Now, we have a special guest in Executive on the cutting edge of FinTech innovation. He's Warren Pennington and he's Global Head of Investment Management FinTech Strategies for the Vanguard Group. Vanguard as you probably know, is one of the world's largest asset managers with approximately $5.3 trillion in assets. Vanguard is also the world's largest robo-advisor. That division is called Vanguard Personal Advisor Services, and that it has a $115 billion in client assets. Warren is an experienced banking executive, having worked for Macquarie and Wells Fargo before joining Vanguard. Today, he also serves on the advisory board of Ben Franklin FinTech Accelerator which is part of Ben Franklin Technology Partners, Philadelphia's leading startup incubator. Warren, welcome. Thank you Chris. Good to be here. Warren, so I gave a bit of your background in your introduction, but can you tell us a little bit about how you came to the position that you currently have overseeing what by all accounts is a leading edge and substantial effort in the FinTech area? Sure. I think it's easier to connect the dots looking backwards. I did come out of college with an engineering background. So I'm an engineering educated person that went into finance as my career path. I think there's always been a connection between applying technology to solve really complex financial services problems. At Vanguard in particular, I think the size and the scope of the firm and the opportunities just presented itself, it was a good match. The timing was right, technology is at a certain stage, and the ecosystem is out there, and we made the case that it would be a good thing for Vanguard to pursue. Did you always want to be in this area? Did it even exist? It didn't really exist, so I can't say I always wanted to be in this area. I think it was just a natural progression. I've always had teams that have explored and experimented with applying technology to solve problems and have had been very fortunate to work with really talented people throughout my career. At Vanguard, at that moment in time, things lined up and it was something that we move forward with. It sounds like you're advocating both practical experience as well as formal education? Practical and formal, and very hands-on. It's experiential learning. Yeah. That sounds ironic to someone who might think without really delving into it. This is really about computer science, and it's about the math, and the models along. Yeah. I think the math and the models along give you a really powerful tools that's really up to artists to figure out how to apply the tools, and we don't think it's quite that mechanical yet. So let's start with the basics. How do you define FinTech? That could be from a personal perspective or officially from the Vanguard perspective. What is it? How do we think about it generally? It's a handy name to apply to just marrying all the new technologies and financial services business. So it's a pretty wide ranging term. I think that we look at it in terms of these two aspects. One is the way that financial services are delivered to clients or customers or individuals, so that's the retail end of things. There's a lot going on there, personal advisor services, robo advising. Anything that gets directly to perhaps your mobile device and makes things simpler to integrate financial services into your personal life. The other part I think in some way is a little bit more deep in complex technologically which is institutional side of things. So for asset management, it's how do the markets work? How do you interact trading globally with all different asset classes? Same thing insurance and banking. It's how do businesses work together, and the utilities, and all that? Does it have to do with classical areas? Is this about reconciling trades or is it about the generation of trade ideas? Is it about reporting? Is it about compliance? Yeah. I think it's about all of those things where technology that's applied isn't quite adequate yet. Where the legacy way of doing things was invented before tech evolved, before data science existed, and so it's time to rethink the way things work. I think that that's another aspect of FinTech. It's an opportunity for people who have an understanding of technology, who are creative, who have an understanding of some deep expertise area to ask those basic fundamental questions of why are we doing this? Why is this working this way? So it could be great for somebody working in a reconciliations team to rethink everything they're doing and to explore other technologies. A big term there is a robotic process automation, where creative clever people used to solve it on their own with Excel writing macros or something. That's same attitude is really useful and you can just now apply more powerful tools to that space. It could go all the way to trading ideas, where you're evaluating interesting new data, coming up with new ideas based upon that new data, and analyzing it in a different way, and you could start a hedge fund based on that basic premise that there's something out there that people don't know about. It sounds like you're arguing that it's not just automation, it goes far beyond that. It really is a rethinking, a retooling, a process reengineering even. Yeah. In fact, I think you want to start with a business strategy. You don't want to start with a technology necessarily. You want to start with there's a big opportunity or big problem to solve, and how do we do it now, and then start to figure out how you might change that. Assume it's possible, assume that there is some technology out