Tim Bourgaize Murray: The Buy Side's Uberization

Anyone who lives in New York will have noticed Uber’s advertising push earlier this summer, haranguing the current mayoral administration for examining city traffic congestion patterns—which Uber claimed would be the first salvo in a battle that could potentially rob the city of “10,000” driving jobs, if the city somehow came to limiting the car service’s operating capacity, or banning it altogether.

This isn’t a new strategy for Uber. Obviously the multi-billion dollar company is known for its rapid ascent and novel approach to, well, efficiently moving people around. But it’s just as aggressive at dealing with its opponents—usually local officials who aver its lack of regulation, and old-school taxi interests who don’t appreciate being so easily crowded out of a market they’ve had cornered forever. But easy success does tend to do this—breed vicious defense of territory, even in the cool, hip, digital “sharing economy.”

The issue has even risen to the level of the early presidential campaign in the US. During a debate on a political news show I caught this week, the host argued with a panelist over whether Uber is “truly disruptive.”

He explained that people have been paid to drive others around since the Depression—it’s just the interface that’s different. And that got me pondering this month’s feature on buy-side digitization.

Inside & Out

But look at Uber: Its at-your-fingertips convenience is only part of it what makes it successful. The other part is the underlying technology humming somewhere in a datacenter, algorithmically determining prices and commanding what amounts to a super-sized GPS to match demand with supply in real time. The secret sauce is really the thing sitting in between the good idea and your iPhone’s screen.

It’s no secret that the banks are very concerned about new technologies—digital currencies, crowdfunding, and peer-to-peer lending among others—disintermediating some of their bread-and-butter services, but we hear less about this in asset management.

Sure, on the advisor side there are robo-advisors popping up, and that’s a space worth watching. But as you move up the investment chain, and the more complex an institution’s needs become, the harder it is to introduce an Uber-like alternative.

Why? Unlike your taxi driver, who is just a stranger with a license, these things rely heavily on relationships and on well-defined legal and operational processes, all of which makes the business harder to crack. For that matter, when a public pension comes asking about why it’s suddenly broke and unable to fulfill its mandate, they want people to blame, not machines.

Rightly Concerned

Still, these firms are rightly concerned—and little surprise that relationship management and better product tracking are the twin emphases as they embark on greater digitization inside their own shops.

We’ve heard time and again about the reasons for buy-side firms updating their client interfaces: We’re all accustomed to using intuitive apps on our smartphones, and that has changed expectations for user experience across financial services. They also want more performance information, faster.

But look at Uber: Its at-your-fingertips convenience is only part of it what makes it successful. The other part is the underlying technology humming somewhere in a datacenter, algorithmically determining prices and commanding what amounts to a super-sized GPS to match demand with supply in real time. The secret sauce is really the thing sitting in between the good idea and your iPhone’s screen.

Lessons Learned

Even if they’re a few years behind, asset managers seem to have learned that lesson—be pretty on the outside, smarter on the inside, cross your fingers, and maybe you won’t go the way of other disintermediated industries. It’s a difficult thing to do—people will resist, technology doesn’t always fit together, and constant prototyping isn’t cheap—but it already appears well worth the effort.