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- [00:05]
Bill Kelly
Welcome to Educational Alpha. I'm Bill Kelly, your host, bringing you on the ground conversations with business leaders, educators and industry colleagues from around the globe. Educational Alpha is sponsored by iCapital, the financial technology company with a mission to power the world's alternative investment marketplace. Part innovator, part educator, and part navigator of the alternatives industry, iCapital offers intuitive, scalable digital solutions that have transformed how private market and hedge fund investments are bought and sold. With iCapital, financial advisors, wealth managers and asset managers around the world now have access to everything they need to deliver the return and diversification potential of alternatives to high net worth investors. To learn more, visit icapital.com.
- [01:01]
Narrator
In this episode, Bill sits down with Anneliese Osborne, author of From Hoodies to Suits and a veteran in both traditional finance and the evolving digital asset space, Analy shares her journey from commercial real estate and structured finance at Moody's to becoming a leading voice in blockchain innovation. They explore the institutional adoption of crypto, the role of blockchain in transforming back office operations, and the shifting attitudes of younger generations toward investing. The discussion also covers tokenization, stablecoins, permissioned blockchains, and the broader technological convergence with AI and DeFi.
- [01:36]
Bill Kelly
Annalise Osborne welcome to Educational Alpha.
- [01:39]
Anneliese Osborne
Thank you Bill for having me. I'm super excited to be here.
- [01:42]
Bill Kelly
I've been looking forward to this and I think we hatched this plan at the Beryl Elites platform. Our mutual friend Videc, you and I were on a panel together. I don't think we had ever crossed paths before that and I will say I've spoken on that platform a couple of times. It is the most eclectic conference I've ever gone to. It's in a bar, people are moving around. But the content is great and it evolves into nighttime entertainment too. So maybe it speaks to a lot of what you've done around breaking norms down and going from maybe Tradfi to DeFi. But interesting platform. And the origin of this discussion it.
- [02:20]
Anneliese Osborne
Is it was a great conference and they do have really great conversations there. I thought I felt like they were very deep.
- [02:25]
Bill Kelly
They do. And Videk I think does a lot of YouTube videos that he came out of that and they get a lot of pickup too. So there's definitely an echo to that content, which is great because if you're not there, you can pick the pathway and see what you want to learn. So I think it's from that standpoint, very, very good platform. So I did learn a lot from you there, not the least of which is you're amongst many things, an author as well. And you wrote a book from Hoodies to Suits talking about the innovating digital assets for traditional finance. And we're going to talk about that through the lens of the book to some degree. But it's here and now with or without the book. But you've done a very good job of being a tour guide for so many that have had the opportunity to take a look at the book. But before we get to that, maybe a little bit of your background because as I best understand it, you grew up yourself in the tradfi space.
- [03:14]
Anneliese Osborne
I did. I am surprised to be here. But I love it. It's super interesting and I learn something every day for sure. I did traditional finance, I worked in commercial real estate and then I worked at Moody's doing commercial mortgage backed securities and all sorts within structured finance. And CMBS was actually innovative at the time when I had started a long time ago because if you think about it, decrease the cost of financing because it shift the risk from banks balance sheets to bondholders who could buy at their level of risk. So that was interesting at the time. I did that after business school and I stuck around for a long time. When I left Moody's I did a lot of corporate board work and then I starting up helping different hedge funds, private equity, family office, startup business lines. So I'd done my corporate time and I was looking for something new and growing and I got into the space cause I was asked to join a regulatory task force for ICOs when I did not know what an ICO was. And an ICO is an initial coin offering. It is slightly similar to an IPO in the sense that it's fundraising for a new company. But an IPO is established and an ICO is you and I have an idea and we want to go out and get people to fund it from a very early venture stage. So that's how I got into the space. I did a lot of research and I learned what blockchain was and how it worked. And I just saw the applications for capital markets and I assumed other people were working on it. And at the time people working on it were kind of more the hoodies in the sense that they were tech or entrepreneurs and they didn't understand finance. I don't think finance is broken. I think it can be upgraded. It's continually upgraded. Think about pink sheets and faxes before emails even. So yes, I think it's the next iteration. And I found a partner back in 2018 and we started Then. And I've stuck with it as the market continues to evolve. I was definitely early in 18. I think now is a much more interesting time, especially for your audience with the world of like trading and institutional investors and hedge funds. I think now people are paying attention.