there that does exist, then FinTech means now I take that new idea and I start exploring the technologies and make it work. You sound really excited about it. What specifically about all of this gets you excited? In some ways, it's not necessarily a plug for Vanguard, but it's a relationship between a mission that you believe in, and the opportunity to change the way things work. So technology really empowers individuals with the ability to make a big impact. You can leverage the skill of a single person with technology, and when you marry that to a nice mission many firms have those, then you can start to think about how to make things work differently. For our case, the markets themselves, the way they've evolved over time, a market needs to have a place and a time for people to gather, to buy and sell something. That used to be accomplished and still is in some ways by having just the right people, and you know who to call. Some of the biggest trades and the largest funds still work that way. But that doesn't necessarily mean that the investor gets the best price or has the best information. Usually, what that means is the intermediaries have the most information, and they can have the advantage in making a decision. So anything you can do to help get the investor or the firm that needs to raise capital and give them a better chance to get the best outcome, that's something worth trying. It sounds like that really hit home for you? It does. Investment banks have always been really clever and creative in deploying technology: insurance firms, actuarial science. There's a lot of legacy technology and skill that has been applied in finance. I think now it's just opening it up even more widely to more and more participants to try it out, and really to try and just change the way the markets work or change the way a product is designed, ultimately hopefully to benefit some end-user of that service or products. The language you're using is partially the language of disruption. You're making ongoing references to historical techniques and processes at the same time. Do you view it as disruptive per se, or what's your view on what this means from a revolution perspective? Yeah. In the short term, it's evolutionary. It's incrementally fixing or changing the way things work. But I do think that maybe that's the reason why FinTech has become more and more predominant. The term, the usage, the startup community of capital raising, ultimately, this is revolutionary. The trick is figuring out what does that revolution end up delivering? What does it look like at some stage in the future? That part of that it's hard to predict. But yeah, if we didn't think it was revolutionary or at least possible to be revolutionary, in a positive sense, we wouldn't be doing it. Are there areas of FinTech that you can see from your perch that hold special promise perhaps over others? I think industry, it's a little bit industry-specific. I think that rethinking things like what is money? What is banking, and what does that mean? Given the new technology or the recent technology, not even that new. If we started from today to solve the problems that banks fulfill, or that asset managers fulfill, or that exchanges fulfill, would we design it this way? Generally, the answer is no. So then the question is, what do you want to do about it? We start generally with, and I think you have to, you have to start with many existing players, and that's where you get that evolutionary piece. But everybody is somewhat focusing on their own objective and their own ideas. While we're cooperating, there are some alignment and there are some areas where you know over time things will change and diverge. Are there areas that you think either for Vanguard or perhaps your own personal view that dominate? Yeah, I do think that the move towards peer-to-peer fill in the blank. The idea that individual investors or individual consumers can connect more directly with the natural supplier of the product or service in terms of finance, it would be maybe money, or capital, or insurance, or real estate, that's really exciting. There's a lot of activity going on in there, there's a lot of experiments that we watch, big firms watch that we would never do partially because we think that there are flaws in the business model. Maybe it's something that if it was done at scale, wouldn't be legal, maybe there are regulatory things that these small companies don't participate in. But we think that's incredibly powerful and it does go back to the direct to consumer model that Vanguard really got active in decades ago. On the flip side again, it's the design of markets themselves. So whether it's an insurance exchange or whether it's a global bond market, the building and operation of markets that are more efficient is something that we're really excited about, and I'm. It sounds also like you're speaking about democratization much of what has often been the rare air of the history, of the sell side, of intermediaries or distribution channel. I think that it's fun to read history in this space too because it helps keep us grounded. The invention and creation of mutual funds, 1930s effectively. That's an incredibly powerful democratization tool a product to allow any individual investor to get access in the past to the exposures and portfolios that they individually wouldn't be able to do. So we think that that's a nice thing that says that what's happening now isn't totally revolutionary. But now the idea is what about other asset classes? What about opening up things that are still rare air for institutional investors only, very