Paul

About Paul Rowady

Paul Rowady is the Director of Research for Alphacution Research Conservatory, a research and strategic advisory platform uniquely focused on modeling and benchmarking the impacts of technology on global financial markets and the businesses of trading, asset management and banking. He is a 30-year veteran of the proprietary, quantitative and derivatives trading arenas. Contact: feedback@alphacution.com; Follow: @alphacution.

Decay of Knowledge, Rise of Tech Debt

Has (information) technology made us smarter? And, are there costs that counteract - if not, neutralize - the perceived benefits of technology? Given the intangible and elusive nature of the impacts, plausible answers to increasingly common questions like these usually defy placement into an analytical framework. This post is our attempt to begin to overcome such impediments and be as objective as possible about the full range of impacts from technology, whether the use case be personal or institutional. The Digital Attention Crisis Our hypothesis on the decay of knowledge and the rise of "tech debts" is based on the idea that knowledge decay in the digital era is influenced by the following chain of logic: The capacity of (human) attention is, at best, inelastic - both individually and collectively; The proliferation of technology into all aspects of our lives represents an increasing source of distraction, noise, and "overhead" - collectively known herein as technology debts; The payment of tech debts is likely to increase in tandem with the increasing [...]

By |2020-10-05T21:18:35-04:00January 22nd, 2018|Open|
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Bulge Bank Headcount Index – Q4/2017

Though still tracking at levels last seen in early 2007, Alphacution's index of "bulge bank" headcount - updated through year-end 2017 - continues to walk a tight rope of relative stability as it has continued to do so for most of the past 8 quarters (see exhibit below). This news also seems to track with the prevailing belief and commentary that the US economy is in relatively good shape - if not, at least, stable. As always, a look into the details - and specific banks - yields a more vivid story: For starters, and including Wells Fargo & Company (WFC), 5 of the 10 banks in this analysis are within 5% of their maximum headcount over the past 45 quarters. (Goldman Sachs and RBC are within 1%.) Meanwhile, with the index down approximately 150,000 employees from its high water mark in mid-2011, Citigroup and BAML have shrunk by 166,000 and 81,000, respectively, from their maximums. Rankings of individual bank headcount indices can be found below... WFC, the largest US [...]

By |2020-08-17T07:14:08-04:00January 16th, 2018|For Subscribers|
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In Support of Digital Content…

I have wanted to add these thoughts to our Feed for a long time: Though I suspect that nothing of value seems easy to accomplish these days, being a knowledge worker and content developer seems especially difficult given that the bar for being a content developer and, at least, pretending to be a knowledge worker has never been lower. It has become all too easy to become a producer of content given the tools and interconnectivity of the digital era. This state of play is somewhat paradoxical in light of the fact that knowledge, experience and creativity are the least likely categories of work to be automated away anytime soon. So, in order for knowledge work and content development to be economically viable these days, business models and consumers of digital content are going to need to change with the times. Author and neuroscientist, Sam Harris, who hosts the intellectually-stimulating Waking Up Podcast, has made the case for supporting digital content as well as anyone I've heard. Here at Alphacution, [...]

By |2020-10-05T21:18:13-04:00December 12th, 2017|Open|
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The Dawn of Operational … Beta?

If you've heard of the term operational alpha, then you likely know that it is a trending concept - similar to digital transformation - that seeks to leverage the latest digital-era tools and methods to foster increasing operational agility and resilience, particularly among asset managers. (Think: Citadel, the creator of the term - and one who arguably walks this walk as well as anyone.) Moreover, if your current job is related to implementing tools and methods that are designed to foster operational alpha, then you are likely working with or for a leading, forward-thinking player that is culturally tuned to navigate real change. The problem with alpha of any kind is that you can't really have alpha unless it is measured in relation to something else. Beta. In any case, we have some illuminating news for you: It turns out that operational alpha does have something relative to it - which makes it more than a concept. It's also a number. And, that number is based on another number that [...]

By |2020-10-05T21:18:02-04:00November 1st, 2017|Open|
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Context Machine: Introducing a Techno-Operational Benchmarking Framework for Asset Managers

Executive Summary Riding the wave of the FinTech juggernaut, technology now permeates all aspects of the financial services ecosystem; front-to-back, top-to-bottom and across the entire business segment spectrum. Any lingering gaps between technology strategy and business strategy are closing; making them indistinguishable from one another. And yet, for all the promise of the revolutions in artificial intelligence, cloud and big data, such attempts are met with unforgiving challenges. Most players in this ecosystem are still using dulled intelligence tools to navigate this rapidly changing and increasingly techno-centric landscape. Finding balance between the primary engines of productivity - information technology and human capital - continues to be conducted like a game of Marco Polo. Operational alpha - a kissing cousin of terms like digital transformation and process re-engineering - is a growing theme among the pantheon of new vernacular in this space that seeks to illuminate such challenges. However, despite its descriptive elegance, operational alpha remains an emerging and elusive concept. In the midst of an evolving supply chain, solution providers [...]

