Are Bank Jobs at Risk From Technology?

all the humans. Speak from Pandit, who ran City Group during the financial crisis, said that technological developments could result in a thirty percent decline of banking jobs in the next five years. That is soon, and that is a lot. That is thousands and thousands of people. So here to give us some context, perspective and perhaps uh an alternative view is Kevin McPartland, who is a principal market structure

and technology analysts with Greenwich Associates, which is based in Connecticut. Um, Kevin, so what's your take on this? I would love to get your sort of in the ground observation. Does this seem realistic? Sure? Yeah, I'm gonna I think I'm gonna side with Jamie Diamond on this one. This isn't about a loss of jobs, but really a change in jobs.

And I think, you know, we saw this, I think in the first dot com bubble back in thousand, when you electronic trading was really starting to take over and the trading desk makeup was starting to change. It wasn't that you were losing jobs. It was that you were taking what maybe before we're business school traders and replacing

them with you know, computer science PhD s. Now. Obviously, technology and the markets have evolved quite a bit since then, UM, but I think we're in I think we're going through a similar transition where it's not just also in this time around, it's not just about the skill set of the people in those jobs, but where those jobs are.

Some of those jobs maybe that we're at banks, the banks that are looking to increasingly outsource UM, you know, pieces of their technology infrastructure, UM too, you know, sometimes large firms that often UM startups as well. That we're just going to see some jobs shift around, right, more so than seeing these jobs just you know, disappear into thin air and have the robots take them. Kevin, let's let's focus if we can, on retail banking for for just a minute. I mean, is that the area that

you're going to see the biggest job losses? I mean, I really think it's across the board. There's no question the industry is being disrupted. Um, you know, everything from you know, when you call for an issue on your

credit card and you're talking to an automated voice. Um, but right down to the institutional trading desk, right where there's you know, less traders covering more clients, and they're able to do that because they have you know, more sophisticated technology in front of them that allows them to service those customers. And those customers also have more self service technology than they did. So I really do think this spans the gamut from you know, retail all the

way through to the institutional markets. So when you talk about the disruption that's already happening, what do you see as the biggest technological development that will result in a mass shift in banking jobs over the next five years? I I so, I think it's a back end phenomenon that we don't really see, right, It's not the There's a lot of cool stuff that's going on that's on the screens, that's on your phone. But our ability to

process data and analyze data, just the compute power that's available. Um. And there's a whole host of technologies that have made that possible. That's what we didn't have five or ten years ago. It's so so much compute power. Right. The fact that you know, with Apple's announced me yesterday that they can do um, that amazing face scanning and within a chip that's in your phone. UM. To think about that on on an institutional scale, with an Amazon or

a Microsoft or Google data center. UM, there's just so much that computers can do with that power. UM that just wasn't available or affordable five or ten years ago. So let's just talk about you're saying the shift in jobs. But when you talk about that back end stuff, I think about Bank of New York, Melon, I think of some of these you know, classic processing focused firms that are big, have a lot of people. Are they going

to go bankrupt? No? No, I think they they'll you know, their business model and they're the economics of the business will have to change as they you know, continue to uh. If we if we call it outsource more and more functions to computers. UM, they'll be able to then take the people that they do have and push them further upstreaming to get their you know, their customers, facing their

their their new business, their innovation. They'll be able to have people more focused on those UM I guess you would call them like neck up tasks, where the computers can automate more, you know, more of what can be automated. Which I think that process is going on for arguably for decades. We're just continuing to move down that spectrum more, more and more complicated things can be automated. Kevin, I got one question for you, and it's only a word Equifax.

