A couple of months ago, I had the privilege to have been invited to speak at eComm 09 in Amsterdam. I have posted on this previously but recently the video of my talk was posted and perhaps will make it easier to understand my accompanying presentation. If you can spare 20 minutes (there is an additional 10 minutes of q&a at the end) and are interested in understanding how Nauiokas Park defines our opportunity space, please have a look as it is probably the most succinct expression of the worldview we bring to investing and analyzing potential investment opportunities.
And here is the presentation again, in case you would like to follow along as you listen to the video:
Well-built developer platforms are the future of every industry. (-ReadWriteWeb)
Note: Their is a small glitch around 7:40 where the video skips over a few seconds; funnily enough (for the conspiracy theorists out there) this is exactly where I say that had ZSIN’s existed, the extent of the disasters that occurred in the mortgage securitization markets would have been at least an order of magnitude smaller…)
Huge congratulations to Stefan Glaezner and Eileen Burbidge for creating the White Bear Yard space for start-up entrepreneurs in central London. I’ve seen the space and it’s terrific with the only (very small) downside being a reasonably long walk from the nearest tube station.
Since we embarked on our Nauiokas Park adventure, one of the elements of our vision has been to create a common working environment allowing us to be close to the companies we invest in, but more importantly bringing together the hard-to-quantify but very real benefits of having a shared working environment. Having spent 15 years working on trading floors, I know what the advantages (and disadvantages) are and for very early stage start-ups. In particular the benefits of just having some people around are huge.
We have a few different – and hopefully smart, interesting – ideas of how we would do this but they will have to wait until we have the necessary funding. Until then I’m only too happy to heartily recommend that any London based start-ups looking for space (and funding) talk to Stefan and Eileen and try to get a desk or two at White Bear Yard.
Instead, Wall Street needs to be reinvented from the bottom-up: by a new generation of radical innovators, to create thick value, for an authentically shared prosperity.
Building a disruptively better global financial system is the central challenge —and the largest, richest opportunity — for today’s economic revolutionaries. It’s time for Finance 2.0.
Investors, entrepreneurs, and radical innovators of all stripes: it’s time to It’s time to go big, or go home. You’re happy that social gaming is worth billions. That’s nice. But it’s also chump change. Because the gains that can flow from better capital markets are worth trillions.
Finance — not video games, advertising, cleantech, or social nets — is where 10x+ returns lie for today’s venture investors, and life-changing fortunes lie for entrepreneurs.
Hallelujah. Anyone who knows us knows that this is right out of our pitch book. And yet. It’s not easy. And I’ve been wondering why that might be. How much of it is a ‘turkeys not voting for Christmas’ problem? Or is it a question of ‘Lord, make me chaste. But not yet…’? I don’t know, hard to tell. Anyhow I’m sure we’ll get there in the end, but there is so many exciting opportunities and so much potential sometimes I struggle to understand why we aren’t reduced to beating back hungry investors with a stick. I guess the real answer is that we need to spend more time seeking capital and less time investing it. But I tell you that just doesn’t seem right. It should be the other way round, no?
A wise man (not being sarcastic – he really is wise) once told me of a very large private equity firm where he used to work at one time. He said they had a lot of smart and ambitious people. And a few well, Forrest Gumps. The latter took care of investing, while the former focused on the much more important job of raising more and bigger funds. I thought he was joking. I’m now pretty sure he wasn’t. (Note to self: area no. 697 of financial services ripe for disruption: allocation of capital to private equity managers…)
There has been much recent angst in the venture capital world about funds that are too big, and indeed the same debate flares up from time to time in the hedge fund world where many strategies (although not all) have analogous scaling problems (over-crowded trades, positions too big for the market, opportunities too small to ‘move the needle’ of a big fund.) But investors time and time again prefer to take the safe route and ‘buy IBM’. The classic fail-conventionally-versus-succeed-alone trade. Don’t get me wrong, there are some amazing big funds – where as an investor you get to eat your cake and have it too: ie great returns and the ’safety’ of a tried and trusted organization – but there are also many many mediocre funds who have grown out of their edge and had their business objectives perverted into raising and keeping ever larger amounts of AUM, rather than having the objective of generating the best possible risk adjusted returns. I guess the fund-of-fund structure was one answer to solving the dilemma of how do you scale allocation of funds into many small and/or new managers, unfortunately more often than not, many of these funds find it easier and safer (reputationally not financially) to slide back into allocating to the same old, same old. (And a few bad apples discredited the whole concept by just putting all their money into a ponzi scheme and taking fees for their trouble!) I’ve thought about this a bit, and I must admit I have yet to come up with a clever mechanism that would solve the problem of efficiently (and safely) getting investment capital out into the ‘long tail’. But I’m sure it exists. Especially with the tools and access to information available today.