wealthy people, ideas that could help everybody benefit in terms of their financial future, and creating ways to get them exposure to that. alternative assets. Yeah, I think what I thought was a veiled reference to cryptocurrencies. In there, what's your view of Bitcoin and all the related? So we learn by doing and we learn by exploring hands-on. So we've definitely looked at those spaces, and it's probably a great example of those areas where we're saying. I'm glad that it's happening, it's not something that we see as a true investable asset. As a firm, we don't believe gold is an investable assets. So much less Bitcoin or a cryptocurrency. But what we do see is it's an incredible mechanism for peer-to-peer, for democratization of transactions on a global basis without the need for intermediaries. So probably not in the exact form it's in right now, but it's an interesting space to watch and the experimentation that's happening in that space is something that we want to look at. Does that telescope back to distributed ledger technologies and related ideas? Yeah, there's generally a lot of references made comparing blockchain distributed ledger to the Internet. But anything that gives you the chance to directly connect digitally with lots of other parties around the world has high security, can make the interaction more efficient, can reduce the need for intermediaries, things like that. So we're very excited and working hard on blockchain. It's a potentially disruptive technology. So some of the existing players that work in the markets that we are engaged with have different views than we do. But generally, it does feel like block chain has a great amount of promise, and we're working on it alone. Perhaps without giving away any secret source, what things are intriguing about blockchain and other related technologies? Yeah, we initially started off a stealth project trying to learn it and build effectively a trading platform, slashed exchange all in one focusing on blockchain. It was an internal thing we worked on and found out that, that wasn't a good idea. For various reasons, technical limitations at the time that could change over time. But what it did do was it gave us enough hands on experience to say now we understand that core technology, which I think is really important. Really hands-on experience with that technology. We matched it with a couple of different opportunities that we see. So if you want to run things high efficiency, then you need to have low costs. So one of the things we could do is automate. So but not robotic process automation, more of a true automations, starting from scratch. So the creation of an asset or a data point, the instance sharing of that, the automation of collecting those things into something that might look like a portfolio or an index, and then that can lead to other things downstream. So we have been public that we have already started to automate our index fund operations by doing that through a distributed ledger and away we've applied distributed ledger blockchain, and that was our US equity index funds, one of the index providers. That leads later to the ability to do something we call tokenizing, and that's more of a common terms. So take an existing asset that is not digital, it's traded electronically perhaps, but it doesn't actually exist in digital form, and creating a token of that in a in a blockchain space, and that's not a revolutionary idea either. There's many people looking at that, but that's the space we're in it. That would be our phase two. Then phase three is hopefully if all these things work out, it's the true digitization, where the legal framework, the regulations, the operations, the asset itself is the digital representation that's in the network. Right now, some people think that's what a cryptocurrency is. But we're saying that we're looking at even traditional assets and thinking about how to digitize them, banks with cash, asset managers with assets. So for listeners, can you walk through for each one of those three stages? Current stage, stage 2, stage 3, what you think the benefit to clients, people, society, your firm, what that mean? I think the ultimate benefit that we see is it puts much more power back into the end user consumer. So as a retail investor of the fund manager like Vanguard can automate running an index fund. That still may be something that a retail investor doesn't do themselves. It still may be something that we want to have specialists do because they have lots of other things that they're focusing on. But that automation obviously lowers cost. It could improve the product, we believe it will improve the quality of the product, and when you ultimately get to digitization of assets, we actually think it improves, it gets back to valuation of things too. If you have what we would call fixed the liquidity problem. For me, liquidity and for the firm liquidity means does everybody that wants to buy or sell something know everybody else that might want to be on the other side of that transaction, and can they connect in an inefficient way? So right now, you cannot do that. Even in the most electronic markets, you can't, and the equities market. So if you could start with a blockchain type solution and automate the operation of something with the data, and then you could expand that out to integrating with a market, maybe changing the way the market works, and then executing transactions, or you pretty much have continuously operating self-sustaining automated financial products that would be helpful for clients and consumers. Are there risks in this area