:: The Park Paradigm ::

Markets for the Digital Generation

I’ll admit that like anyone else I fall victim to pre-conceived notions no matter how consciously I try to avoid doing so. As I know from reading the work on behavioral finance of my colleague James Montier, it is a somewhat inevitable consequence of the human condition. Heuristics are part of the human OS, and while they serve us terrifically in many many instances, they have bugs known as cognitive biases. Even when we are conscious of these potential traps, they are fiendishly difficult to avoid. One of my favorites (with which I do battle daily), is confirmation bias:

Confirmation bias is a type of statistical bias describing the tendency to search for or interpret information in a way that confirms one’s preconceptions. In inductive inference, confirmation bias is a type of cognitive bias toward confirmation of the hypothesis under study. To compensate for this observed human tendency, the scientific method is constructed so that we must try to disprove our hypotheses.

And so I have to admit that had you asked me a week ago to name my “Top ten list of large incumbent financial services firms most likely to succeed in the AmazonBay future”, it is very unlikely that Fidelity would have made my list. On the basis of the evidence brought to my attention over the past week, I think they’d probably make the list today.

Joel P. Bruckenstein at Morningstar wrote an excellent article on what Fidelity are doing with their Fidelity Labs initiative. I’d encourage you to read it but in a nutshell, they have taken inspiration from Google Labs to set up a unit that experiments with applying new technologies to their core business of distributing retail financial products and services.

The first products to emerge in beta from their lab, are Financial Search and Mortgage Search. The first is an optimized and enhanced search engine to search for financial products and services, while the second is a more specialized search engine for mortgage products that combines an intelligent ‘wizard’-like interface to help the user define their search appropriately. A cynic might say - so what? - these are things that exist already or are of marginal extra value to the user compared to the tools and products at their disposal today. I think that would be to miss the point. We are just scratching the surface. Early projects like this are as much about showing what is possible and learning what is relevant as they are about directly and immediately creating economic value.

If Fidelity is to be successful in the medium to long term with this venture I think they will need to guard against what I would call the institutionalisation of this group. Large organisations (probably necessarily) value order and conformity and process to an extent that makes non-linear innovation very difficult, if not impossible - even in companies with an enlightened and progressive culture. Anyhow I’ll be keeping them on my radar screen and look forward to watching this initiative evolve.

(btw I’d like to thank a colleague - Kiyo - for pointing Fidelity Labs out to me.)

Share This