In an era of mobile computing 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 big data and execute cloud-based massively parallel computing, spreadsheets still have the same machine-code A1 cell-structure. The most advanced Excel function is a macro.
Consequently, finance hasn’t moved past summing up columns and rows. Predictive algorithms and XBRL should make concurrent 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 Facebook and Google’s cool campuses has been to dangle a big check in front of them. And often that’s even enough. The best programmers don’t do it for money, they want to change the world.
Eventually, finance will grow up. We can design web-sites without HTML; we can build databases without C++; there’s no reason why we shouldn’t get real-time corporate performance 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 real-time cash flow statement.
Douglas R. Tengdin, CFA