 Thank you very much indeed for that kind introduction. Apology is for giving you a heart attack by arriving just on time, the nature of the journalism job, as we tend to live according to deadlines. I should also say by the way that one of the things you discover if you're an author writing in the mainstream book market is you never write your subtitles to your books yourself. They're almost always imposed on you and none of those subtitles are ones that I would have chosen. There we go. What I'm going to do today is just share some thoughts about the issue of fintech, informed by my own experience of covering the last big wave of financial innovation and the subsequent financial crash. Now, as you've heard, I am obviously not an economist or a banker or financier. I'm not a regulator. So apologies if some of these comments sound rather amateur, but as I'm going to argue at the end, you need to have amateurs looking at what's going on to try and guard against some of the worst dangers of what happens when you have excessively expert experts in charge. And I'm speaking to you both as a journalist, but also as an anthropologist. As you just heard, I had did a PhD in cultural anthropology before I became a journalist. And I was working out in a place called Tajikistan looking at marriage rituals. Not obviously linked, but actually I would argue very, very relevant in some ways. And I'd like to start with a story, being a journalist we like to tell stories. Back in 2005, I was appointed as the head of what was then called the capital markets team of the FT in London. It was a job that I had partly lobbied for because I'd been previously running the lex team at the FT and was very struck by the sense that although the newspapers at the time were excessively covering the equity markets in the financial system and paying some attention to currency markets, I could see that there was this vast shadowy underbelly of activity which was going largely uncovered, which was to do with credit and derivatives. I used to say that the financial system was like an iceberg. I actually wrote memos in 2003 and 2004 saying there was an iceberg problem. You had a small piece bobbing above the water where information was commoditised. Everyone could see the equity prices and this vast shadowy underbelly where nobody frankly had a clue what was going on. So I was kind of curious about what was going on. I made quite a lot of noise inside the FT saying we needed to cover it. In the end, the editor got so fed up, he more or less said to me, oh well, if you think it needs to be covered, you go ahead and cover it. Off you go, you go and run the capital markets team. Which I should say back in 2004 and 2005 at the FT was certainly not a promotion. The lex column is a glory part of the FT. It's on the front section. At that stage the capital markets team essentially wrote for the very back parts of the paper. Whereas the high status economists sat next to the editor's office overlooking the river, next to the office of the mighty Martin Wolf, the capital markets team sat in the basement overlooking the trash cans. They were a very long way away from each other. It was a very good indication of the kind of silo mentality in terms of the difference between looking at economics and finance. That was a FT not just in the media world but also in the academic world and in the central banking community, I would argue with fairly disastrous consequences. Anyway, in 2005 I got moved across to run capital markets. I was actually pregnant at the time and what my colleague said to me to try and be nice about it was oh well, never mind, capital markets is a brilliant place to have a baby because nothing ever happens. True story. I think many people thought I had gone off onto the mummy track and I arrived and I was fascinated by what I thought might be happening out there in terms of all this innovation. Didn't know much about it and I decided that the first thing I'd do to try and get to grips with it was to go out and do what anthropologists call some field work, i.e. to go out and talk to some real life bankers in the jungle about what was going on. Because you can't, as an anthropologist, just wander out into a bank trading room and set up your tent there and observe them in the wild. The nearest thing you can do is to go to a conference, a banking conference. So I took myself off down to Nice. Investment banking conferences always happen in nice places usually with sunshine and cocktails. Took myself down to Nice in the south of France to the Securitisation Forum conference so it was happening down there that year. I remember that day very clearly. I walked in to this gigantic hall with very wacky 1960s style French architecture and I suddenly thought, wow, I am back in Tajikistan. I should explain what I mean by that because when I was in Tajikistan I was trying to understand really what the cultural map of the Tajiks were and in particular how their traditional religious identity had interacted with the Soviet system. And the way I did that was to go to lots and lots of big weddings because weddings from an anthropological perspective are fascinating. It's a time when the tribe gathers together as a group and reaffirms their social network and they also use all kinds of rituals and symbols to state their mental and cultural map of the world. They reproduce essentially what's happening not just in a sort of physical sense because you have babies after marriage but in a social sense and a cultural sense your map of the world. And so I'd go to these wedding rituals and look at how the Tajiks were using these rituals to display how they saw the world. And going to an investment banking conference was exactly the same. You had basically this scattered tribe of derivatives credit traders who'd come together to essentially reaffirm, connect themselves as a tribe, create these social rituals or that bonding around the bar and essentially forge not just a common language but a common mental map of the world and common understanding of what really mattered and what didn't matter. And so I sat there for two days listening to the talks, seeing the bankers at play going around talking to each other with their rituals listening to how they talked about what they were doing in terms of innovation and it was absolutely