The names Steve Jobs and Elon Musk have become synonymous with innovation. While at Apple, Steve Jobs revolutionized music, cell phones, media, personal computing, and more. Elon Musk pushed the envelope by creating a new vertical in the auto and energy industries through Tesla and has revolutionized the space industry with SpaceX. These pioneers have had an incredible impact on their respective industries, but they achieved this success through distinctly different approaches.
At Apple, Steve Jobs found gaps in existing products and then revolutionized the sector with proprietary technology. The iPhone, iPad, iTunes, and Mac changed how consumers interfaced with media by putting it at their fingertips and offering an unmatched user experience. In contrast, Elon Musk created a new category within the reluctant auto industry; the result of Musk’s efforts extended beyond cars to the creation of flame throwers, boring machines, solar roofing shingles, and new battery technology. Where one innovator pushed progress through improved technology in focused industries, the other introduced new technology in unexpected places.
Investment management technology has a long track record of adopting technology cautiously and waiting for other firms to prove it out. Fifteen years ago, no asset manager or software vendor would consider replacing on-premise data centers with a cloud infrastructure. Though many technologists saw the advantages of cloud, the flexibility of the platform, and the potential cost savings, few were willing to make the first move. Now we see cloud technology throughout investment management—noting that other industries have benefited from the cloud for years, the question is whether cloud adoption could have occurred sooner in our industry? How can we push the envelope further, faster when it comes to technology advancement in the asset management space?
In recent years, we’ve seen a number of fintech companies take on incumbents in asset management technology. The comparison to Elon Musk could easily be made—these new entrants are strong on technology, but less experienced in the industry. Few have made it past the point of entry before they re-direct focus to industries with lower barriers to entry or are acquired by stalwart technology vendors in our space. So does that mean that we, collectively, prefer the Steve Jobs approach? Do vendors need to know the industry inside and out, and improve upon what’s already there to be accepted by asset managers? Or is there room for a real disruption if the right solution comes along?
We’ve been promised revolutionary technology repeatedly over the past few decades, but real improvement on operational processes and technology has been hard won. It takes an extraordinarily nuanced understanding of the investment management lifecycle to offer value that will be embraced from the front to back office—and that has typically come from the type of continuous improvement that helped Jobs re-shape personal computing and media. When Steve Jobs hit it big with Macintosh, legend has it that he took his own expertise and improved upon the Xerox Alto personal computer (for tech nerds, Malcolm Gladwell offered a fascinating deep dive on this in the New Yorker). Continuous (and sometimes slow) improvement like this is endemic to our industry—a select few vendors built early investment accounting systems that we’ve been building upon those since the 90s. But as managers and service providers move more of their infrastructure to the cloud and centralize their data, it seems the groundwork may be laid for fintechs to swoop in.
With scalability and data access being revolutionized in investment management, vendors that couldn’t break into our industry might finally be able to scale those tall barriers to entry. After all, Elon would never have broken into the automotive industry to build the Tesla if the battery technology wasn’t ready. Though I hesitate to prognosticate about “disruption,” I do see a future where fintechs at least have access to the playing field and look forward to seeing how that might push technology in new and unexpected directions.