We also need to fix the supply-side by taking away the naked incentive for asset managers to blindly pursue AUM growth as a priority. This is easy. It was the first thing I said I’d do differently – three years ago – if i ever managed outside capital. It seemed so bloody obvious: management fees pay the cost of running the business, carry or performance fees are the juice. So set management fees at the level of the operating budget. Simple. You would think investors would love this as it reflects the true cost of managing the investments and aligns interests. Sure, it is a bit more complicated than just multiplying the capital by a fixed percentage, but only a bit: the cost structure of an asset manager is not exactly complex – people, an office, some travel, IT (more or less depending on the strategy) and some professional fees (legal, accounting, etc.) Further if there are economies of scale to be had in the strategy in question, these would be naturally passed on to the investors as the costs as a percentage of assets would naturally decline as assets grow, but the managers would be indifferent to this and so aim for an amount of assets that allowed them to create the best returns net of management fees. Indeed this is exactly what Paul Kedrosky suggested the other day. (Once again perhaps we were too early!) We thought potential investors would love this. The reality (so far) is that most have been at best indifferent and in a few cases outright skeptical – “That sounds too clever, why don’t you just stick to 2% like everyone else…” (I’m not making that up!) ie Don’t rock the boat. And that’s a problem, because we’re all about rocking the boat! And I can’t see how we can be otherwise and remain credible when our value proposition is to identify and invest in disruptive business models… (Sigh.)
Anyhow, Umair don’t lose faith, we’re working on it!
As many of you know, last week was ‘seedcamp week’, the third one since following Saul and Reshma’s initial inspiration in 2007 when what was to become Nauiokas Park became one of the founding investors alongside the (better known and more established) giants of European venture capital. In fact I think it is fair to say that seedcamp may well have been the catalyst which tipped me down the path to creating Nauiokas Park which until that summer of 2007 had only been one idea amongst many percolating in my brain. So perhaps we are in fact the original seedcamp startup!
The concept and the competition has come a long way in a very short time and is testimony to Reshma’s energy and skills and Saul’s vision; I think the best gauge of their success is trying to imagine the European startup scene without seedcamp: hard to do. Perhaps the most exciting aspect of seedcamp’s evolution for me is seeing a more diverse and mature group of entrepreneurs rising to the challenge. And when I say mature I don’t mean older or later stage, but mature in the sense of marrying technical brilliance and/or an inspirational idea with a pragmatic and well-conceived business model. Gone (or mostly) are the ‘build-it-and-they-will-come-and-we’ll-sell-them-online-ads-or-something’ innocents of yesteryear. In their place this year we had a great, diverse and passionate group of talented entrepreneurs who not only had a lucid approach to building a business and making money but also seemed to be incredibly well prepared in terms of knowing exactly what they didn’t know and getting the best out of the amazing group of mentors that is the seedcamp community. Indeed my greatest regret this year was missing a day of mentoring due to an unavoidable (and unscheduled!) board meeting – not only because it meant I didn’t get to meet as many of the teams in person as I would have liked, but also because I didn’t get to soak in the advice and world views of the many other great mentors in parallel.
Judging this year was both easier and harder than in years past. Easier because almost every one of the finalists had a strong and reasonable claim on being a viable business; harder because it was less easy to choose from such a large and diverse number of relatively closely matched competitors. In no particular order, my favorites were Boxed Ice (whom I had originally met at mini-seedcamp London and been impressed), Erply, Codility, Talasim, Joobili and Fabricly.