fascinating. Several things were very clear to me. The first was that the bankers were speaking a language which was just as peculiar as Tajik. But this was called a financial gobbledygook. They spoke in endless acronyms. They spoke with all these terms which appeared to be almost deliberately designed to confuse an outsider. And I should say back then in 2005 people were so uninterested in this shadowy part of the financial system that actually I was pretty much the only journalist who'd bothered to go down there. It was very, very unfashionable to look at this stuff. So you had a lot of financial gobbledygook and whoever actually understood the financial gobbledygook whoever understood the algorithms had tremendous power simply because they knew what everyone else was talking about. Secondly, that financial gobbledygook was wrapped up with a sense of evangelism and evangelistic further and self-confidence. And it's worth stressing this point now because these days, now that all that financial innovation has been shown to have gone so unbelievably badly wrong it's actually very hard for people who weren't around in 2003, 2004 and 2005 to actually remember or believe that there was a time when people thought that credit derivatives and CDO were going to be really, really, really good not just for bankers' bonuses but also for the world and for end consumers. It's really hard to believe that now but I sat there in those meetings as presentation after presentation tried to argue that what was going on in the credit markets in 2003, 2004 or 2005 was essentially the great necessary liquification of the markets where every single thing in the world was going to be turned into a liquid asset that could be traded where there had been derivatives to allow every single asset essentially to be priced according to its risk and that risk to end up in exactly the right hands of the people who needed to hold it and that by creating these funky methods to spread the risks you were essentially going to create a financial system that was unbelievably safe. That was a gospel according to the credit derivatives securitisation CDO tribe and it was never expressed quite as clearly as I've said because of the gobbledygook but that was the idea thrown around a lot and in retrospect you can say well did they ever really believe that? I mean was that just a complete massive self-deceptive spin that was put on top of the whole credit innovation game and you kind of get into very interesting territory I mean back then there was almost nobody who'd come out and say in public this is bollocks to use a wonderful English phrase this is ridiculous and I know there was almost nobody because I was frantically looking for somebody anybody I could quote in the newspaper who would say that and almost no one would actually come out and say that I think many bankers if you pushed them sort of said actually you know what yeah it does sound all a bit too good to be true but you know what we're so busy and we're so invested in this whole system happening that we're not going to really sit there and rock the boat by asking ourselves too many hard questions and it comes back to that wonderful phrase of Upton Sinclair the novelist it's very hard to get a man to understand or a woman to understand it's very hard to get a man to understand if his or her job depends on not understanding it's very hard to get someone to understand if your bonus depends on not understanding there was a tremendous incentive for people just to kind of go with the flow and a lot of questions existed at the sort of boundary of semi-consciousness Pierre Bourdieu, the anthropologist who has a huge impact on my thinking brilliant brilliant brilliant thinker used to point out that in fact what really matters in maintaining social systems is not really what people openly talk about it's what they don't talk about it's social silences that really matter and it's the stuff that's on the edge of our conscious and semi-conscious that we kind of half knows a bit weird but don't really want to ask about and looking back when I sat in that hall in Nice and thought about what people were talking about what people were not talking about was actually in some ways even more interesting than what they were talking about I sat through two days worth of presentations about financial innovation and credit markets and in all that time I never heard any of the bankers mention a single human being it was as if the whole thing happened in this kind of esoteric neverland where people had been taken out of the equations I mean quite literally and again I don't think the bankers noticed that because no one's trained to think about what they're not talking about but in retrospect it was very striking there were all kinds of fundamental contradictions in what was going on that today are very obvious and at the time I didn't see and I don't think the bankers saw I mean in retrospect why did anyone think it was a great idea to have financial innovation that created products which was supposed to liquefy markets and make everything tradable and yet those products those CDOs ended up being so complex that no one actually ever traded them what would happen is they'd be created and then essentially put on someone's balance sheet and there wasn't a market price so they had to use prices extrapolated from rating agencies and things like that and yet you had a marked and market financial accounting system where none of this actually made sense why did anyone think it was a great idea to spread risk across a financial system in order to make the system safer and yet to use mechanisms to spread risk that was so fundamentally opaque that they actually introduced new correlations that no one noticed I mean there were really big intellectual contradictions in this evangelical messianic vision of financial innovation but nobody saw because essentially they weren't asking the right questions they weren't thinking about what they weren't talking about and then there were two other problems one was of course the fact that these tribes came together in this great big bonding ritual these bankers with this gobbledy goop that united them and this evangelical vision meant that essentially they had a very strong sense of tribalism they alone understood what was going on they actually didn't