- [05:11]
Bill Kelly
It's interesting. I think a lot about this current trend is very, very different in that innovation used to be the home of the institution or the institutional investor. And the endowment model, which some people use had its roots back to the 1800s when Harvard began investing their endow endowment. And if there was a new investment idea around venture capital or hedge funds, it was done institutionally. It does seem like this whole explosion of digital assets grew up more at the retail level to some degree. And I think the institutions and you mentioned this in your book. And a certain large bank CEO is very, very dismissive of what blockchain and more specifically crypto. And I think oftentimes people wrongfully so use those terms interchangeably. But event either holding their nose or not, the camel has come into the tent. And I think that's been disruptive in so many ways because we're having to learn from the next generation as opposed to creating these great ideas ourselves. And I don't know how much of an impediment toward accepting that has been because I think, and I love the title, because if you go into a conference and a bunch of people wearing suits and somebody walks in in the hoodie, your instinct is to immediately dismiss that person as a non serious, inconsequential member of that new community.
- [06:35]
Anneliese Osborne
Well, also, if you think about Zuckerberg when he did Facebook, it was like a badge of honor to not dress up and wear suits. It was like, we don't need to follow the status quo. And so it also goes along with the lines of does innovation come from institutions? And I think sometimes institutions are more difficult to innovate out of because we know what we're supposed to do. We understand this is the regulation, this is the workflow, this is the process that's the most efficient. But it's not necessarily the mindset of the hoodie. And the hoodie is more like, how can we move fast and break things? Or what can we do differently? If you think about when bitcoin started, it launched in 2008 at the same time as Occupy Wall Street. And so the bitcoin white paper came out and it was about how peer to peer, we cannot use the banks and I can't transfer money to you. And it was the same time people are doing Sit ins and trying. Not like they were against the big banks. So that was an interesting dynamic. From my perspective, banks and investment companies can actually benefit. They can make money and save and reduce expenses off of this technology. But the idea behind it to me was much more libertarian and how do we fractionalize? And I think there's different ways. We can take this, we can take this one. We can look at the alternative asset class of crypto which if you think about so stepping back a little from hoodies to suits is the technology. The technology was started by these entrepreneurs and these hoodie wearing tech guys. But they created, I think it's $3.4 trillion is now how much is in the crypto ecosystem. That's amazing. They created that and now to take it the step further into institutions. That's where I think the suits are really important. Because we need to understand regulation, we need to understand the flow, we need to understand how to build and grow businesses as well. Because there aren't that many Mark Zuckerbergs out there who can actually take a thought to actually a public company that does well. And also Mark Zuckerberg now wears suits. If you look at when he's at congress or wherever he's presenting, he's not wearing that hoodie anymore. So it's like a rite of passage. When you cross that chasm as you.
- [08:35]
Bill Kelly
Alluded to, I think we're going to see more and more of emerging these technologies. Maybe there's going to be a lot more M and A because I think some of these big banks and insurance companies, they have a lot of balance sheet and once they understand, they get up the learning curve, maybe read your book, then they can say okay, now I have my aha moment, we have to do something about it. And I wonder and your views on this would be important maybe to set the rest of this conversation. Annalise, when it comes to doing something, I don't know enough about this, but I look at the power of blockchain and the distributed ledger as a record keeping mechanism. Very different than traditional double entry accounting. But if the banks and insurance companies can get that right, is that the first most important building block or is there something else that has to come before that?