Of the finalists this year, once again very few would fall within our investment universe and indeed that is something we’d like to help change going forward. Resource constraints – time, money, people – have not yet allowed us to pursue this but I would love to work with seedcamp to run a mini-seedcamp ‘Finance’ to source, develop and encourage more startups to go after a market that is just crying out to be disrupted. Indeed after the incredible success of the geographically focused mini-seedcamps in 2008/2009, perhaps it might might sense to extend the mini-seedcamp idea down a sectoral vector next. While the variety of sectors and business models represented in the applications this year is certainly more varied than in 2007 or 2008, in my opinion the relative lack of diversity is probably one of the few important remaining weaknesses of seedcamp (and indeed the startup ecosystem in general.) Erply, Pearl Systems and Fabricly, while on the edges of our investment universe are definitely companies we will keep an eye on going forward. Fabricly in particular could become more interesting to us if and when they focus on developing their position as a central clearing-house in the fashion supply chain; I thought they had an excellent team and were unlucky not to have been amongst the winners. I was also very impressed by the team at Erply and would question the thinking of anyone who would consider the opportunity they are pursuing as ‘boring.’ With respect to our investment universe, Codility and Advertag I would say are wildcards insofar as their current business models would not fit within our approach but I suspect both have technologies that could be repurposed to target financial services and markets more specifically. Ones to keep on the radar screen perhaps.
Although I am relatively less active than I might otherwise be as a direct result of my significant commitments (of both time and capital) to Nauiokas Park, I have managed nonetheless to make a handful of angel investments over the past couple years, three of which have been seedcamp winners or finalists: MyBuilder (2007), School of Everything (2007) and Kyko (2008, launching soon…) In this year’s class I’d definitely consider investing privately in Boxed Ice, Talasim, Joobili and Fabricly but unfortunately its clear there is no way I would be in a position to lead any of these given my constraints, but if/when they do decide to raise outside capital I’d love to see a term sheet…
A couple years ago, I had just decided to try to build what would become Nauiokas Park. I wasn’t entirely sure exactly how I was going to go about it but I had a vision of what it might look like and I knew the market opportunity – to develop technology-enabled disruptive business models in financial services and markets – was vast. Also, Saul and Reshma’s inaugural seedcamp had given me an excuse (or a push) to stop ‘mulling it over’ and ‘get started’ even if I didn’t exactly know what ‘it’ was yet.
One of the first things I did was to start building a database of startups and private growth companies that I thought fell into my embryonic firm’s new investment universe, and one of the first companies I added (on August 29th, 2007 to be exact) was Mint.com. I had first heard of them early that year when they were raising a Series A round and the concept had always appealed to me (and I had always wondered why banks had been so oblivious to it.) I had definitely hoped to be able to take a closer look once I had raised outside investment capital (they were already past the seed stage where I could have contemplated trying to play as an angel) and so it was one of the first companies on our internal ‘radar screen’. Well as they say in the start-up game, it always takes longer than you expect and here we are – one giant financial crisis later – in the fall of 2009 and Mint will now be coming off our radar screen (into our archives) having gone and gotten itself acquired by Intuit for $170mn.
On the one hand, it is exciting to see innovation in the space we are calling our own, succeed and be rewarded. And although I’ve never had the pleasure of meeting Aaron, I would like to congratulate him and wish him continued success with Mint and Intuit. Who knows, perhaps I’ll get to meet him in the future. Maybe when he’s contemplating his next venture? On the other hand, I can’t help but wonder if they sold too soon. I have to insert a disclaimer here – I have absolutely no idea what Mint’s financials looked like – so my view is entirely speculative, but I can’t shake the suspicion that if they had enough traction to get $170mn from Intuit, they had already hit and passed the inflection point and could have aimed at becoming (at least) a billion dollar company and owned the space.
Bittersweet? Well partly for not having invested as an angel but that’s just back-trading, so not really. Mainly it’s because – if the company was for sale – I would have really liked to have been in a position to run our slide-rule over it and, if it made sense, put in a bid, either alone or as part of a club deal with one or two private equity peers. If they have attained critical mass – which it looks like they may well have – it doesn’t take too much imagination (if you live in the sixth paradigm) to see them developing into a multi-billion dollar business over the next 5 years or so. Don’t get me wrong, I understand why management, the angels and the VCs, might find this exit attractive, especially given events of the past 24 months, but I can’t help thinking they’d done the hardest part and instead of letting a winner run, took their profits too soon.
PS If anyone knows where I can find Mint’s financials and projections, I’d love to have a look.
