Chasing the future, without losing sight of reality
“THE parable of the Ox”, written by John Kay, refers to a story about a statistician who in 1906, noticed that at a county fair game where people guessed the weight of an ox, the average of all their guesses ended up being very close to the animal’s exact weight, as revealed by a pair of scales.
The story continues to build – very quickly, people leave aside a reality which came from knowing as much about the ox to something disconnected – using ever fancier models and methods to predict the result, some betting on the bets of others, and even filling the gaps by using predictive models that create even more guesses in an attempt to ‘improve’ their accuracy. The story reaches its zenith, when the masses, driven by popular folly, ignore everything including the farmers, and the ox dies.
It’s an interesting look at today’s markets that face the challenges of seeking growth while building relevance in the real economy.
Markets can remain as they are, i.e. the status quo, or take extreme measures more akin to a leap of faith to grow. So, what lies in the future of markets? It’s a big topic, but here’s a few key principles that should be included among other well-intentioned efforts.
Future challenges
Generally speaking, the parable of the ox shows that getting carried away with the popular next big thing (to which I would add “of the moment”) is an act of folly. Growth and expansion is highly necessary, but it is also up to us to be the guardian of capital markets – to help create growth that benefits society at large by connecting capital to businesses that create value in an efficient manner.
So, let’s take a broad view of the challenges that exchanges face in the future. One part of it is driven by the digital platform economy. In fact, the pervasiveness of new and disruptive technologies now challenges every exchange worldwide.
It brings radical change, and many new opportunities have been created across a wide swathe of economic sectors, stretching from travel, books and music to transport, banking and even healthcare and energy.
The other part of the challenge comes from the sizeable demands of our role. The exchange industry holds a responsibility to foster growth and innovation throughout the capital markets for the benefit of developing nations.
The United Nations Conference on Trade and Development estimates that annual investments of between US$3.3 trillion to US$4.5 trillion are required to achieve the Sustainable Development Goals by 2030. There is currently a US$2.5 trillion gap, filling it is a key role capital markets can play.
These two parts of the challenge makes life for us interesting. Firstly, looking past the noise of digital disruption, we see a fertile ground for new business opportunities that will strengthen our role in connecting capital, businesses and society in the real economy.
Today, exchanges need to transform into the open marketplaces that can continue to create trading opportunities across a wide range of products. At Bursa Malaysia, this is the dual nature of our choice – we choose to be part of the disruption facing our industry and transform ourselves so that we remain competitive at our core responsibilities while also growing new domains.
Bursa Malaysia’s ability to play this dual role comes from a number of things. Our ecosystem, a continuous work-in-progress is designed to encourage players to hold the responsibility to re-invest in the system to create a virtuous cycle.
New domains
It builds trust and empowerment – where all participants actively fuel a positive culture that feeds a developed market mentality. We also focus on developing and harnessing both old and new skills, to connect with strategic partners across the Asean, and to build the understanding and adoption of sustainability to connect with Next-Gen investors.
The combination of the above puts us in a good position to pursue new opportunities. Connectivity with other markets helps us build upon each other’s strengths to serve everyone’s needs.
It also helps us develop new domains – by collaborating with firms that use innovative technology and business models. These firms are important components of accelerating our progress as a marketplace, and they can provide access to technology and innovation that would take much longer and be less cost efficient to develop on our own.
All of this is underpinned by our stand on ethics and the power of the softer side – the intangible qualities that hold a market together and push it forward. It is seen in our design of regulations and market management approaches which allow for the kind of liberalisation that helps drive a thriving economy in a sustainable manner.
So, while we prepare ourselves for the future, we also remind ourselves of the role we must defend – to help Malaysian compa- nies globalise themselves, boost the base of our economy which is driven by SMEs, grow our investor base and continue to drive innovations such as those found in our Islamic capital markets and derivatives markets which have gained global visibility and recognition for their ability to contribute meaningfully.
Our focus on the future is one that allows us to develop and offer highly relevant products and services in this part of the world, which is driven by the greater Asean economy.
Lest we forget the parable of the ox, this isn’t about farm animals alone. In this region, growth cannot be an empty bubble – it is filled with the future of an economy that connects over 600 million human beings, and has an incredible breadth of potential opportunities to be explored. Understanding this is crucial to delivering our vision - to be the Asean’s leading, responsible and globally-connected marketplace.
There will always be new things to offer an educated opinion on, but this final instalment of an eight-article series is a good look at the development and future-proofing of an exchange that will continue to create opportunities and grow value.
Read the whole series here: http://www. bursamalaysia.com/corporate/media-centre/ thought-leadership/