- [09:22]
Anneliese Osborne
I think there's definitely use cases for blockchain. So if we're talking about back office functions, it's safer, cheaper and more secure. Think about a large Google sheets where you know who inputs into every block and you can't erase it. And I think we'll definitely decrease error with manual entry I think we'll see what's there. We all have access to it. There's a lot that can be programmed and I think that blockchain technology allows for that. So I think there's definitely cost cutting measures that we can talk about. For most back office, I mean, if you look at JP Morgan, they created JP Morgan Coin, which is in essence an internal stablecoin for the bank and they save millions. I'm not sure the number because it hasn't been published for a while, but they save crazy amounts of money every year being able to use that internal immediate transfer, which is in essence an internal digital currency to JP Morgan. They use it for repo transactions, they use it for all sorts of collateral transfers.
- [10:16]
Bill Kelly
And is it backed like a stable coin?
- [10:19]
Anneliese Osborne
It's backed by depository receipts. So that's why it stays within the ecosystem. We can talk about stablecoins. So think about institutions coming into this market. If we look at a year ago, the ETFs went live and the ETFs, which are really an institutional wrapper of crypto, an opportunity to invest in this alternative asset class. There's a hundred billion dollars now in one year in crypto ETFs. So that's actually really impressive because that money might be coming from some retail, but it's also really coming from institutions as well. And if you think about the price of Bitcoin, which we haven't really talked about initially, crypto had a really bad reputation because it was so volatile. There is crazy volatility within cryptocurrencies because they're not backed by the full faith and credit of the US Government, for example, they're not necessarily backed like a bond is backed by the credit of a company or some sort of collateral. It's not backed by collateral. But if you think about now with a hundred billion dollars in these ETFs, they're generally Bitcoin ETFs and institutions are less likely to day trade. So I think that that's going to help decrease the volatility of something like Bitcoin.
- [11:23]
Bill Kelly
Maybe on that point, maybe slightly out of sequence, but it's worth pausing on it. So the institutions are more investors than traders and they're buying this because they think they're getting it at fair value and they're looking for long term appreciation. And a lot of the volatility has been driven by the fact it's been individuals just day trading the hell out of bitcoin. And I do wonder, as we think about a next generation where we're responsible for own retirement. I just had a guest on earlier today, we talked about the same thing. Are we feeding into the trading frenzy of this next generation versus trying to find ways of making them more investment savvy? So it's great for the institution, but how do we ingrain that in the minds of the hoodies?
- [12:08]
Anneliese Osborne
So interesting to bring this up. So I do have a chapter in the book on this as well that I think generational wealth and generational decision making is very different. So there was a study that was done in the UK that 85% of Gen Z in the UK turned to finflancers first. There's actually an article that was done less than a month ago in the Wall Street Journal that talks about different generations and where they get their financial advice. It shows for the next generation, finfluencers first, then friends, then professional organizations like banks, et cetera. It's very different because if you look at the baby boomers, the number one is from the financial institutions. It's a tiny for the finfluencers. So finfluencers are you or me who go online and we create an account and are an influencer in finance. And not to say that they're bad, but there's no justification for who you're listening to. If you're a Gen Z that doesn't have as much information, you're not going necessarily to your parents, you're maybe not learning it in school and then you think what do you do with your money? So I think that's just a different mentality. And with that same mentality, if you think about Gen Z and millennials grew up very digitally, they grew up with a supercomputer in their hand as a telephone and they're very digitally native. And so they would like to have more opportunities to invest on apps. They're much more comfortable on apps, for example, than say the baby boomers are where they had to learn as a second language technologies. And so I think there's gotta be a way for institutions, especially RIAs or retirement opportunities for investing that work with them, meet them somewhere in the middle. Because it's a different mentality. If they're going to be on social media, they're going to need to have. They're also going to have half the world's wealth soon. The baby boomers money. It's a great wealth transfer that's transferring to Millennial and Gen Z. Millennial, the oldest millennial is about 40ish. And so they're starting to run the departments and the companies. So they're not only going to have the majority of the world's wealth, they're also going to be running the companies and making financial decisions. So I do feel like there's going to be a shift and that the idea of retirement planning we need to think about how do we capture that group of people, how do we reach out to them? Because a lot of this generation don't want to work with necessarily their parents.