or more generally in FinTech and specifically, the ability to have oversight and regulation or other areas that you see are important? I think there's a balance. I think I mentioned little earlier it's nice to let some startups go out and do some crazy things that we believe have flaws. The risks are when those things grow and people can get hurt because we do think that smart regulation is incredibly helpful to the markets. The incentives out there to make a lot of money fast never almost align with the long-term interests of the investor. For example, you can do things and make decisions that aren't fair. So I think the idea of fairness in the markets is helpful whether that's insurance, real estate, financial products. So we think there are risks, but the main one we would say is, if we over-regulated it too soon, then you stifle the ability to do something revolutionary. If you don't catch up quickly enough, then you allow something that has negative impacts to people to grow too large. I think, we didn't always anticipate what putting our personal lives for free into perhaps a Facebook. What could that mean to us in the long term if you extend it way out? Hard to predict the future. So let's get to some of the need of the topic. How does Vanguard incorporate FinTech? We do it in a number of ways. So you mentioned personal advisory services. So for that, retail client interaction and the technology that could work there, there are a number of things going on that space. One of the areas is working on digitizing advice. So there's quite a large initiative there working on that, expanding on what we've done in PIS and globalizing it. So there's activity there. There's something that Vanguard started up in the city of Philadelphia called the Innovation Studio a couple of years ago. That one has a broader mission around truly being innovative and the idea there is, again, facing clients, so looking at the ways that Vanguard creates, distributes, and interacts with our clients, the products that we sell. So there's teams that are thinking of the newest next thing that might be out there mostly from the retail standpoint. There are other initiatives around there, where we modernize our websites and the way we interact with clients that side. That's a core. That's the big part of Vanguard, number of headcount, and all that sort of thing. For our team, we're housed inside the Investment Management Group, which is the part of Vanguard that runs the money, that manages over five trillion as of now roughly of assets, and the hundreds of funds that we supply globally to our clients in addition to the fact that we have external advisors to those clients. So I'm part of a team that was created a couple of years ago. Tim Buckley was actually the CIO at the time. Starting up the Innovation Studio, there was a question, can the Innovation Studio do both facing out to the retail clients, and can we solve the problems of the investment group? The thought it was no. They're very different. The complexities of the investment space are much different, and so we created a team. We started off as an experiment realistically. Again, hard to predict the future. The experiment was to go see, can IMG, the investment group, find ways to really be disruptive in the future? So yes, the disruptive part is part of the mission. Can we help the individual employees, the crew? Can we empower them. So the idea of being in technology is great. It's a leverage for an individual, and their skills, and their knowledge. That's been the way I've approached it. We've gone down the path of saying it's really about talent. Yes, technology is critical, that's the toolkit. But it's really about the talent to figure out creative ways to use it, deploy it, and to build it. We have to build things. We're not a think tank. We're not a consulting group. We're actually building. The way we've gone about that is by saying that the smartest people will be all over the place, so we have to make it easier for a big company like Vanguard to work with those people, whether they're in the academic world, research institutions, whether they're with large incumbents, banks, stock exchanges, or whether they're startups in the venture capital of community. So most of those things were pretty new. Most large companies don't have a lot of ability to be nimble to interact easily with small companies. So that's been our mission, is to find ways to make it easier, both to scout those folks out and then to make it a lot easier to work together and to help jointly solve a problem that really suits Vanguard's strategy. So it's really interesting because we often think about Vanguard as a big index fund, although they're actively manage the activities within the firm and outside the firm with some advisors. What's the aim of the technology? Is it really about scaling cost? Is it about generating ideas? How does it add value within that regime? Right. We're called FinTech strategies because we started off with what is the business strategy? The three strategies that we have are looking for new and better insights, insights are the raw ingredient to make an investment. So that's your data analytics, alternative data sources. But the whole purpose is, can we come up with a new and better insight? Another area is platforms and visualization. Once I have all these insights, what do I do with them? So I need a way to work on that space. So that's the idea of, is there a technology platform that I can integrate all of that data, and operate things, and run funds, manage money? The third space is new and better markets. So the