Nauiokas Park – which was set up last summer by Amy Nauiokas and Sean Park, a former head of debt syndicate, credit trading and digital markets at Dresdner Kleinwort – has recruited an ex-NYSE Group electronic trading expert and the former global co-head of financial technology advisory at Deutsche Bank as venture partners.
Nauiokas Park was set up by the pair to offer strategic advice, leadership and capital to growth companies with innovative business models at the intersection of financial services, markets and technology. Nauiokas has in the past featured in Financial News’ list of the Top 100 Women in Finance, while Park is a former Financial News Rising Star.
It has now struck a joint venture agreement with Financial Technology Advisors, a new corporate finance and advisory boutique set up by Udayan Goyal after he left Deutsche Bank in February. Goyal has become a venture partner at Nauiokas Park. The two firms share offices in central London.
Also joining as a venture partner is Sam Johnson, a former vice president in equities electronic trading at Goldman Sachs who left in 2000 to found a trading connectivity solutions company that was acquired in 2007 by NYSE Group. Johnson remained at NYSE, most recently as executive vice president and co-chief executive of NYSE Technologies, until his departure earlier this year, according to Nauiokas Park’s website.
Nauiokas Park has made five investments since its creation, but market conditions have put its focus more on advisory work in recent months, according to its founders.
Nauiokas said of Goyal’s arrival: “When we launched it was clearly a very interesting time in the markets, and while our long-term capital raising and investment strategy has not changed we made the decision to focus our efforts more on consulting and advisory work. As Sean and I turn our attention back to capital raising, it makes sense to bring on a partner who can share in and pick up the advisory side of the business. The partnership with FT Advisors offers complementary skills in a similar sector and critical mass for both firms.”
Park also highlighted the complementary skills of the four partners encompassing financial sector experience and knowledge of the start-up technology industry, citing the “technical skills and network contacts” of Johnson, whom he has known since their days playing rugby at the same university.
Nauiokas said the company hopes to turn its attention to fundraising soon, following signs that investors’ risk appetite is returning in the financial sector. Nauiokas Park is weighing several potential investments, while broader plans over the coming months could include expanding the team at analyst and associate level, particularly in New York.
Nauiokas and Johnson are based in New York, where the company does not yet have offices, while Park and Goyal are London-based, and Park believes the rare approach of having twin bases spanning the Atlantic can yield benefits because the London and New York markets are very different and yet equally important in terms of understanding and investing in emerging opportunities for disruption and innovation in financial services.
– Write to Vivek Ahuja at vahuja@efinancialnews.com
Aren’t sure what kind of overlap there is between Financial News and Park Paradigm subscribers so hope they don’t mind me posting this here.
If innovation grows at Nauiokas Park, some of the best seedlings come from the fantastic seedcamp nursery. We were particularly pleased that folks like Timetric, CityOdds and GymFu walked away winners from the London Mini Seedcamp in April after we had encouraged them to apply. And so with this in mind I want to encourage ambitious, intelligent and passionate entrepreneurs, young and old(er) to test out their vision, ideas and execution skills at seedcamp week 2009. There is only two weeks left to apply and I sense that the competition for places will be very keen indeed, so don’t leave it until the last minute to get working on your application.
On behalf of Nauiokas Park, I would particularly like to encourage and see more start-ups focusing on disruptive innovation in the financial services arena. There is so much opportunity in this vast sector of our economy and yet it seems as if many or most entrepreneurs tend to avoid applying their technological or business model creativity and innovation to this market. Clearly there are some barriers that don’t exist in other sectors or markets but by the same token, in many instances, the potential rewards are accordingly significantly higher.
In any event, for any ambitious start-up in Europe (or even further afield) today, applying to seedcamp is a no-brainer: even if you aren’t selected as a finalist, the work needed to submit a robust and cogent application will serve you in good stead as you look to build out and finance your new business. If you are a finalist, the contacts you make and the information you will absorb during the week are something that can not be bought for any amount of money. And if you happen to win – well that’s just icing on the cake! So what are you waiting for? Apply! You’ve really got nothing to lose.
