MIT’s Symposium On The Future Of Fintech: By Matthew McGarvey

MIT’s recent symposium on the future of Fintech introduced three concepts that could be applied to sustainability efforts.

The first was Simon Johnson’s argument that Fintech’s biggest impact will be outside of the US and in lower and middle-income income countries. Dr. Johnson felt the opportunity in these markets would be “massive”. Middle-income countries, in particular, have just the right amount of infrastructure and need for financial disintermediation. Fintech’s potential to create financial stability via a decentralized system is “where the action is”.

As it stands, access to credit and capital remains significant structural barriers to economic growth in developing and middle income countries. Dr. Johnson’s belief is that advances in financial technology, specifically public blockchain technology, such as Bitcoin, will facilitate improved access to capital. In his view, public blockchain, and not private node drive blockchain technology, will mirror the Internet’s development in this regard.

Andrew Lo shed an altogether different light on the subject. His presentation focused on the unintended consequences of technology and where financial technology can play a larger role in helping advance society—developed economies in particular.

In Dr. Lo’s opinion, we’ve entered an era where Moore’s Law and Murphy’s Law are becoming intertwined. In other words, whatever can go wrong, will go wrong, only much faster and more frequently.

Dr. Lo focused the bulk of his presentation on the creation of completely customized precision indexes based upon the individual income, lifestyle and psychological makeup of the consumer. In his opinion, the technology is there, but the algorithms are not. We are not lacking in artificial intelligence, but rather in “artificial stupidity” that shows us how humans actually trade.

Contrasting the two presentations, it was clear that Dr. Johnson’s assessment that fintech will model the Internet in its development was spot on. The Internet initially exasperated the digital divide. The digital-haves leap frogged the digital-have-nots. Whereas technology was supposed to be a great equalizer, this has not proven to be the case. While fintech will unlock unforeseen access to growth and capital in developing nations, Dr. Lo pointed out how it will also add jet fuel to developed economies’ search for Alpha.

All of this was perfectly summarized by Dr. Roberto Rigobon’s presentation’s main thesis that we as a society continue to measure the wrong things.  Whether it’s growth or happiness, we are ineffective in how we measure things. In the case of fintech’s impact on sustainability, this will be shockingly relevant and increasingly important. From a sustainability perspective all we can do is continue to ask the question “at what cost”.