financial markets exist, they're different in terms of the way they run. Every asset class has its own market effectively. You have over-the-counter markets, like bonds, where basically every bond is its own market or you have exchange-traded instruments, where they're electronic. But all of them could be improved. So when you work on the new and better markets, it opens up the idea of new asset classes as well. So maybe we could tokenize or digitize alternative asset classes and give that exposure to the retail client. Allows them to have a better diversified portfolio, have a better chance of hedging against negative events to have uncorrelated exposures the portfolio of theory. The more you can incorporate that, the better it is. That's available to only a few now and Vanguard's mission is that retail client to democratize the opportunity to invest. So those are the three areas. We line up around those three strategies. It sounds like you're not really picking passive versus active per se. That really is about the betterment of whatever strategy or area you're talking about. Can you give us a couple of examples with some specifics? Sure. I mean, we look at passive. Passive is a term. It really just means it's a highly efficient and scalable process. So S&P 500, the FTSE indices, CRSP, those are all investment strategies mostly related to market capitalization. You build an index, you put certain size of companies together generally. There's other kinds of indexes. That investment portfolio is created in a more open process then we execute that. Vanguard and other passive managers execute it. But it's still an investment strategy. It still starts off with the premise. You have to create an index based on some methodology. So active is maybe a more custom methodology, and those things are things that we do internally as well. We don't necessarily look at them that differently. Ultimately, you have to have data, you have to have your investment strategy, you have to create a portfolio, and you have to implement it by executing, and trading, and monitoring and all that. So a specific example I gave earlier, which was you start to automate running an index fund, passive. Somebody else just given us the portfolio. We just make it much more efficient by automating the data, and ultimately the data becomes your portfolio. There are other areas in the over-the-counter space where we're saying the markets aren't that efficient. They're the new and better market strategies. Others ways that we could make them more efficient, there are lots of ways to approach that. New exchanges pop up. Electronic trading venues are popping up. But we don't think that they're actually solving the root problem, which is more directly connecting all the investors with each other more efficiently. One area is applicable to a lot of spaces. It's natural language processing. So there's the big role of data science, which has lot of meanings. But, really, data science is the idea if you take a quantitative approach, which has a theory behind it, you build a model, generally they're linear models. Then you have some error. You implement the model, and then you put data into it to test the model and refine it. Data science simply put, I think it's just flipping it over. It's empirical. It's take a bunch of data, intelligently create models from that data, and then do something with it. One area that's exciting is NLP, natural language processing. It helps you get in some cases, the best and the first used cases to speed up things. If a credit analysts job is to understand as much as they can about a particular firm or a sector, they're doing a lot of reading. The reading is there to extract all the relevant information. They generally look at similar sources. You want to have highly credible information sources, regulatory filings, earnings, transcripts, press releases. Potentially in real time. In real time would be good. That's generally hard for a human being to do. Reading one thing at a time is hard enough. If you can partially automate that, we get to the space that we call augmented intelligence, which is the idea that you've given the experts much more information, much more quickly when you've helped automate some of that work. So natural language processing, reading regulatory filings, extracting key information. Are you guys reading unstructured news streams? We are. We're exploring that. That's been around a while. We're just figuring out how to deploy it in a way that makes sense for us. But, yeah, we're reading unstructured news streams, websites, discussions of products, announcements, marketing materials. There are a lot of experiences in this space. Multiple languages? Multiple languages, interestingly very challenging. We're doing it in a way that's parallel. You have to start over again. If you're going to read English, there's some ability to translate some of that to another alphabet-based language. Still hard to do. You work in Asia, and you go with character-based symbolic systems, different approach. So we do that. The good news for us in Vanguard is most of the investments we make, there's an English version of it, so we can get a lot done. High 90 percent coverage even just within English effort. It's, again, it's early days, so later on we expand to other languages. Some have emphasized how certain groups defined perhaps by demographics like Millennials, have a special preference for using Fintech or various aspects and characteristics of Fintech. How has this idea impacted yours and Vanguard's thinking? I think that it's kind of tied to the whole idea of behavioral