- [14:26]
Bill Kelly
Investment advisor and I think that whole field of investment advice is ripe for disruption too. I just don't know if it can happen fast enough because you look at the average age of these advisors, they're 50 to 60 years old. Most of them are white males. So they're already struggling. When the male of the partnership usually dies first, the spouse usually doesn't want to keep them, and now you've got this transfer of wealth. I think these Gen Z and Millennials have a very different attitude and approach. And even if these advisors can keep the business, they're not even going to be speaking the same language to them. So I don't know what the outcome will be. And usually disruption presents opportunities and hopefully the right app or set of people settle in there to really make sure this next generation has the right access. But thinking more about being investors versus day traders.
- [15:19]
Anneliese Osborne
So I will teach at different universities one off, I'll go in for one class. And I always ask who owns crypto and who owns mutual funds. And it really is interesting that different schools, there's a different sway. But my most recent one, more people own mutual funds than crypto. So I do think there are some people relying on their parents and less on crypto. But I also think that the investment market has changed. So if we look at, in, what was it, 96, the height of the market for public companies, where there were over 7,000 public companies and now there's 4,000. And so there's more in the private markets. And so in the private markets, what are the opportunities and who can invest in them? It's just not as easy.
- [16:00]
Bill Kelly
It does present a whole host of problems and opportunities as well. And your point about the shrinking public markets, if you and I have responsibility for our own retirement, we should have access to real economy full stop. And it's hard to argue the other side of that. But then how do we provide that access? And I think the industry itself is operating, I would argue off tradfi norms. So they're saying, well, if I'm going to get Mr. And Mrs. John Q. Public in here, they're really not equipped to do it through a drawdown fund. So let's create an interval fund which acts and behaves more like a mutual fund with quarterly openings and navs being struck, et cetera, et cetera. And I just don't think that that's necessarily the killer app. And I look at blockchain as perhaps part of that solution where you could create maybe different sleeves of liquidity, a permission blockchain around price discovery. So I just don't know if the industry has gotten this right. I think they're moving very quickly toward asset gathering, maybe being less thoughtful about sustainable solution to the end investor.
- [17:10]
Anneliese Osborne
I do think that blockchain is working to fix that problem. And opportunities to access private equity funds. For example, right now the minimum buy in for private equity is so high, say it's $5 million to invest in some of these funds. Well, the back office functionality of blockchain that we were mentioning before actually makes it much more efficient to be able to take more investors in to some of these funds and then actually decrease the minimum investment. And that opportunity allows more people to take part. So maybe instead of $5 million, it's $200,000 or it's going to get lower than that. I'm sure it will be $50,000 soon. So if you look at KKR, Apollo Hamilton, Lane, Franklin Templeton, all of them have tokenized private equity funds to offer more opportunities. And this I think also speaks to to the changing generations where they're all looking forward, as in where are we going? Not where are we today? So I think they are looking at opportunities to offer private assets in a differentiation investment so we can have more diversified portfolios. It doesn't just have to be mutual funds or specific stocks. I think we're kind of getting there. It just takes a little while. So it takes a while to upgrade the systems. If you think about most of the banks or institutional investors, a lot of them have very old systems that they have built out on from a technical perspective. And so it's upgrading that. And a lot of times each group has their own tech stack. And so I feel like we are working towards it. Ernst and Young came out with a study maybe last month that interviewed 352 institutional investors and their take on digital assets. And I was very surprised to find more than half think that tokenization will be beneficial for portfolio diversification so they'll be able to invest in more types of assets. What really struck me is 24% actually are active in defi, which is decentralized finance, which again, I'm surprised at that number. And they said that's going to obviously increase and they're looking to defy for derivatives staking and lending. So if you think about the decentralized finance model, I don't think it's that different than traditional finance. I think a lot of words are called different things. But the idea is that there's less intermediaries. So I want to finance my deck behind me. So maybe I'll put down my crypto as collateral and I'll get a loan from someone. There's real life use cases. You could do that. Obviously that's from a retail perspective, much different from an investment perspective. But that to me was a real eye opener.