I mean, there's you know, there's always going to be uh, you know, where where there's technology, the technology was still developed by humans. There always can be issues and there's always going to be some bad apples in the world. But you know, the industry is resilient and continues to uh, you know, continue, So you don't think it's gonna be

a problem. You don't think it's gonna you know, you don't think some smart banker is going to say, you know what, maybe we've been a little overboard with all this technology and maybe we just ought to have people dealing with each other. You know what, it's a it's a it's a good point. So there's always going to be a relationship component where people will trust people. Um. But you know, we've also all become more comfortable with

technology over the last ten years. Right, You're you're comfortable putting all of your banking information to paying your bills online and ten years ago you probably weren't, Thanks very much, Kevin McPartland. He is the principal Market structure and Technology at Greenwich Associates. Well, the rebuilding in Texas as well as in Florida continues, and here to tell us more about the people that will do a lot of the

rebuilding is our own pressant. Gopaul Prashant joins us from our Boston bureau home to Bloomberg one oh six one Boston, Newburyport thirteen thirty in Metro West and the South Shore Pressant. Always a pleasure and maybe just to start off by describing this industry which really sort of favors mom and pop outfits, uh that are really expected to make a decent amount of money because there's a lot of clean up to go around. Well, it's it's kind of an

industry that's sort of floorat of the radar. I don't think people even realized it was an industry. UM. But you know, you have uh, you have various sizes of companies. You know, the largest company in the space is a company called belfour out of Michigan. And and they do this reconstruction work around the globe. And I know they they've they're expecting record revenues this year at one point seven billions. So it's a it's a pretty large company.

Um And and then you have a mid sized players like the one I wrote about, UM, a company called Cavalry Construction. Uh. You know, the name is pretty appropriate. They they mark they kind of ride into areas where they're hurricanes and other storms around the South and rebuild homes and businesses. Um and and then you have sort of smaller players. Many of them are sort of shady. So it could be people who just show up your

door with a pickup truck after a storm. Uh. And you know, in some cases they might steal from you or or uh take a down payment and then leave. So not all of them are like that, of course, but there's they're they're various kinds of these companies. So how expensive is it bresciant to rebuild your home after it's gotten flooded. And what's the process of, say a Michigan based company, of going down to Houston, getting enough workers and flooding the zone, getting in there and uh

and reconstructing things quickly. Well, okay, so let me take these two things. So in terms of the cost um it varies, so that the cavalry construction charges six to eight dollars a square foot for the first step of the process, which is to um, you know, pull out the soggy wood and dry wall and um uh and and and everything else in the house, rip it all out, bring in fans into human fires, treat for mold um.

So that so for a three thousand square foot house, that alone would cost you about twenty four thou dollars um. And then to reconstruct a house of that size it would be about hift um for But you know, of course they're doing you know, houses up to twenty million, and those larger and more expensive houses are going to get much more expensive finish is and that will be very costly. And so that's one part of it. And the US about the company's the company from Michigan. So

how do they go go about this day. I think they have even people that they sent to Texas. You know, they they have employees UM and so they sent I think at least that many there, and they have I think they're to start with in Florida. I think they were going to have uh fiveing or and forty, doubling the size of their existing force in Florida. They have people all over the country in the world, so there are already people in place, and they bringing additional people.

For Sean, maybe you could speak about the the the additional people that might not be available because of either immigration laws or immigration fears, or just the disposition of the workforce. Yeah, that's a that's a tough issue because we we've had a kind of a labor shortage and construction for quite some time now, and uh so this is just sort of exact surbating that in places like

UH Florida and Texas, UH and and Texas. UM. You know, a lot of these companies, including the ones reconstructing houses and also home builders UH and others who need construction workers are are struggling to find people. And that's it's getting worse because of uh, sort of the crackdown on undocumented workers. Many of them are sort of uh, you know,

in hiding. Uh. What I've heard is in some cases, if you have a family, or say a husband and wife and kids, um, one of them on one of the parents will stop working and stay at home with the kids just in case the other, you know, the other one is uh is deported. So someone's home with the kids. So there's a lot of a lot of fear. Um. Texas in particular, there there's a bill in place that

uh scaring people um uh immigration bill. So so there's uh, there's a lot of reasons why this could the the uh, the shortage could really slow down the reconstruction, and it will also potentially make it more who pays for this. Uh. So in the case of flooding, it's pretty much we have a we have National flood insurance, and so it's those premiums um and I think they're they're gonna have

to they're subsizing that with taxpayers uh and UM. So there's that, and then you have homeowners dipping into their pockets. I think that's the bulk of it in Texas because you know, in the Houston area, for example, only fourteen percent of people have flood insurance of homeowners, so the bulk of these victims probably also do not have flood insurance, so they're going to have to figure something out. Shan.

