Our discussion started with Rob pointing out an often overlooked fact: before the dotcom Boom, finance employed more innovators, and technical talent than technology companies. Top talent from MIT, CalTech and IBM would often get swooped up by firms like Morgan Stanley, JP Morgan.
While historically finance and technologists has always co-existed, there has been surprisingly little innovation in fintech (likely due to regulation and culture). However, that may start to change.
According to Rob, Elliot Spitzer’s ‘Global Settlement’ in 2003 shifted the landscape for the better. The ruling (barring investment firms from asserting influence over their research analysts) resulted in a Chinese wall between the divisions.
At this same time, new publishing tools like blogs, rss feeds and social media began to emerge. These publishing tools, coupled with new distribution outlets have led to the start of a massive shift in power (and influence) among outcast financial researchers and analysts.
The social web and api’s have empowered analysts to break away from the traditional banking institutions and strike out on their own – all while maintaining the same levels of credibility among their peers.
Examples include publicly blogging trades on Covestor, interacting socially on applications like StockTwits and the emergence of blogs as media outlets. An amazing example is Barry Ritholtz’s, The Big Picture, a blog covering macro perspectives on the capital markets and which is frequently quoted in leading publications such as the New York Times and FT.
The idea that an individual’s voice could compete with major banks and trading brands was unthinkable only a few years ago. These new channels also allow financial analysis to step past the ‘herd mentality’ so prevalent in days past.
Individuals can more freely promote their own often contrarian views opening up massive new opportunities and creating compelling content.
Long story short, we may be at the precipice of an innovation revolution within financial technology (fin-tech).