- [19:40]
Bill Kelly
Wow. Interesting. Maybe there are pockets of innovation and we wake up one morning and it's less pockets and I look out and there's a field of greatness and I finally get it. But you mentioned Hamilton Lane and I followed the story, albeit loosely. And right before we came on, I just reminded myself and it was on the Polygon blockchain and they came out with a secondary fund late last year, early this year. And you almost had the numbers spot on. So we must be reading some of the same news stories. But this secondary fund, if you were the Abu Dhabi Investment Authority and you were coming through the master fund in Cayman, 5 million bucks to get in. But if you wanted to come in through the polygon feeder fund, $20,000. Now that sounds like amount of money. That is more qualified purchaser or accredited investor. But it ain't 5 million. So it is bringing it to the masses. And maybe this is just speculation on my part. You might have more of an informed view. But there's gotta be some trading on that feeder fund on the blockchain. And I would have to imagine that it would have to be a permission blockchain, that somebody would have to be playing referee. And I know you talk a little bit about permission blockchains in the book.
- [20:57]
Anneliese Osborne
Sure. You can actually put permissioning on public chains. There's different ways to look at privacy as well, which is I think the biggest. I'm spending a lot of time. I wouldn't say challenge because I think we're figuring it out. Opportunity is to find ways to privately protect. Public chains are actually very efficient. If you think about. I look at it like the intranet and the Internet. The intranet is what we first used because companies were afraid of having access to all the information and who's going to hack what. But then you Realize the Internet was like a bulletin board for us at companies Internet you could actually access all sorts of information. Now commerce is done straight on Internet. I think the blockchain of a public blockchain is similar because it's not as restricted. I think a lot of the private permissioned are more like a very large database. But the idea of being able to transfer tokens or transfer investments or dollars or what have you, there's opportunities to put permissioning. So Polygon is public. And so if you look at a lot of the tokenized funds, they're done on public chains because you can transfer back and forth, you can cash in, but they have any security is a security. There's a KYC whitelist and you can only transfer it to somebody within that whitelist. So that is fixed different privacy things that we're looking at and doing it. Without a money laundering perspective, how do we have the benefit of the blockchain? And the decentralized nature usually is very open to information. But for example, what If I have $20 million in my wallet and I don't want to admit that I have $20 million, but I want you to know that I have $2 million of Bitcoin I can transfer you, for example, or Fidelity Fund that I can transfer to you. So I think there's different ways that we're approaching that. But I do think there are opportunities for privacy and permissioning on public chains as well. Now granted, I'm at Kadena, we're a public chain, so that's how I see it. But if we look at even the banks, the banks are trying to figure out now how to work on public chains. One thing, the banks are very highly regulated. And so there's not a lot of clear regulation right now for banks. So that's why we look at MICA in Europe. There's black and white, it's not gray. And blanks can't play in the gray because of the regulations. But they're also recognizing we're going to get here. Let's start planning now. So there's sandboxes, for example, in Singapore, there's a number of US banks that are doing projects out in the sandbox in Singapore on public chains to realize once we can do this on public trades, how do we do it?
- [23:26]
Bill Kelly
Jumping back a moment, you mentioned it earlier and just now again, this concept of collateral staking and lending. So if I use securities lending, which has been around longer than you and I, and if I'm a fund or an asset manager, I lend securities and I take cash in or repos or something as collateral and usually it's collateralized up to 102% just to pick a number. And the underlying collateral is relatively stable. And if it moves around, I call in more. If it's moved up, I return some collateral. How does it work? If the security is crypto or Bitcoin and it's very volatile, is it just more capital calls? How does that work?
- [24:04]
Anneliese Osborne
Well, it's programmable. It can automatically cash out. So your collateral will cash out to pay down the loan that you have if there's volatility. So it's just automated.