Then there's also the whole interest ructure and economy that needs to be put in place in order to support the workers once they arrive at the places where they're going to do all this reconstruction. Yeah, you can if you think about it, it's a it's a pretty uh difficult situation because it's there's a housing shortage. So a lot of the homes, you know, tens of thousands of apartments, I don't know the exact number of a hundred and fifty thousand houses or something like that were damaged and

in Texas as a result of the storm. So there's a shortage of housing that just got a lot worse. Uh. And then you bring in all these people to kind of reconstruct, and they need a place to live. Uh. So you can imagine that houses that were not flooded or properties that were not flooded, those those uh, it's gonna get a lot more expensive to live there. So

this is this is gonna be an ongoing issue. I gotta say, whoever got into this business is a genius, because I'm sure that they will only get busier, uh, and it's only going to get more lucrative. Or any of the real big property companies getting in on this. You know, I haven't heard about it yet. UM, I wouldn't be surprised. Uh. You know, it's a pretty It's still there's some big players, but there aren't that many.

This company, bell for UH just keeps buying up smaller players, and you know, there were some regional ones that they've purchased and they're you know, so they're not that many very large companies, right. Preshanko Paul, thank you so much for joining us. Really a fabulous story and really interesting and I'm curious to see how many people actually shell out for for full renovations and making sure it's all okay.

Praushanko Poul. He covers real estate for US. He is based in Boston, UH and he is a Bloomberg News reporter on Lisa Brown Waits along with Pim Fox. Yesterday, JP Morgan chief executive officer Jamie Diamond spoke at an investor conference in New York. He said that bitcoin bitcoin won't end well. It's a quote fraud and quote worse than tulip bulbs. Talking about the uh most well known example of a bubble in financial markets to discuss, I

want to bring in Leonel Laurant. He's a columnist covering finance and markets for Bloomberg goad Fly based in London. Leonella, you wrote a column saying that perhaps Jamie Diamond is onto something and the bitcoin very much won't end well and will end up kind of blowing up. Can you explain your argument here? Yes, I think that even though Diamond's words may have got everybody excited and keen to point out how wrong and maybe even you know, outdated,

his view is. I think his point is basically that this is a market mania like tulips, and that ultimately this is going to eat itself and collapse on it so and before any regulator gets involved. And my view and I look at bitcoin but also other sort of hyped up millennial alternative asset classes like marijuana stocks as well, and I just think that the amount of supply that's coming in and excitement around it maybe doesn't quite match

the demand that we see on the ground. And I think that is reason enough to at least be skeptical about this idea that you can just keep growing exponentially. So, Lena, can you give us a little more example what you mean about supply. I know that you pinpointed the fact that even though bitcoin has attracted a lot of investor money, you can't actually use it to buy that much more in stores or common places of of buying stuff. So is that what you're talking about or is it something else? So?

I think it's something else for me. There's a there's a couple of issues in terms of supply. I mean, first of all, there are new coins being created all the time. Uh the I think there's something like eight hundred cryptocurrencies you can track now on on coin cap and um, what's what's happening? There is essentially more and more new increasingly, Uh, you know, volatile and potentially risky

currencies are being created. Bitcoin itself recently split into effectively with a new currency called bitcoin Cash that was supposed

to improve upon the original. I mean that that alone has been enough to actually have investors questioning just how unique and valuable the If you just look at the technology, pind it, how unique and valuable it is I mean, if you have hundreds of this type of currency and you can't really pinpoint any increase in consumer adoption, right because analysts will tell you that since there's been a huge boom in trading bitcoin and other cryptocurrencies, but maybe

