Why is finance so dumb?
In the era of smartphones and 3-D printing, financial analysis is stuck in the ‘80s. The principal tool of the analyst is the spreadsheet—something that Lotus 1-2-3 popularized in 1983. While our PCs can access cloud-based massively parallel computing, our spreadsheets still have the same machine-code A1 cell-structure. The most advanced Excel function is a macro.
So finance hasn’t moved past summing up columns and rows. Big data and XBRL should make real-time analysis of corporate financials possible, but spreadsheets aren’t granular or fast enough. And getting programmers to work on such analysis is hard. The way to lure competent coders away from Apple’s and Google’s cool campuses has been to dangle a big check in front of them—the kind that only hedgies and Wall Street can afford. And then all they do is algorithmic trading.
But hopefully this will change. We can design web-sites without HTML; we can build databases without C++; there’s no reason why we shouldn’t get real-time estimates of Wal-Mart sales using feeds and tweets without depending on a few computational finance gurus to program in Matlab and Simulink.
Get ready: the future of finance is the Twitter-feed balance sheet.
Douglas R. Tengdin, CFA
Chief Investment Officer