- [24:16]
Bill Kelly
And automated that it will call in more collateral too if it's needed.
- [24:19]
Anneliese Osborne
It could, yeah. It depends on however you program it.
- [24:22]
Bill Kelly
Using a smart contract, I assume you.
- [24:24]
Anneliese Osborne
Can use a smart contract to have more collateral called in. If you think about margin calls, 247 the world and the financial world are so much more global. So banking hours, we still go by banking hours, but cash can be transferred outside of banking hours at this point. But that's one thing that for a 247 market, having automated margin calls where you can rebalance and you don't have to call and make a transfer by pressing buttons or using the phone, I think that's a huge step in efficiency. Think about high frequency trading. That was another step of increasing in technology to make our lives easier. So I feel like this is as well. And the cash you mentioned Stablecoin before, like we can dive into that a little bit too. The Stablecom market now is $240 billion. $240 billion. So it's more than Visa transactions. So it's actually really interesting to think. And those are generally held by US Treasuries. So if you think about that, they're a huge holder of U.S. treasuries. The stablecoin market, so the crypto market, all of these degenerates that people looked at before that are not degenerates but the idea of all these hoodies. But Stablecoins are in essence a digital currency that we can transfer today, immediately. I can transfer to you, I can transfer to my aunt in Africa with no cross border payment fees. There's just the cost of gas getting it over there, which is very minimal. I don't have to use Western Union and they get it today. If you think about if I got a check in the mail. So it probably took what, five days to get to me. I cashed the check in my bank account actually using my phone and it was a five day clearing so that's 10 days that I don't get the money. But think about if I could get the money immediately instead of them writing me a check, think about the velocity of money. And if I am an institution and I'm dealing with billions of dollars or trillions of dollars that are going through the financial system, if I don't have to wait days to get it, I could automatically put it up against something else. So I do think that there's a lot of benefits. Even central banks outside the US there's something called central bank digital currency where they're looking at the reserves of the countries. Stablecoins are stable because they generally mimic the US dollar and they're usually held as a reserve of US Treasuries or a basket of something similar. So it stays at a dollar. A central bank digital currency is in essence backed by the full faith and credit of whatever country is the central bank is putting it out. So it's interesting is a lot of central banks outside the US were actually looking into CBDCs because of cross border payments, which is also interesting because that's really trade oriented as opposed to, I don't know, I usually think of it internally as in internally within their countries. But that was an eye opener to me as well.
- [27:02]
Bill Kelly
So if you look at the US Is it a question of when or if we will have a CBDC?
- [27:08]
Anneliese Osborne
Oh, a CBDC. There's other things that go into CBDCs. There's a question of privacy where I spend my money and I don't have to file my taxes. They can see everything coming and going. And even though I know that there are programs for the digital dollar, I think that's probably the biggest concerns about having a US CBDC. I do think stablecoins will come first. Stablecoins being PayPal has a stablecoin. Visa and MasterCard are also really looking at this. So the companies that we would think would be replaced are spending a lot of time and money figuring out how can they shift their business and to incorporate this. So that's something to think about as well. That means we're really here. And with the changing administration, the U.S. this year, it's a huge boom year. The SEC is much more open to. Previously the SEC chair there was a lot of enforcement actions where companies would ask questions, but then they were almost ruling by enforcement. Now the SEC is trying to be much more clear to say we're really interested. How do we become the hub of innovation in the United States and not move outside the US So I think that is super helpful and I think that's going to really translate into growing in the United States this year for innovation. But you had asked about CBDC. I think PayPal, for example, has a stablecoin. So I don't even need to know I'm using blockchain. I can just open my PayPal account and transfer money. There's not a 3% fee charged. If Visa or MasterCard, it's transferred immediately. Even a Visa MasterCard, the retailers don't get the money immediately. We're working with a country about doing a Stablecoin as opposed to a cbdc, but actually a stablecoin supported by the sovereign. So that's really interesting because it is then technically money, not a security. Security is if I can get yield on my stablecoin, which we're looking at doing that too. So, for example, if you have a tokenized treasury fund, instead of me holding dollars in my wallet or my bank account, I can hold it in a tokenized treasury fund. So I generate yield while I'm sitting on my cash.