want to have too many outsiders looking in they didn't mind me at the financial times because they thought well hey that just shows how important we are but they didn't really want wider politicians or anyone else looking in too much and this is really the crucial point for the most part politicians and the public had no interest in actually peering into this tribe and asking what was happening I mean I can't stress that enough back in 2005 credit derivatives all of this innovation was fantastically boring, boring, boring boring I mean even getting it onto the front page of the FT was very very hard and that really matters because if you want to hide something in today's world if you want to make sure that people don't look at you the easiest way today is not to create some kind of James Bond style plot and conceal it the easiest way is to actually find a way to get culture and society to label something as boring, geeky dull and then people just won't bother to look most of what happened in 2005 6.7 was actually hidden in plain sight and it wasn't deliberately concealed but people weren't looking because it seemed to be so dull and then last but not least there was another lesson which is that what I think back to that conference in 2005 it wasn't entirely clear who the bank has thought was in charge of them who they thought they were regulated by I remember having a couple of conversations with people and they said to me well yeah things like mortgage derivatives I mean it's sort of inside the bank structure it wasn't always entirely clear whether this was a trading product or a credit product that of course had a lot of implication for the way that these things were reflected in the balance sheets and in counting terms that I won't go into but within the regulators it wasn't entirely clear who was supposed to be in charge of this stuff there was a lot of different fragmentation in the regulatory world because it was a new product and it didn't fit into an existing silo incredibly easily I mean it's a cast-on rule on journalism in newspapers that as newspapers we are always set up with departments and divisions and bureaucratic structures designed to cover the world that existed ten years before always okay because guess what something happens a team gets built around that and it's very hard to dismantle a team that's the reason why at the FT we used to have a banking team we had a a capital markets team and an economics team all in different divisions they were seen as different things banks are the same you have products and departments set up to cover the world that existed ten years ago so are accounting systems so are regulatory structures so when you have a new product it starts to challenge the structures by either falling between the cracks or having overlap and turf war or getting ignored more commonly altogether so you're probably wondering why I talked about all that past and the reason I talked about that past is because if you think about the cultural wrapping and framework for how media and the wider world responded to the last big way for financial innovation it provides quite a useful benchmark or checklist for thinking about what you're all here to talk about today which is how it's a system how are journalists how are academia how are regulators going to respond to the current big wave of financial regulation which of course is fintech because in some ways you can see quite similar patterns developing not always and I'll talk about that in a minute but in some ways there are quite similar patterns developing do we have a new whole wave of linguistic gobbledygook an entire new language there's often very hard for mere mortals i.e. the people who are not highly played bankers fintech experts to understand absolutely yes I mean anyone here in the room think that they understand absolutely everything that a fintech banker says maybe are there any fintech bankers here no well anyway point made once again we have gobbledygook acronyms equations a lot of language that's if not deliberately but functionally ends up concealing obscuring creating boundaries once again that means that we have a small group of technical experts who end up having a lot of power as a result a lot of people depend on what the geeks are doing and most people do not understand and that's not just true of the fintech world I mean one of the reasons I wrote my book the silo effect was because when I looked back at what had happened at a crisis and saw how you had a pattern with a global system that was tightly integrated in the sense that it was ever prone to contagious shocks something happens in one corner and it flashes around the system and yet within that system everyone depends on what a tiny group of geeks are doing that no one else knows what they're up to I could see that pattern wasn't just true of finance it's replicated over and over again in many areas of modern life whether it's our medical system whether it's the way the internet works so many areas we have geeks doing something that have the ability to affect everybody and yet very few people understand so fintech has got gobligook fintech has got a group of geeks doing things that people do not particularly understand fintech has got incredible growth it's making some people very rich indeed fintech has got a sense of evangelical messianic self confidence and belief in itself I mean a number of times I've gone over to Silicon Valley in the last couple of years and heard people tell me that fintech is going to change the world it's going to make everyone's life so much better and why on earth didn't they come out with this before I mean it sounds incredibly like the kind of brochures that JP Morgan and others were putting out about CDOs back in 2005 fintech has got the same sense of tribalism and of course it's also got the same problem that bedevilled the whole growth and credit and credit derivatives which is this issue of regulatory silos in theory it should be very easy to cope with fintech in theory the existing regulators should simply move from covering their existing areas of finance into covering the whole new world of fintech and as you just heard in some ways fintech is not that different from anything we've seen before we've had technology and finance impacting on each other for decades ever since the telegram