CAPE TOWN - “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next 10. Don’t let yourself be lulled into inaction.” - Bill Gates

Change rarely goes the way people expect. There are factors we don’t take into account or know about - the “unknown unknowns”. The world would be a far less risky (or exciting) place if it were more predictable.

Disruption is the buzzword. It conjures David-and-Goliath images of small start-ups staffed by out-of-college tech geeks taking on large established corporations and, with well-aimed slingshots, sending them crashing.

But it’s a mistake to underestimate the big players.

They might not be as agile, but they have huge resources on which to draw. Most of them are not standing by idly; they are watching and learning. A good example is the major car companies’ response (or apparent lack thereof) to electric cars.

Whether a large corporation adapts to change depends less on its size than on its culture.

Last week, I attended a two-day media conference in London hosted by the global asset management company, Schroders. A large portion was devoted to technological innovation and disruption in financial services, providing fascinating insights into how financial companies were adapting and, in many cases, leading the way.

Three factors drove disruption, said practical futurist Andrew Grill:

* A share in the high profits enjoyed by established industries.

* New technologies.

* Heightened consumer convenience and expectations, driven by greater efficiencies.

Uber, Airbnb and Netflix were examples of disrupters in the taxi, hospitality and entertainment industries respectively. They disrupted themselves to morph into successful companies, Grill said. Uber began as a limousine-sharing app; Airbnb advertised rooms with blow-up air mattresses and Netflix started as a DVD mailing service.

In the financial space, Grill cited the app-driven insurer Trov, which let you insure individual items such as phones, laptops and cameras, for an hour, a weekend or a week. In South Africa, insurance start-ups Naked, Pineapple and Simply spring to mind.

Advances in what is known as “big data” and AI - what Grill preferred to call augmented intelligence (man plus machine) rather than artificial intelligence (man versus machine) - would transform our lives in ways few of us could imagine.

For example, digital agents - “robots” such as Alexa and Google, with which you could have a basic conversation and which would find you a song to play, informed you of the weather on the other side of the world or booked tickets to a show - would take over more and more functions in our lives, to the extent, Grill said, that the agents, rather than humans, would be the target for advertising. “We are not going to see ads anymore.

The ads will have to go to the robots,” he said.

Alpha in big data

There have been suggestions in the media that financial analysts and portfolio managers might soon be replaced by robots.

Mark Ainsworth, the head of the Data Insights Unit at Schroders, said AI was largely about doing what humans didn’t have the time to do.

His data analytics team helps portfolio managers to generate alpha (performance as a result of investment skill) by gathering and deciphering the data generated by, among other things, our actions using our smartphones. This “big data” on, for example, people’s brand preferences when shopping online, was converted into information that was useful to marketers and investors.

Alex Tedder, the head and chief investment officer of global and US large-cap equities at Schroders, spoke about how AI and data analytics were used to monitor a range of company metrics and to screen information not found in financial reports.

Analysts, he said, formed a thesis of a company, which governed investment decisions. The thesis was tested against incoming data.

That could tell you whether a company or sector was facing headwinds. A good example was the tobacco industry, Tedder said. Tobacco had been a cash cow, but vaping was starting to see its profits go up in smoke.

Bank disruption

On page 13, Personal Finance reports on how start-ups are threatening to shake up the banking industry. In the past few years, Capitec has taken massive market share away from the Big Four: Absa, FNB, Nedbank and Standard. A second round of disruption is imminent, with new banks gearing up to enter the market. How will established banks fare under such an onslaught? Watch this space.

PERSONAL FINANCE