finance in general. I think that certain people are more comfortable relying on technology more fully, and that might be because of an age bracket, it might be because of a personality, it could be many things, but, yeah, there's always a search to try to understand your customers in the longer-term, but for us, that customer is also a future crew with what we call employees at Vanguard. So that's always out there. The comfort with digitization in general, the comfort with relying less on people, fewer interactions with people is growing. There's always, and in fact you gave the example of Vanguard's robot advisor, which is actually a hybrid model mostly, because there's an aspect of there's only so much you can really glean through a questionnaire or digital interaction. There's a lot of information that you still can get as a human being to human being having that interaction. So I think that there's always blend, and we look at that and see those opportunities. But as that information than curated back into, say the AI or the robo-aspect of it? Yeah, it is to a degree, but I think to a certain extent, you're never going to truly replace an expert with an artificial intelligence machine. To do that, you have to have 100 percent of all of the relevant factors in a digital format in a way that you can process it with a computer. While there is a lot more out there that's digital, whether it's photographs or videos or things that now they're cool techniques to look at, the computers can look at that information, there's still just too much that can't be digitized. So I think that's really why we call, for us, AI is augmented intelligence. That goes back to the 50s too, if you want to read history. This has been an ongoing debate, should you look at replacing humans or should you look at giving them tools that make them more powerful? So you really are adopting a kind of bionic model, which is also referenced to something like the 70s? Yeah, nothing. Most of this isn't actually new, which is the fun part. The concepts have been out there a long time, but now what's happening is Cloud computing, more and more data available, more new techniques. So some of these old ideas, we can actually build things with them now. Let's stick with the end client for a second. At the same time Fintech is evolving, the financial services industry is evolving by itself, perhaps as a result of some technological developments, but also because of what appears to be a growing model of client centricity, customer centricity. It's covered in many countries by changes in fiduciary or related regulations, by increased knowledge on behalf of end clients, the UBO, Ultimate Beneficial Owners, of assets. I wonder what your thoughts are about the ecosystem in which ultimate clients live. Is this about financial wellness, at the same time it's about technology? Yeah. I think, ultimately is about financial wellness, but then the challenge becomes what does that actually mean. For the way that Vanguard of traded itself as a firm with its client ownership structure, mutual ownership isn't unique or revolutionary. Well, it was and is unique in the asset management space. The alignment of our interest with our end client was, part of that was to ensure the financial wellness in terms of meeting the future needs, the financial future needs of a client in terms of how they invest. That's always been part of the way we've structured our business. So I think all firms have that idea. What is the future need of an individual client? What does that retail clients need? How broadly that is defined becomes how you define personal financial wellness. There's ideas that it includes health, it includes savings for events, it includes emergencies, it includes all sorts of things; family, trust, estate planning, taxes, kind of a lot- What about physical wellness? What about behavioral or psychological wellness? Yeah. I mean, insurance companies have always had to sort of dance that a little bit with physical health and the risks that an individual poses to the firm, but it also helps, in theory it helps modify behaviors. I personally don't want a card in my car monitoring my driving behavior, but my physical health could be benefited if I did that. But more generally, perhaps physical, financial, emotional well-being, all those things are connected. They are connected, yeah. So maybe should it all live at Vanguard or should all live it, I don't know, UnitedHealth Group or some other firm? Yeah. Maybe we're defining an ecosystem, at the same time technology is come into play a very big role. So the short answer is, I think it depends on an individual's own preferences. So you kind of have to understand and find groups of people that would have a common definition, and for some people that might be everything. That might be saying that, not Vanguard but another company, a health company might decide that they want to provide that offering through a certain set of clients. I think one of the theme that technology brings, and it's kind of a Fintech related subject, to tie us back is, this idea of ecosystems you've talked about. You've mentioned that word a couple times, and truly believe that that might be the best way to go about that is saying, Hey, they're uniquely qualified firms or people out there to solve particular problems, and they may not all be in the same firm. So the way we've gone about looking for talent, there's a similar idea about how you might come up defining a broader product offering, and that through product and strategic partnerships is something that goes on there, and there's a lot of