not at all an increase in using it on the ground, that's enough for people to think, well, if there's a if there's a heck of a lot of supply and not a lot of actual on the ground adoption, isn't that a disconnect? In times of the investment thesis? Leonel, I want to just play Devil's advocate and separate these two issues for just a moment. Let's start with bitcoin, because I mean, there are new stocks that come onto

the market all the time. Some of them are traded on exchanges that we know about, some of them are traded on exchanges that you don't want to know about. New bonds are created all the time, new asset classes, new investment instruments are created all the time. And you only have to ask someone who bought a commercial mortgage backed security what it's like to buy something that's new

that doesn't have a ready market. We understand that, but isn't this a challenge to the way that banks operate, And doesn't it make sense that Jamie Diamond would say this, So you use a couple of interesting points. Do see the idea that new coins and they call themselves initial coin offerings, I think in a nodes to initial price offerings, right, I think the people who come up with these new coins want to be seen as new companies and I p s in their own right. Um, I honestly see

this as much more speculative. I mean, if you look at the prospectus of an i P O, if you look at the attempts to actually make some claim to maximize shareholder value for a for a for a stock, I just don't see that happening on on the on the tokens, on on the I c O s. Hold on a second, because there's a difference between some of the new cryptocurrencies that are coming out through initial coin

offerings and Bitcoin. For one, there actually is a critical mass with Bitcoin, and there is an established following and miners and everything else. So it's not quite the same as an i c O tied to a company that

is a startup that no one's heard of. So I guess I have to wonder, you know, is that you know there will be a winner from the cryptocurrency boom, and there could very well be one cryptocurrency that gets adopted and becomes the thing, and I think that that could be the bet really with bitcoin now, I think we're maybe delving too much into the technology itself and whether it's and whether it serves a purpose and the price.

I think the main reason why we are talking about this today is that it is now trading around four thousand dollars and slightly below, and at the start of the year it was one thousand dollars. I think that if this was just a question of saying, do you like the idea of bitcoin, do you like the code behind it? Do you see a community behind it? That's one thing the main reason why people are betting on it,

speculating on it, playing it. I mean, I'm sorry. I think it's got to be the fact that that the price has gone up so much again some of like a fift increase in transaction volumes, but very little increase in consumer adoption on the ground. To me, that spells speculation, and it doesn't spell the kind of quote unquote good speculation where you think that something is going to be

worth something for a fundamental reason. And to your other point, excuse me about about the bagging industry and whether Jamie Diamond has a vested interest. Well, okay, maybe, but I also feel like I think people people know that. I mean, there are there are plenty of bankers out there who might change their mind, who might even say, well, um, you know, I was very dismissive of it a few years ago. Now I'm not really going to take a view. Um, And frankly, I think it's totally okay, and it's good

to change your mind. I think that the fact that he hasn't doesn't necessarily mean that this is just because he's he feels it's a threat to backs. I mean, we've got to leave it there. A line on Lauren, Thanks very much our Bloomberg gad Fly columns. Great column. Check it out on Bloomberg dot com. By one get

one free. Yes, this applies to the iPhone eight and eight plus, among other phones from eight T and T now A T and T hasn't said whether the deal will be extended to Apple's most expensive phone ever, that's the nearly one thousand dollars I Phone ten. Here to tell us more is Shira Ovid are Bloomberg gad Fly columnists knowing all things technology and Apple? Shira, have you already set aside a little fun to purchase your new

iPhone ten? I have not, I will confess, although I did walk by the Fifth Avenue Apple store this morning and there were a couple of dudes and lawn chairs on the sidewalk. Maybe they were just hanging out on the sidewalk, or maybe they were already starting a line for the new phones. Can I just before we get into any real substance, iPhone X is really iPhone ten? Well, I mean yes, doesn't that kind of why? Why the

naming conventions are a little bit confusing now? Right? So the UM properly, the non fancy new iPhones should be called the seven s, but they called them eight, and then the iPhone ten. It's the letter X, but they pronounced it ten. Romanumer. It's the tant anniversary edition of