was first invented the problem though today is that the type of skills you need to really understand the bows of the technology involved in fintech and the type of skills you need to understand finance how money moves around the world and macroeconomics those skills tend to exist in different people and they tend to exist in different agencies and we live in a world where essentially you need so much training to become a professor of economics you need so much career dedication that people tend to be taken down silos in their career path and one of the big questions I have is how will regulators get the skillsets they need to keep up with not just the fintech geeks, the innovators but to really try and break down the existing structural and departmental boundaries that currently exist between the regulators who know a lot about technology and the regulators who know about finance so there are echoes there are also however big differences and in some ways I think the fact the conference is happening here today is a sign of the difference because if there is one thing that people have learnt from the 2007 crisis it's that when you have a big shadowy underbelly when you have the bit of the iceberg underneath the water it can be very dangerous and there's another thing that people have learnt it's that if you simply ignore that shadowy bit of the iceberg for a long time problems get bigger and bigger over time so quite apart from the fact the financial world has decided that it's not a good idea to have subprime mortgages on a massive scale quite apart from the fact that many regulators and bankers and investors are very cynical about CDOs credit derivatives technology perhaps one of the biggest lessons of the financial crisis has been to ask questions about the shadowy parts of finance and to essentially try and make them less shadowy by having a wider debate that is good news what the OFR are doing and I've written this many times so I'm not just trying to be nice to you but what the OFR are doing is absolutely in my mind on the right track in terms of not just trying to create a multidisciplinary approach to looking at finance and financial innovation but also trying to find ways to communicate that with a much wider range of the public I mean if any of you haven't clicked recently onto the OFR's website and again I'm a journalist I'm paid to be cynical so I don't mean to be nice to the OFR however, if you click on the website you can see an astonishing range of data about what's going on in the world in a relatively easy to understand form not always but relatively easy to understand form and when I think back to the struggles I had back in 2005 and 2006 I understand even the barest tiny detail about what was happening in credit derivatives I kind of go wow actually that is progress there was so little information about what was happening with credit derivatives and CDOs on a macro level back in 2005 that central bankers on a few occasions rang me up and asked if I knew the size of the market which is nuts any time a regulator is asking a journalist what's going on you ought to sell immediately but the good news is the OFR is there there are other groups there the fact you're having this conference today to try and talk about these trends in a wider context the fact that there are people trying to actually translate what the geeks are doing and explain it in a wider context all of that is good the question I have though is in a world where the current administration is trying to roll back the regulatory reforms and the funding in a world where the public has very short memories in a world where excitement about technology and trust in technology amongst the public is still astonishingly high I mean there's a survey conducted every year by Edelman the public relations firm which looks at which parts of business the public trust and unsurprisingly this shows that trust in banks collapsed in 2007 trust in other businesses collapsed in 2008 and 2009 trust in government collapsed in 2010 trust in the media of course collapsed in about 2014 even before Donald Trump but trust in the tech companies has remained astonishingly high if you don't believe me go and look at the Edelman survey I find it amazing it may just be a sign that there's trust waiting to collapse in the future but thus far trust has been the only technology has been the only business sector where trust has stayed sky high so the question is that given all of those developments funding being cut public with short memories politicians that are very distracted and frankly know very little about technology and public trusting technology is the fact that people like the OFR like the University of Michigan are trying to have a wider debate will that be enough to stop some of the craziness in the innovation in the fintech world honestly I just don't know I'm not as close to the financial weeds today as I was back in 2005 and 6 because my day job is really being a bureaucrat and managing a large team of journalists rather than reporting on the cold face and there are days that I really miss that but that's a question I'd ask have you collectively done enough will you do enough will you keep doing enough we as journalists are absolutely determined to try and do our part by covering what's happening in as easy to understand as possible it's not always easy I think part of our coverage has to admit when we don't know I wrote a piece as it's purely by coincidence on the plane over this morning about the CME listing bitcoin futures and the raging argument between the CME is saying don't worry we're totally safe we're going to have massive margin requirements and of course interactive brokers who took out an advert yesterday saying in fact if they go ahead with this this is going to create systemic risk and I'd be interested to hear what you guys think all I can say is I just don't know right now which argument is correct because I don't think we have enough information and so I think it's beholden on journalists to say quite openly we just don't know probably academics and regulators too but I do respect what you're doing by having this conference today it is badly needed it's very important and so I'll just end by saying thank you for having me along today and I just wish I'd been to a conference like this back in 2005