By |2020-10-05T21:17:52-04:00October 31st, 2017|Open|
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Broker Tech Spend Speaks Volumes

Broker spending on technology is one of those topics that rises to the top of the headlines from time to time, particularly given how much the market landscape has shifted in the past several years - and how competitive, regulatory, and new market drivers threaten to change that landscape even more along the road ahead. So, during the course of developing research on a related topic, we had occasion to expand our modeling in the area of market makers, broker-dealers, and related specialist execution technologies - and stumbled upon a different lens through which to evaluate "broker" spending patterns. In the following chart, we share a common format for presenting these kinds of figures; a ranking of 5-year average total technology spending by 9 public broker and broker-like companies. Simple output.  Mildly interesting. Ten's or hundred's of millions of dollars spent on technology is notable. But, not particularly illuminating. However, as we benchmarked technology spending using employee headcounts - a technique we use regularly - the picture packs an entirely [...]

By |2020-08-17T07:14:08-04:00October 19th, 2017|For Subscribers|
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JPMorgan’s Massive Collaboration Experiment

Sitting in on the Symphony Innovate 2017 conference last week in New York, the figure that stood out for me was not that Symphony had already achieved 250,000 users so far in 2017 - more than doubling over 2016 - but that J. P. Morgan (JPMC) represents about 60,000 of those users. (Did I hear that right?!) This is roughly 25% of JPMC's current total headcount of over 240,000 - and, upon further analysis, is likely concentrated within their corporate and investment banking division (48,748 employees for Q2-2017), asset management division (21,082 employees for Q2-20170), and to some extent the operations and infrastructure group known as corporate center (32,358 employees for Q2-2017). And while numerous other bulge banks (like Goldman Sachs and Bank of America) and large asset managers (like Blackrock and T Rowe Price, who claimed 6,800 users) are significant partners, backers and/or users of Symphony's communications platform, it occurred to me that with 60,000 seats, JPMC's footprint here just might represent that largest experiment in collaboration along the [...]

By |2020-08-17T07:14:08-04:00October 10th, 2017|For Subscribers|
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Man or Machine: Who Are The Real Trading Champions?

Despite dramatic changes to the fortunes of quantitative trading strategies of late, they still represent the extremes of "technology leverage" in the global markets ecosystem. This means that due to a high level of workflow automation, these types of firms generate more output - as measured by revenue per employee (RPE) - than any others in the industry. Or, so we thought... In the context of its broader research mission, Alphacution has been focused - perhaps even a little obsessed - on modeling, measuring and benchmarking the interplay between the two primary engines of productivity within the global financial services ecosystem: technology capital and human capital. The value of this research - something we call "navigational intelligence" - is to help technology buyers understand where they fit amongst the constellation of peers and competitors, and for solution sellers to understand the needs and spending patterns of their clients. Until recently, high frequency trading and market-making operations - like those found at Virtu Financial and its newly acquired KCG Holdings - [...]

By |2020-10-14T21:52:16-04:00September 20th, 2017|For Subscribers|
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Bulge Bank Headcount Index: Rare Uptick in Q2

It's only happened twice since the peak, recorded nearly 6 years ago (at the end of Q3 2011): Alphacution's bulge bank headcount index has recorded a rare uptick, as of the end of Q2 2017 (see Exhibit, below). Now, of course, it may be too soon to sound the trumpets that a major turn has been made for headcount in the global banking sector. The moves - in either direction - are still small. Although, who knows? Maybe the expectation of regulatory rollbacks has got bank hiring managers feeling more exuberant of late. Or, maybe - as we suggested in our prior post - that process automation, particularly among quant shops, actually requires more people is something that applies more broadly in financial services (given the push to implement more AI). One thing is for sure, most of our bulge banking tracking sample (7 of 9) is bigger in terms of headcount than they were more than 10 years ago. Only UBS and Citi are smaller, but that has been [...]

By |2020-08-17T07:14:09-04:00August 30th, 2017|For Subscribers|
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Automation May Require More People

Here's  a quick jolt of provocative thought, just in case your brain - like mine - has become a little soft over these summer months: Talk of AI and various other forms of process automation have reached a fever pitch. With that phenomenon comes a flood of new intelligence - and also a heavy dose of mythology. Sometimes the difference between the two is not immediately obvious. The idea that automation has a tendency to kill jobs is one of those if-then statements that is rarely if ever questioned. In the world of trading, quantitative (aka - automated) strategies have earned a reputation for becoming incredibly successful with few employees, thereby supporting the prevailing wisdom. Well, it turns out that "quant shops" just might scale headcount relative to assets under management (AuM) differently than other managers with other trading strategies - and not in a way that is supported by prevailing wisdom... Alphacution just sent a completed draft of its first major asset manager study over to the editor. This [...]

By |2020-10-05T21:17:23-04:00August 24th, 2017|Open|
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