We hope you’ll agree. Never seemed to quite make it to the top of the never ending list of priorities and then when it did our favorite designers were booked up for months (that’s what happens when you are good.) Anyhow it was their concept and we loved it. I hope you like it too. So now you really can go visit Nauiokas Park, at least the one in the cloud!* And while you are there, don’t forget to stop by and buy a book or two, we figure if we sell 130 million books or so, we won’t need to raise any outside capital and better yet we will have created an enormous community of like-minded souls to help us in our mission to catalyze innovation and well, change the world.
And for those of you who always wondered it’s: \ˈnī\o-kas\ˈpärk\ -
Etymology: Modern finance, from Anglo-American, from Banking, Trading and Technology, from Latin crescere to grow, visio to see and successus
Date: 21st century
1 a : a place where capital and ideas meet b : a space at the intersection of financial services, markets and technology
2 a : an area designed to nurture and grow companies with “disruptive” business models or technology b : a place where expertise in strategy and operational execution combine with experience and a vibrant network to create value
3 the center of an ecosystem from which will grow the next paradigm in financial services and markets
4 a state of mind characterized by creativity, curiosity and an openness to new ideas
5 a place where innovation grows
And remember, everything takes longer in a start-up than you thought it would!
* In the spirit of eating our own dogfood, we used cohesiveFT’s Elastic Server toolset to set up our -admittedly very simple – virtual web server in the cloud.
Every executive committee member of a large bank, exchange or insurance company should read Kirk Wylie’s latest post to understand why their cultures are broken and why they so regularly find their organisations blithely running off the edge of a cliff, comfortable in the knowledge that, “well, hey at least we’re all doing it so it must be ok” and safe in the knowledge that their is a big taxpayer airbag (or trampoline?) at the bottom protecting them from any nasty consequences. Of course they are unlikely to – except in the unlikely event that it gets published in one of the traditional echo chamber publications like the FT or the WSJ.*
I’ll resist the temptation to copy/paste the whole post here but please go read it as this excerpt doesn’t give it justice:
Independent, entrepreneurial techies can actually make the biggest impact in the organizations that fight against them the most: they’re the ones that need them the most. Use them as agents for change, challenging assumptions, challenging entrenched attitudes, challenging technical group-think. Otherwise, your worst employees (the ones who can’t really get a better job elsewhere) win, and you as an organization fail.
Kirk is speaking of technologists, but the same thing applies across the organization. But big organizations kill entrepreneurship, actually it’s in their DNA. It’s not news, tall poppies and all that. As I was leaving 16 years of working – mostly happily – in big organizations I spent a lot of time thinking about why this was (and also why I hadn’t noticed it earlier in my career.) The answer to the second question was really because of luck. For 90% of my investment banking career I had the good fortune to be right in the heart of building three new and transformational markets: first the Ecu/Euro market, then the European credit markets and finally the move to ‘electronic’ capital markets. Throughout this part of my career, innovation, entrepreneuralism and independence actually helped me succeed because there was no pre-existing status quo to upset. This only became apparent to me in hindsight.
The answer to the first question is now obvious to me, but it wasn’t always so and really only revealed itself when I left and was able to step back and look at the machine from the outside. The expression ‘well-oiled’ machine says it all. This is the ultimate compliment used to describe a successfully managed organization. So where does non-linear innovation, disruption, questioning fit in a well-oiled machine? It doesn’t. In fact the more ‘well-oiled’ the machine, the less tolerant it is of exceptions. (Which also explains why I operated happily for so long at DrKW!) Switching metaphors, entrepreneurship is seen as a virus in these companies and they produce potent ‘corporate antibodies’ to seek out and subdue any such viral outbreak and they do everything (pace Kirk) to innoculate themselves against them in the first place.
But what is a CEO to do? The ‘well-oiled’ bit is equally important. I am sympathetic to this. (I mean if I was in charge I wouldn’t want too many of me’s running around, that would be chaos.) It’s not an easy question to answer and is made even harder (especially if you are running a public company) by the fact that the visible benefits of the entrepreneurial genes are only realized over time – I’d guess at least 4-5 years at a minimum and sometimes it might take as long as a full business cycle. And yet the average leadership tenure in these organizations is at best at the short end of that, and the compensation and stock market cycles are much shorter. I’ll be frank and say up front, I don’t have an answer but I’ve got a couple ideas I think are worth trying.
