I recently read an article about computer-driven cars and, ever since, have been fascinated and borderline obsessed by the concept. On the streets of Pittsburgh just outside the doors of Confluence’s corporate headquarters there are Uber cars driving themselves as part of a test to advance this concept of self-driven cars. At some point in the very near future we will live in a society where only computer driven cars occupy our streets.
To think that something so important to our everyday life is about to undergo such a drastic change is remarkable. One can only imagine that at some point in the not too distant future, the government will create rules and regulations stipulating – even mandating – that only computer driven cars are manufactured and used. Think about it! When this becomes a reality, the world we know as it relates to transportation will be nothing like today. No more traffic lights or stop signs, no more human error leading to car accidents, no more road rage or exchanges by frustrated drivers.
One could say that the exact same thing is happening to the fund reporting industry. Over the course of the past 15 years, the Securities and Exchange Commission (SEC) has been slowly moving us from human-readable output to computer/machine-readable output. With Form N-MFP and Form PF, the SEC has us well down the path of creating consistent formatted data reporting for their consumption and analysis, and separate from the reporting expected to be sent to and read by human beings. In 2015, with the SEC fund reporting modernization proposal, the SEC doubled down on that concept and pushed us even further down the path.
One can envision a world where we no longer have human-readable, highly stylized output, but instead our focus narrows only to the data and the analysis thereof. When this becomes a reality, the world that we know related to reporting will be nothing like today. No more detailed review of output and reports, but instead a focus on systemic reviews of the data based on predetermined business rules, no more fancy artistic book covers, no more haggling over colors and fonts and shapes and sizes, no more printing and mailing. While this future may look stark, it lives in a world where shareholders ultimately benefit from the prevalence of computer-generated analytics and comparatives and less on subjective human analysis and interpretation.
I am fascinated by where we are heading, but also concerned about that muddy place in the juncture between where we are today and where we will be when we get there. I expect that it will be an interesting (yet sometimes terrifying) journey as well as a tremendous challenge to have both computer-driven cars and human drivers occupying the same space on the road. I also expect the journey for the fund industry to produce human-readable and computer/machine-readable reporting simultaneously to be both intriguing, but even more importantly, costly.
The challenge that we have as an industry to be equally focused on data and the accuracy of information sent to the regulators, and to also ensure that we continue to deliver highly stylized human-readable reports to the market is daunting. Until the regulators fully move us into a world consisting only of machine-readable output (that admittedly, eventually becomes human readable in some consistent and comparable format, but I digress, that is the topic for another blog), unless we have technology solutions for this challenge, we may see our own form of cars colliding in an unexplainable accident.
Although I never thought that I would say this, when I think about this journey, it makes me realize that I am much more in favor of regulation in the fund industry than I have ever been. In a world where the SEC demands computer/machine readable data, but does not regulate and eliminate human-readable reporting, the fund industry bears tremendous and unnecessary cost. I, rather naïvely at times, dream of a world where the regulators in the transportation space, who can be innovative and forward thinking, would sit down for drinks with the SEC commissioners and help push them to drive a more futuristic world. I hope to one day see that as the top story on every news site in the world while I am browsing on my iPhone in my car that is driving me to work.