- [29:05]
Bill Kelly
Interesting. So with these stablecoins, and this is going to maybe show my old school ness. But how different is it from using Zelle or Venmo?
- [29:15]
Anneliese Osborne
You don't even need to know. That's when I think we've arrived, is when we don't say blockchain or even stablecoin. The idea is I can just sign in with my regular web2. Right. I sign into my PayPal account and I send it over. But it's more immediate because the transaction is immediate. If you send it with Zelle, you're not actually able to take the money out right away unless there's already money there that covers it.
- [29:38]
Bill Kelly
So Zelle is not using blockchain technology.
- [29:41]
Anneliese Osborne
No.
- [29:42]
Bill Kelly
Okay.
- [29:43]
Anneliese Osborne
FedNow, they came out with to try to transfer money faster. But even they're looking at blockchain. DTCC is looking at blockchain, Swift is looking at blockchain. All of these companies and intermediaries are figuring out how can we do it faster, cheaper, more secure. So it's interesting that intermediary transfer agents, if you have a blockchain, do you need a transfer agent? Because in essence, all of that's recorded on the blockchain. But there are digital Asset Transfer agents and they're trying to figure out how can we make this better.
- [30:11]
Bill Kelly
You mentioned dtcc, so I think most listeners will know security processor for three quadrillion of security transactions. And in advance of this conversation, at least I know they have been doing some work with digital Assets and blockchain. And so I looked just quickly to see where they are. You probably know more than I, but they just announced in April that they come out with smart contracts for digital collateral markets where they're going to settle collateral using smart contracts. And it's interesting, maybe tying two things together. When we came out with T +1 for security settlement middle of last year, I think most people would say we're still talking about one day as opposed to one second or one nanosecond. So I think anybody that thinks that TradFi is just sitting in their hands, just waiting and watching, not the case at all. And I don't think anybody 30, 40 years ago would view DTCC as an innovative organization. But they clearly are.
- [31:11]
Anneliese Osborne
I think they do, but they also have to pay attention. It's like if you think about the Kodaks or the Blockbusters or look at Yahoo and AOL or Skype.
- [31:21]
Bill Kelly
Microsoft shut Skype down last week or two weeks ago.
- [31:24]
Anneliese Osborne
You might be the front runner or you might have a great business model, but if you don't keep up, you might disappear. But I do think the DTCC is definitely looking at what's next. They acquired Securrency last year. I think it was last year, which was a big blockchain company, so they brought it in house. So you had mentioned M and A. M and A is also happening within the crypto industry. So there was a.
- [31:45]
Bill Kelly
There was.
- [31:45]
Anneliese Osborne
I don't remember how many billions this week that coinbase just acquired a digital derivatives trader as well. So I feel like people are putting pieces together to build and grow. I do think a lot of the web three companies will be acquired or institutions will look to see how they can acquire. So I think it'll be an interesting year. But Also you said T plus 1. Not everybody wants T plus 0 because not everybody has the collateral necessarily. So I feel like it's something to think about and weigh. It's like not everybody wants to have their securities back mark to market every day. But I do think there are ways around all of this.
- [32:19]
Bill Kelly
I think the flip side of the T plus 5, then more opportunity for the trade to break. The collateral doesn't show up. So it seems to be if I've made a commitment, the less time between trade and settlement, it seems like the better the world will be. But I definitely understand there's an arbitrage at work there too. So in the remaining time that we have, I'm curious your views about generative AI that seems to be sucking up all the Oxygen in the room now. And I hear more and more about that and less on Blockchain. And if I'm CEO of an asset management industry, which would maybe describe the domain of a lot of our listeners, what is the right approach? Is it, first it was TradFi, then moving toward alt, and then blockchain, and now generative AI, Alt data, quantum computing. What should the focus be? And maybe eventually we see a great convergence of all of this new technology. But how do you see the future and maybe some of these trends merging together?