The first is to set – from the top – a deliberate human resource policy of seeking to “doping” the organization with a limited and controlled number of people like Kirk. (Doping is the process of adding controlled impurities to a material – for instance a semiconductor, or metallic alloy – to improve it’s useful properties.) This needs to be managed very deliberately, like a program – put a senior HR person in charge of this and manage it: these people will likely have a higher turnover, complain more often, get into trouble, want to change projects and/or departments and so need their own career track. I’m not sure what the correct ratio is, but I would guess it’s on the order of 1-2% of total staff, not necessarily evenly distributed throughout the company. (I knew my Materials Science degree would come in handy one day!)
The second is to create – and then protect institutionally, not personally – a specific department dedicated to exploring ‘white space’. When I say protect institutionally, I mean frame it like a trust so it cannot be undone or hacked by successive waves of management and is insulated from the quarter on quarter, year on year vagaries of the economy and/or the companies results. If you don’t do this, you will inevitably fall victim to the problems Azeem enumerates in his great post on why corporate venture capital (almost always) doesn’t work. Before all the serious, “pragmatic” people out there roll your eyes all at once (if indeed any such types would consider wasting time reading a blog) this doesn’t and shouldn’t need to be a big ask. Again probably on the order of 1-2% (even less for the biggest companies), of resources. The best example in practice I can think of is Xerox PARC, although the irony there is that Xerox didn’t really figure out how to plug PARC’s non-linear thinking and brilliant innovation back into the company (or at least not very well.) But perhaps that is not a bad thing (in proving my point) because I would posit that all other things being equal, Xerox’s share price has been higher (than it otherwise would have been) because they owned this asset. This cheap, deep out-of-the-money call option on the future. As far I as can tell, this is also what BT is trying to do with BT Design led by my friend JP and it is heartening to see that – at least so far – he is being allowed to continue to pursue this vision despite (and hopefully even because of?) the very poor results of the past couple years. I don’t know of any truly analogous initiatives in big finance.
And indeed that is (one of the reasons) we decided to set up Nauiokas Park. Clearly we’re not the whole solution, but we think we can play a key role for big financial institutions: a way to have (some of) their cake and eat it too: by entrusting a relatively small amount of financial capital to us, we think we can create just such a verdant ‘garden of innovation’, allowing them to harvest the fruits of some of the most dynamic entrepreneurs active in their industry, while protecting and nuturing them, away from the noxious antibodies of the corporate organism. Indeed, taking a page out of John Seely Brown, I guess you could describe our mission as seeking to create a vibrant knowledge ecology for finance and markets, and help our stakeholders profit from it:
There’s a fundamental change from finding ways to innovate inside a corporation to leveraging the knowledge ecologies of many little companies in places like Silicon Valley. You find that the shift turns much of the classical R&D into A&D – that is, acquisition and development. Larger companies can buy the research they need and instantly acquire a diverse portfolio of research groups.
I’ll be honest though, it’s not an easy sell. Even for the corporate leaders who ‘get it’ the reflex instinct is to think (sometimes aloud) “makes sense, but we can do that ourselves”. Well, you can’t prove a negative, but we’ve spent a long time inside these same big financial institutions, and our many years of experience led us to conclude that it is bloody hard to do (for all the reasons above and more.) On the bright side, being challenged makes you think harder and forces you to refine and adapt your ideas, ultimately making them better. Hearts and minds. Hearts and minds. Wish us luck.
* Just to be clear, I have nothing against the FT or the WSJ per se, I read them regularly (well WSJ not so much) and think they are solid publications. I’m not suggesting they aren’t important sources of information and opinion – you’d be stupid not to read them if you are in finance – just that, and this is the wonderful thing about the world in 2009 – I think you need to read much more widely and in particular embrace at least a diversity of viewpoints, if not views.
We can make our world smarter.
Intelligence can be infused into how we manufacture and sell… move goods, people and money…
The world is ready for a smarter planet.
Find out how to build it together.
If you would rather avoid wading through the inevitable corporate speak on IBM’s website, a good place to find out about what they are doing and how they are thinking is this recent article “IBM’s Grand Plan to Save the Planet” from Fortune:
In the parlance of the information technology industry, these situations all represent “dumb network” problems. The term sounds pejorative, but it simply means that we don’t truly understand commuter traffic or electricity flow or the inner workings of the cacao genome, and as a result our highways, utility grids, and cash crops are not managed as effectively as they could be.
