based companies, it also has an ability to change them immensely, causing a reevaluation of the business itself. Taking this into account, knowledge industries today need to consider the ways technology can both affect them positively and negatively.
This process of moving to more advanced technologies is both difficult but interesting to envisage. Today we might Google the exchange rate between the Singapore dollar and the rupiah. In the future though, we might use software tools to predict the exchange rates in the short term and long term future. Indeed, financial/service companies are already doing this but what about the general public? Is knowledge such a precious commodity that it must be limited in supply? As more computer scientists slowly emerge to meet society’s needs (there is a supply constraint), technology allows us in one case to comprehensively search for and track indicators.
For example, the Economist Magazine publishes the Big Mac Index, in which prices of Big Macs at McDonalds are tracked across the world as a gauge for long-term exchange rate movements (the idea is that Big Mac prices over the long run should all be the same). Can this index be automated in real time via a program that grabs Big Mac price data and publishes them for the public to make informed decisions? While this isn’t necessarily the best idea, it serves to show that this sort of technology can exist.
Ultimately, the technology of the future will not only feed us information; it will inform and guide us to make efficient decisions. Technology not only allows us to automate an immense amount of computation, it also permits us to build complex platforms, as I’ve mentioned in previous posts.
For the first time in history we’ve seen platforms, and even parts of society move online. Shopping platforms, B2B marketplaces and grassroots forums are just several examples. Yet what more can be done? Is there a way to build a platform to visualize global financial flows? Is there a way to build a platform for stock market IPOs without the investment banks? How far can we push technology, to make even more complex platforms that have never been seen before?
A colleague of mine mentioned that throughout history, society has valued different sects/types of individuals, rewarding them handsomely (a hat tip to Vish). For example, a bishop during the Middle Ages lived lavishly and had the same luxuries as nobles. Conversely, that same bishop may not have the same fortune in our technologically driven society of today.
The new billionaires of today and the future are those who foresee and build technologies that can be harnessed to their maximum potential. It’s no surprise that Apple is larger than Exxon Mobil. It’s no surprise that Facebook is setting its sights on a $100 billion IPO. Moreover, it will likely not be a surprise when new and more innovative entrepreneurs gain wealth, while seeking to push the boundaries of technology even further.