Go to the ANT, you sluggard; consider its ways and be wise
Nothing illustrates the impact of exponential improvements in technology on the financial services sector than a head-to-head comparison of Bank of America and Ant Group. The former is a US banking heavyweight with around 67 million customers, mostly onboarded after the then 94-year-old business was acquired by NationsBank of Charlotte in 1998. Ant Group, meanwhile, is rooted in China. It is an affiliate of the Alibaba Group, which holds a host of financial services brands, including Alipay, with has gained more than a billion active users in around 19 years.
Nimble teenager thrashes this banking grandfather
It is tempting to explain away these statistics using the respective country’s demographics. China’s population outnumbers that of the US by more than four to one and its citizens are relatively younger, which suggest they are more comfortable in the digital world. Dig a bit deeper, and you will find the real reason: Bank of America is built around products and physical branch infrastructure whereas Ant Group offers customer-focused, digital-platform-based services enabled by cutting-edge technology.
This allows the Chinese ‘teenager’ to outperform Bank of America in every metric imaginable. For example, it takes the US bank 20 days to approve a loan versus two seconds for Ant; the US bank does not offer automatic reallocation of inactive capital whereas Ant can do so instantaneously; and the Chinese firm will automatically reallocate as little as US14c compared to the US$3 million minimum set by its US counterpart for similar treatment. Amin Toufani, who bills himself a full-time optimist and CEO at T Labs, shared the Ant Group versus Bank of America story during an engaging discussion on Exponential Business Models, held at the 2022 Discovery Retirement Summit.
A historic unlearning: the Fosbury Flop
His presentation was chockfull of relatable narratives aimed at getting financial and risk advisers to reprogramme their customers and reimagine their practices for the coming technology epoch. More on this in a moment.
One of the standout messages shared during the presentation was courtesy the popularisation of a new high jump technique during the 1968 Olympic Games. According to Toufani, the Fosbury flop, named after its creator, Richard Fosbury, represented “a historic unlearning; a moment when [society] unlearned how it used to do something and came up with a new way”. This technique is the only technique that is taught to aspiring high jumpers today. “What will your Fosbury moment look like? And what will you need to unlearn to thrive in this new world and to help your clients thrive?” he asked.
Financial services stakeholders are conducting business at a time of exponential technology growth. Today’s smart phone, for example, has 200000 times the processing speed and two million times the memory of the computer used in the moon lander module that took Neil Armstrong and co to the moon in 1969. Just as extreme, is the evolution of digital camera technology. The first demo model weighed in at around 10kg and required a portrait subject to remain perfectly still for 23 seconds while it recorded an image. “If you compare this camera to those we have today, you are looking at device that offers 2000 times the resolution with a 1000 times reduction in weight, at a faction of the cost … we are talking about a four-billion-fold improvement across the three dimensions,” said Toufani.
What business are you really in?
To get ahead in business, financial and risk advisers need to leverage the technology available to them. PS: The writer appreciates how obvious this statement is and fully expects it to elicit an incredulous response from readers, as in: “Seriously, did Gareth just write that!?”
Success depends on going beyond simply searching the online universe for the most up-to-date artificial intelligence (AI), cloud storage or machine learning solution. To truly succeed, you must understand what business you are in. Reaching this point is not always as intuitive as one expects. Toufani referred back to the moment when Steven Sasson first demonstrated his digital camera prototype to his employer, Kodak, to illustrate. In 1975, the company executives scoffed at the invention because they firmly believed that they were in the paper and chemical business, when in reality they were in the memory capture business.
If you expect respite from the staggering pace of technological development, think again. Toufani identified five technology supremacies that are likely to occur before 2030. In his words. AI supremacy is when AI becomes more powerful than the human brain in the vast majority of business applications; blockchain supremacy refers to when the blockchain architecture for databases becomes more useful than conventional databases; biotech supremacy is defined as the moment when more than half of the population believes the biology they were born with is no longer sufficient and decide they would like an upgrade; quantum supremacy refers to the moment when quantum computers become more powerful than digital computers; and solar supremacy is when the marginal cost of solar energy drops below all other forms of energy, without government subsidies.
Exponential winners
The best way to choose tomorrow’s winners is to back firms that are riding the wave of exponential change. “The most impactful thing you can do for your clients is to help them to invest in exponential winners,” said Toufani. He observed that being able to find and understand exponential change patterns will benefit clients and financial advisers alike: “When we learn how to spot these patterns, our own businesses are likely to benefit immensely [and] you will actually have a shot at becoming an exponential winner in your own business”.
Few have as much experience with identifying these patterns than Toufani, who developed an Exponential Business Models framework based on a study of 300 businesses. He found that successful businesses place an incredible emphasis on finding their digital twin. “The moment you capture your digital twin, you can unleash exponential value … in fact, the vast majority of disruption stories that we found were about digital twin disruption,” he said. You should be quite familiar with such successes: Uber created a digital twin for cars and people; Airbnb created a digital twin for homes and accommodation; Facebook, a digital twin for physical social networks and so on.
Kickstarting the great convergence
In the world of financial services there are virtually no processes that cannot be automated, optimised and synchronised using a combination of AI, blockchain and quantum computing. This fact, together with the five technology supremacies already mentioned, will kickstart an epoch of great convergence. This is an age where you will no longer define yourself as an asset manager, bank, financial adviser or insurer; but as a technology company that fulfils those and other related functions.
How should risk and financial advisers prepare for the great convergence? To build a truly exponential business requires that you sell performance rather than product. “Your biggest risk is not thinking big enough,” concluded Toufani. “Being in business during this incredible period in human history means that your reach can exceed your imagination”. This journey has three stages. First, identify your digital twin. Second, help your clients to become trilingual by understanding the languages of adaptability and agility; of AI and technology; and work and purpose. And third, embrace rather than rebuff disruptive innovation.