The good news is that we now have the technology to convert these analog distribution systems into multidirectional “smart” networks. Readily available sensor technologies like RFID chips and digital video can track movements in granular detail. Cheap data storage, powerful analytics software, and abundant computing capacity give us the ability to warehouse and make sense of all that information. With the knowledge we’re gaining, we can remake our world in a more efficient way…
…So Palmisano is encouraging his employees to think even bigger, to scout out any dumb network that can be made smarter. Because, as any self-respecting capitalist knows, in great pain lies dormant profit. “We are looking at huge problems that couldn’t be solved before. We can solve congestion and pollution. We can make the grids more efficient,” he says. “And quite honestly, it creates a big business opportunity.”
By now, you probably understand why this resonated with me; there is significant congruence with the themes explored here and that underpin the foundations of out investment thesis at Nauiokas Park. In particular applying the amazingly powerful computing technologies that exist today to make sense of highly complex systems and networks, and of course to analyze and extract meaning from enormous and growing data sets. (Of course it’s also nice that they seem to have been inspired by our logo when designing their icon for ‘Smarter Money’!) On their website, IBM describes the opportunity they see for Smarter Money for a Smarter Planet:
Money, in other words, has been reduced to zeros and ones. It’s intangible, invisible. It’s information. Which is central both to the problem we face and to its solution.
Without question, the replacement of physical money with electronic money — and the spectrum of financial innovations that have accompanied it — have helped the world’s economy grow and prosper. But our technical and management systems haven’t kept pace. They couldn’t provide warning signals of risk concentrations, over-leveraging or underpricing. Banks could repackage risk and sell it, but they couldn’t value an individual loan in order to unwind the debt when needed. However, the same digitisation that has helped create this challenge is starting to provide the means to solve it. Intelligence is being infused into the way the world works, including our financial systems.
We’re all aware of advances like online banking, but the transformation happening underneath is far more profound.
Unprecedented computing power and advanced analytics can turn oceans of ones and zeros into insights, in realtime. Which means we could potentially have a more transparent, predictable and intelligent financial system for a smarter planet.
While it is very exciting to see a giant like IBM get behind such an intelligent and forward thinking strategy, I must admit I was a little disappointed not to find more substance on the Smarter Planet websites. It’s not that I suspect this is just a nice marketing campaign, rather that the communications department needs to work a bit harder to plug in to the projects and ideas IBM is working on in the trenches so to speak to make this vision a reality. And I think they could do more to engage a wider community through their Smarter Planet Blog and/or other social communication tools. Again as it is now it seems a bit sterile and very much a one-way broadcast, as opposed to a two-way dialog. Indeed one of the things I’ve tried to do – both through this blog and with our company – is to help to build a community of people interested in debating and shaping the future of financial services and markets. I think we have had some success, however I have nothing like the reach or resources of a giant like IBM and so it would be fantastic if they were to join the conversation and amplify it far beyond our modest community.
The Fortune article concludes:
Leadership positions, as the company knows all too well, come and go. But with luck, the tone of “Smarter planet” will remain. The message – that technology can be deployed to greater ends than creating the next fetishized cellphone – is bigger than any single company. And so, too, is Palmisano’s epiphany. He deftly led IBM out of the dotcom doldrums. Perhaps more important, he has revealed a model for monetizing scientific research in a way that benefits humanity.
Sure, not everyone can afford $6 billion a year for R&D. But real innovation rarely comes from big, rich companies. With luck, IBM’s ad campaign, coupled with its blowout 2008, will call scientists and entrepreneurs to arms. They’ll see our archaic global shipping infrastructure, a dilapidated educational system, disappearing honeybees, the fraud on Wall Street, and think, I know how to fix that. And I can make a killing doing it.
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I guess the real answer is that we need to spend more time seeking capital and less time investing it. But I tell you that just doesn’t seem right. It should be the other way round, no?![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_c.png?x-id=10483c2d-bbf4-4a59-afd1-59196fc4e09a)
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By now, you probably understand why this resonated with me; there is significant congruence with the themes explored here and that underpin the foundations of out investment thesis at ![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_c.png?x-id=854c3cc5-9621-4020-a308-66b6d1ecc635)