that happening. The news is out there about some of those strategic partnerships. Not just with Vanguard, more generally in the industry, and there's a rapid shift. Yeah. Amazons, JP Morgans, Vanguards, really, and then getting out of the US, similar. Do you see technological innovation, specifically in Fintech, happening mostly in the US. Definitely not- Or you see it being led and driven even in the medium term elsewhere? Yeah. I don't know about lead and driven. I don't know that there's one spot. It does feel like there's a lot happening in the US. That's great. Education, our universities are incredible, the venture, the ease of capital to support startups and to create businesses. You sort of have wonderful pure research. You have a great ability to create companies and do a lot of experiments through those companies, and then ultimately influence the way markets work. It's pretty hard to beat, but definitely not unique. I think it kind of goes back to the smart people live all over the place, and if you give people a computer and access to data and the ability to work together, it kind of doesn't matter. So a lot of the firms that we work with, in fact, are really virtual. The blockchain firm that we're partnering with has one of their key engineers lives in Norway, they're working in Amsterdam, they've got folks in New York. It's getting the people together to create things, is really the key. There are regulatory environments that have different angles. So Singapore versus the UK versus the US. How does a firm like Vanguard handle that? It's a very complex landscape. It's complex landscape. What we do is, we have our normal current business and we make sure we tailor that to the regulatory environments that we operate in. What we do in Fintech for strategies, we say, if we want to do something, let's look around the world and find out where the easiest place to try it out would be, and work with that environment. So we might do an experiment in France, because of regulatory framework, a couple of partners that are ready to go, and maybe some multiple ultimate investors or retail clients that are predisposed to being comfortable with that. So we might do it there, even though we really wanted to be global, we want to be in the US, we want to be all over. You've mentioned a number of times the idea of doing experiments and learning. Is that part of how people should approach or businesses should approach Fintech? I think it's, yes. I mean, that's an easy one. I think it's yes because it's really about innovation, and I think that it's pretty hard to try to think of a grand scheme and spend a lot of time designing and then planning it, and then attempting to do it all at once. We look at it as tech firms do, as researchers do, it's an iterative process. Say, you have an idea, I think I want to automate something, I want to open up a brand new asset class and create new markets, but I don't know exactly how we're going to get there. So you start off with small bite-size pieces, and you do it quickly, and you learn each step of the way, and you keep moving on, and that's the way a startup works, and big companies sometimes emulate that, they wished that they could be nimble. It sounds like another testament for agility. Agility. Strategic agility. Absolutely. And tactical agility in essence. Yeah. So that's why it's hard to predict where the revolution leads because you're kind of doing it one step at a time. Right. Exactly. For those who want to go into Fintech- Yeah. What's your advice? What's your thinking if you were. Yeah. Sitting here it will someone watching the series. What would you tell them? I think it's just an acknowledgement that the financial services industry on mass has a lot of opportunity to catch up and deploy technology, the other areas of the economy and other firms have really been out there for a longer period of time. So if you're interested in finance, that's important. If you're curious, that would be a critical factor. Give yourself skills, understand a bit of technology, understand a bit of data analytics, learn what data science means. Learn what finance is. Pick your area of expertise, you might think you're interested in and learn about it. But I'd highly say the critical thing there is and just do something, build something. It's all about getting your hands-on doing something and creating things and learning from that experience. So any area of innovation, if you look at the history of innovation has been accompanied by challenges. That's especially true I would guess if those are disruptions. Yeah. But even with evolutionary approaches we see challenges. What are the challenges that you see especially in Fintech? Yeah, I think that one of the key challenges is just discomfort. The more you do something that's really out there on the leading edge creative and potentially disruptive the more problems there are in terms of just getting communication clear, getting things you do in finance always evolving ecosystem. So you have partners that are involved working together, making sure people they're clear about what it means. So that's an important characteristic. So the ability to translate complex new ideas in a way that people can understand and get comfortable with is critically important. Regulatory frameworks are a bit of a challenge but we see those. Actually, we see countries almost competing, to try to create a regulatory framework that's friendly to financial innovation. There are always challenges in getting talent, finding the smartest people, aspects of what is that ideal candidate, building teams, collaborating