the iPhone. UM. Apple is gonna have a hard time convincing people to call it the iPhone ten rather than the iPhone X, And just to annoy them, I'm going to call it the iPhone X. Okay, Well, that's got is there's more free publicity for Apple, because of course they don't get enough. Yeah, right, exactly, you can end up talking about them. We'll talk about what's inside the phone, what what can you expect. Let's say, before we get to the the iPhone ten, let's talk about the iPhone

eight in the eight plus. What is so great about those phones that they bother to bring them out as new editions. Well, look, i mean the Apple does what it does every year, which is it It upgrades the current edition of the phone with more features and functions. So the processor is faster, the battery life is longer. They have a glass back now, which some people like

for aesthetic and other reasons. They'll be able to charge wirelessly through these magnetic chargers, which again some people like. Um So you know, there there's upgrades to them, although they are certainly more modest upgrades than the higher priced UM iPhone X as I'm calling it. Well, the post phone reveal is is proving to be somewhat of a hang over. The shares are down a little more than one percent, and I'm wondering how much this is just uh,

you know, some of the excitement just coming down. I mean, literally there was so much enthusiasm and the shares have risen so much, and how much is this a bit of skepticism about this transformation that's going on from the phone becoming the primary point of technology, skipping over the PC, skipping over the laptop, uh, and how well this will be adopted. So there's a couple of things happening in

the stock price. You're right that the share price. Apple share price has gone up significantly this year forty percent plus before this week, and a lot of that is on on anticipation that these new phone models will kind of unleash this new sales cycle and kind of really spike Apples revenor growth to a level it hasn't been in a couple of a few years. UM. The other issue is that the iPhone tan iPhone X model is

coming out quite late. Um, it's not going to go on sale officially until November three, which is pretty unusually late for a new iPhone model, in an indication that there's probably a very limited supply of these phones. They're hard to make, they have expensive, complicated components, uh, and so that's gonna push some sales into later quarters. I

think that was reflected in the share price. But to your broader point about the iPhone, Look, these smartphones are the center of people's digital lives in many countries around the world, and in places like China and Africa. You're talking about a generation that sort of skipped over the personal computer as the center of people's work and home digital lives, and now the smartphone has become that. So I mean a thousand dollars for something that people spend

hours on every day. You know, you start to amortize the cost over the amount of time you spend. These look less like luxury items and more like must have. Sure. One of the things I noticed was that if you were to be able, I know it comes available. I guess the next month on pre order. This is for the iPhone ten. If you're looking for those iPods AirPods, I beg your pardon the air pods right the the wireless your phones? Yeah? Um, thank you. Uh, they're not

They're not included in the box. You don't get that. You don't get the fast charger. Um. You do get the lightning cable, but you don't get a USBC. Um. What what is Apple thinking? Why don't they put all the latest stuff into their latest, you know, anniversary phones. They don't have to. They don't have to. Well they do have, um, they do include headphones with the new iPhones. They're just not the wireless heads right your pods right there yours? Um, but yes they don't have to. I mean, look,

Apple's not dumb. They want you to buy all of their all of their things. And as someone who has been to the Apple store and gritted my teeth to pay eighty dollars for a new laptop charger, I mean, these people are not morons. Right. There's getting high margins on these accessory sales, and there's no reason for them

to include that with your already thousand dollar iPhone. It is an amazing experience to go to an Apple store and see a line extending down the center of the store with people with like thousand dollar items in their hands buying them like groceries. I mean, it is just really truly a remarkable marketing feat that they have accomplished. Um, Shara Ovida, thank you so much and keep on keeping on with that iPhone X. I'll look to you to be the rebel. Shara Ovida is a Bloomberg Gadfly columnist

focusing on all things technology and my fellow skeptic. I love talking with Shia always. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm Pim Fox. I'm on Twitter at pim Fox. I'm on Twitter at Lisa Abramo. It's one before the podcast. You can always catch us worldwide on Bloomberg Radio. H