BUSINESS

Imagine if you were told that you could no longer use your muchloved washing machine to do your weekly laundry. How would that make you feel? Not only would this prospect require notable time commitment, but the effort also required would be substantial. By the time you recover from the hard labour, your weekend would be gone, leaving you feeling that there should certainly be better ways to spend your muchdeserved weekend. Washing machines are a great example of how technology continues to simplify our modern lives, thereby allowing us to be more efficient with our time and efforts. Relating this to business, such characteristics are essential. When it comes to business, time is indeed money. Every second you spend nursing an inefficient process equates to Rands lost in revenue. It is, therefore, paramount to invest in efficient processes and technology is one of the best tools to do this.

Similar to how a washing machine allows one to complete a daunting task with just a click of a button, in the financial markets industry, the automation of otherwise time intensive activities has brought about notable efficiencies to the way business is done.

Tasks that would normally demand substantial time commitment each day and effort can now be programmatically scheduled to independently run at a given

time each day. Thereby ensuring that even if you are not physically available, the show still goes on. As a quantitative analyst within the financial markets space, I have learned to appreciate the importance of technology in the decisionmaking process.

However, technology alone means nothing without reputable data to analyse and thereby base the decision-making process on. Essentially, data is king when it comes to decision making. Aside from traditional data sets, alternative data such as satellite imaging and social media activity of individuals has become a notable commodity. Once one has access to reputable data, technological advancements such as computer programs allow us to put this ample data to good use, thereby deriving key insights from the assessed data. In fact, the availability of data continues being the hindrance to the next best performing investment strategy.

Interestingly, we are all naïve participants to the new age of doing business. For instance, each moment we spend on our smart phones, the alternative data databases gain more data points. Not only are we creating data by posting on social media, but each time we view a post, react to it or share it, we have unknowingly created valuable data insights.

Ever wondered why you mostly get random adverts for things you actually have an interest in? Well, that is the power of machine learning - a sophisticated computer system that is based on statistical models and algorithms where the models analyse and learn from patterns thereby adapting to new information without following any explicit instructions.

Bringing it back to financial markets, technology has revolutionalised the industry in many ways. By now you might have heard of the term ‘big data’ which refers to large sets of data that can be analysed computationally to derive inferences such as trends and patterns. For instance, investment strategies are based on indicators. These indicators would inform the fund manager about the key drivers of a given economy or asset class. Though some indicators are based on traditional data, such as the unemployment rate of a given economy and the Price Earnings ratio (PE) of a given company, some require more alternative sources of data. A good example is the sentiment indicator of the average investor that can be tracked though social media activities of a given population. Of course, it is not a straightforward task collecting this form of data and transforming it to a format where investment insights can be derived. This is where machine learning and artificial intelligence – which refers to using “machines and computers in order to mimic the problem-solving and decision-making capabilities of the human mind” (IBM) - come in.

Thanks to these tools, fund managers are now able to construct investment strategies that are based on solid processes that are informed by data. Not only has this reduced risk by ensuring that human biases have no room in the decision-making process, but these have further led to more accurate return forecasts. Finally, efficiencies have improved thereby ensuring that costs are kept to a minimum. It is clear that technological advancements play a significant role in our modern day lives. As reliance on technological systems increase, it is important to understand that no system will ever be smarter than a human. After all, the same system was programmed by humans. We should, therefore, understand that technology is merely there to improve our day-to-day lives, but we are still running the show. We should, therefore, continue to learn and evolve so that we are not left one day fearing for our lives, with the thought that robots are taking over the world like in a classic apocalypse sci-fi movie.