talent is critical and then continuous learning is a critical factor for these two. That's where you have to say, that's the mindset of a person and figuring that out early on because, you work together, you build something, you invest in folks over long period of time and you don't really know and so you've been together for awhile. Do you have any concerns like those of us of a certain age. Yeah. Might have of the soil movie called Soil and Green. Where without getting too much into the gory details of the movie. Was it was a food product. It was a food product that it induces its own intelligence and machines. Yeah. What about oversight over the machines? I think oversight over the machines. The good news for that is, it's such a blaring problem. People seem to be really worried about that right now in. I'll just stick with the investment space and again I think that the mutual fund industry per say is really positioning itself well here. It's nice that you can have black boxes and there's a space for those black boxes meaning I don't understand how the model works and it's hard to have oversight is something that you don't know how it works. But the regulatory environment has traded say spots for those the hedge funds the sophisticated investment vehicles. But it's a characteristic some would say in much of AI, a machine learning where traditionally as you describe them linear models. Yeah. Don't capture all the potential patterns. Yeah. That are inside it. So that leaves the possibilities of Aaron data mining and finding. Yes. What we call animal spirits or. Yeah. Noise instead of signal, but also machines running themselves potentially. I mean how do we have oversight of? Yeah, I think that's where there's a good role for, I think a regulatory framework to have oversight of that. Model oversight is a long running challenge in the banking industry. There's global regulations around model oversight naive created models that even the creators don't know how it works. So I think that's there. I think that the data bias is again it's good. There's conversations happening in that space. I think over-reliance is probably where we get to you as the biggest challenge, like it's always the model works until it doesn't. Right. Nobel Prize winning economists create amazing models and then they build hedge funds and then something happens and they blow up. So the smartest people with the best models they still. We can't explain anything and we look at Nobel. That's right. Those may not have relevance for the future or in different circumstances that we haven't seen before. How do we rationally deal with well for things that might relate to irrationality. Yeah. In markets or our involving sparse data or things we haven't seen before. Yeah, well I think that's why we believe heavily that augmented intelligence is the best you can do. That human factor and there's ultimate judgment that has to rest with a person. In some cases there's a lot of things that lend themselves to full automation. That's where you're not using judgment. Not a particular expertise that's required. It's a lot of connecting dots and if you connected the dots. It's a deterministic problem. There's only one answer. But now I think this is to me, there's nothing new about this thing we're talking about. I agree with you. It's a challenge but it's non-stationarity. That conditions change, the datas changes. One of the things that we've been watching is the tendency for folks to want to monetize a New Data Source and the new data source comes out and it's got two years worth of data or less. Then if you are a long-term investor that's probably not a good idea to do that. But if you're just a high-frequency trading shop then maybe that data is helpful. So like using it appropriately is also a key. Right, so the idea that it's different this time. Yeah. May or may not be true. Right. It may look different but we just don't know. Right. If you look at any history of data at one small snapshot looks different from everything else potentially, but it's just not. You can build a model that makes that work but it's not a good model yeah. Right. So again that comes down to the combination of humans and machines. Humans and machines and the ongoing fact that it's just too complex overall to really automate it. I started before I worked when I was in university I was working at a research institute Boulder Colorado called the National Center for Atmospheric Research and some of the scientists at the time said, ''If I just had a more powerful computer I already have my model. I could actually predict the weather.'' We still can't predict the weather it's and that's a physical thing. So if you put in human beings and behavior, I think it's probably not a good idea to, let the models run themselves. Right so we need some oversight. We need hygiene. We need care and feeding. Yeah. But those also reflect the skills that you identified. Yeah. For anyone who's interested in the space. Yeah. That's why I think folks that would be a more traditional quants. This is not replacing them either. This is actually hopefully, there's enough of those folks that have the skills that are just continuously learning and they're understanding these cool new data science techniques and they take the maturity and the rigor of their approach and they apply that to the new models to. Oren, thank you so much for being with us and sharing all your ranging insights. We appreciate very much. I like to thank Warren pending tin again for joining us and sharing his insights as leading Fintech executive with a vanguard group. Thank you.