- [33:20]
Anneliese Osborne
Well, first, if I was running a company, I would look to identify my problems and then solutions as opposed to. I know some people were just trying to use blockchain for the name blockchain before, but it's kind of like, how can I make my company more efficient? So from an AI perspective, if we're talking about forecasting or we're talking about synthesizing large amounts of data for a predictive analysis, I think that's a great tool. If it can help us make better financial decisions as a fiduciary, I think it absolutely makes sense. This is, I think, probably 18 months ago now, but Google's DeepMind had solved a mathematical equation that we were never able to solve before. That to me, defines what generative AI is. It is able to synthesize all of these data and come up with something new just for people to put it in perspective. So I do think that that makes sense. Obviously, I know people are looking into Quantum. I think Quantum is interesting. Some people say it's five years away. I think it's longer than that. Cooling is a big problem with Quantum. If we look at the idea of technological innovation, it's just exponential. And especially if you think about AI from a coding perspective, we can code faster now because we can plug it into AI instead of typing it all ourselves and then fix the code. So I just think it's going to be so much faster with technological innovation than it has been in the last 20 years, which were faster than the 20 years before that.
- [34:40]
Bill Kelly
Yeah, it's going to be interesting. And maybe to finish off, I think the most important page in your book is the one where you dedicated the book to your three sons. And the quote, which I love is, may you stay curious. I think that's awesome. What are their 20s, 30s, and 40s going to look like in terms of career path and interaction with technology? And they're already probably more tech savvy than me. Low bar, but certainly maybe even more tech savvy than you.
- [35:07]
Anneliese Osborne
I Think jobs will be streamlined, but we'll also have jobs in other places. Yes, there are robots coming at home, health aides, but I do think that there's still obviously a lot of trades. My oldest is really into computer science programming. He always has been and now he's getting into finance. Not my push, but I think that actually having that basis for computer science and programming is going to be so helpful for any job because the jobs aren't going to be tech jobs. I think every company is going to have such a huge component of tech that it's going to be everywhere. My middle is about astronomy, which is my James Webb photos behind me. But there's so much innovation in space and planets and look at SpaceX and how much cheaper he was able to do it than NASA. And kind of the innovations that spurn from that, that we can work in everyday life that we don't necessarily think about. My youngest is very much a people person. And so this is another aspect is that I do believe as fiduciaries, we're still going to need people because you want to look the person in the eye and understand them and know that you can trust them. So I think the trust aspect is also still going to be important because there's so much you can do in public markets. But I really feel like any mergers, any really large transactions, we're still going to sit down at a table, shake hands or go have a meal. So I feel like, yes, technology will make our lives much more efficient and faster, but I do think us as people is still important to know each other and trust each other.
- [36:35]
Bill Kelly
Is there a working title for the next book?
- [36:39]
Anneliese Osborne
We'll see. The book's a labor of love. I need to make a lot more money now before my next one, but there are lots of ideas of what could come next. So, yes, thank you so much.
- [36:48]
Bill Kelly
Well, I look forward to that and I'll have you on when it does come out. But I appreciate having met you and learning from you initially on the Beryl Elites platform. And I think our listeners get a lot out of this discussion today. And I'll put a link to the book there too. I have a copy right in front of me, as I know you do as well. It is a well thought out, digestible read. And I think of some of these books, they're not approachable because they're so academic. And I know you said it to me as much offline and you can quickly see it as you open the book up. It is very approachable and I think that helps take the reader on a tour that they can come away with learning something that perhaps they would not have been able to get out of more academic tombs. So thanks for all of that.
- [37:29]
Anneliese Osborne
Thank you, Bill. It's been great conversing with you. It's so fun to meet you. I look forward to many more conversations.
- [37:36]
Bill Kelly
Thank you for listening to Educational Alpha. I'm your host, Bill Kelly. Learn more about the Kaya association and subscribe to the show at kaya.org. that's c a I a dot org. See you next time.