If a financial apocalypse is coming, AlgoDynamix could be the company to save us
Interested in learning more about the future of finance? Join us at WIRED Money in Studio Spaces, London on May 18, 2017. For more details and to purchase your ticket visit wiredevent.co.uk
WIRED Money takes place in Studio Spaces, London on May 18, 2017. For more details and to purchase your ticket visit wiredevent.co.uk
Dr Jeremy Sosabowski is trying to prevent armageddon.
At least, that was his pitch in a University of Cambridge interview in June. The armageddon in question is a fairly specialist one, involving more deep analysis of financial data, and fewer asteroids. What Sosabowski and his company, AlgoDynamix, are doing is looking for anomalies in global financial markets – clusters of abnormal investment patterns that might constitute the first rumblings of a crisis or a crash.
“Global financial markets are becoming even more interdependent by the day, making diversification and financial forecasting increasingly challenging,” says Sosabowski. “Past assumptions about correlations and the frequency of extreme events ([like the] US Election and Brexit) are making this even more complicated. Needless to say that occasionally things can and do go very wrong in global financial markets. The irony is not lost on the AlgoDynamix team that most financial models stop working when [they’re] most required.”
For Sosabowski, the best way for the financial sector to protect itself against the next big market drop isn’t to look back (if it were, the 2008 crash would be pretty hard to explain – or at least, harder than it already is). The answer isn’t even to look forward. Rather, the service the company provides – including to several of the world’s leading banks and other financial institutions – is the ability to spot a problem as quickly as possible once it starts, before it snowballs. If suddenly small groups of, say, investors who seem to be otherwise unconnected all start behaving in the same way, AlgoDynamix big data ears prick up, the software sounds an alarm and gives its clients a storm warning to shore up their defences if it thinks it’s spotted the beginnings of a potentially dangerous trend.
But the service the company provides isn’t just about giving companies an early warning alarm; it’s also about streamlining.
“Our software is empowering smaller organisations to better manage their assets in-house, breaking down the over-reliance on external asset/wealth managers,” Sosabowski says. “The new AlgoDynamix financial forecasting methodologies not only improve risk-adjusted returns but also construct fundamentally solid portfolios with characteristics very carefully tailored to exact user requirements. These advanced solutions are now being democratised, readily available to even more organisations within the asset/wealth management space including family offices, hedge funds and even the ‘traditional’ longer term asset managers.”
In that context, Sosabowski’s armageddon comparison comes into even sharper focus. It isn’t enough to say humanity hasn’t been wiped out by an asteroid before, and therefore we should switch off the telescopes. Nor should those at the telescopes be reliant on messy webs of interlocutors feeding competing predictions about the possibility of armageddon into the potentially apocalyptic white noise. What matters is to spot the asteroid when it comes, so we (or at least AlgoDynamix’s clients) have enough time to figure out what to do about it.
Q&A with Dr Sosabowski
1. What advice can you give someone struggling to change or evolve their organisation?
Two of the biggest red flags within any organisation are: “It’s always done this way” and “Yes, we are innovative, as long as long as nobody makes a mistake.” If this is part of your DNA you might be better off starting from scratch.
2. Share your prediction on what the financial services industry could look like within 12-18 months.
Financial services, by their nature, don’t move very fast. Maybe that is, in fact, a good thing. Ongoing changes will be incremental and happen at the periphery. The assumption that financial services will start moving at the same pace as other technologies such as ‘pure’ software or mobile isn’t going to happen anytime soon, [so] get used to it and see this as a positive, not a challenge.
3. What are you most excited about at WIRED Money this year?
Meeting people from all across the globe. And the free drinks.