A New Vision Of The Digital Future

The Briger Family Digital Finance Lab advances the latest research and developments in the field.

When Ciamac C. Moallemi hears people conflating emerging blockchain technologies with crypto currencies and the collapse of FTX, he suspects they are missing the bigger picture—and likely also missing out on opportunities. That’s because when Moallemi, the William von Mueffling Professor of Business in the Decision, Risk, and Operations Division of Columbia Business School, considers the latest developments in blockchain technologies, he can’t help but contrast the spirit of experimentation he sees in the field with the comparative stasis of traditional financial markets.

“There are a lot of ideas that people have tried in crypto because it’s unregulated—and because you can try them. Some of them have been bad, but some of them have worked quite well,” says Moallemi. “Fundamentally, block-chain might enable new things that are simply not possible in the traditional environment.” It’s this promise of new innovations, and the potential to solve financial problems more efficiently, that is at the core of the new Briger Family Digital Finance Lab, one of a collection of labs being launched as part of the school’s Digital Future Initiative.

Overseen by Moallemi, the lab focuses on decentralized finance and its role in transforming how financial markets function within new structures like automated collateralized lending pools and automated market makers. Included in the lab’s purview will be the underlying economics of blockchains, decentralized market microstructure, and mechanisms for decentralized organization and governance.

In addition to supporting research in the area of digital finance, the lab will seek to bridge the gap between industry practitioners and academics, and bring together academics from a variety of areas (operations, economics, computer science) to expose students to these new technologies and their applications.

The lab’s team will investigate questions ranging from “How do we match people when they want to trade or lend?” to “What are the types of products we can offer investors?” For instance, Moallemi sees the development of perpetual futures in crypto (futures contracts that have no expiry date, unlike traditional futures con- tracts) as a good example of how blockchain technology permits the development of new products. “The goal of this Digital Finance Lab is first and foremost to explore some of those ideas,” Moallemi said.

“But then also, by doing our own research and by interacting with practitioners, we bring those ideas back into the curriculum.” Fostering an ongoing dialogue between researchers, practitioners, and students is a key part of the Digital Finance Lab—and one Moallemi sees as essential to both teaching and informing new research. Joint projects between academics and practitioners can identify the capabilities blockchain offers as well as the challenges. Moallemi also sees an opportunity to address further research to make systems work more efficiently. The overarching question is: How can blockchain help process more transactions to help reduce costs and increase efficiency?

Conferences are one way the lab will facilitate collaboration and bring the newest ideas to campus. The inaugural Columbia CryptoEconomics Workshop, co-sponsored by the Ethereum Foundation, was held this past fall. At the event, professors, alumni, and practitioners in the field explored issues related to economics, incentives, and blockchain technology. And the new Digital Finance Seminar Series brings in top researchers from academia and industry across disciplines to discuss the latest developments in the field. The ability of both the lab and the planned events to move the conversation forward in the field will be a benefit to all involved, says Moallemi. “As academics, we’re really good at building models and understanding things if we know the problems,” he says. “But the industry practitioners, they’re the ones who know the problems. So a big role of the center is to connect these two sides.”

The humans in the Digital Economy Lab delves into how technology is changing the way we work.

When the pandemic turned millions of employees into remote workers over- night, it accelerated acceptance of a technology-enabled distributed workforce that had been gaining speed for years. The lasting effects of this technological change—and the next digital disruptors in the workplace—are among the topics on tap for the newly created Humans in the Digital Economy Lab. The lab, part of Columbia Business School’s Digital Future Initiative, is led by Stephan Meier, the James P. Gorman Professor of Business. Bringing together experts from interdisciplin- ary fields, the lab will investigate how technology and digitalization affect and interact with people in organizations. Projects will focus on elements of work including automation across industries, the composition of the workforce, and how the workplace could be reimagined.

For Meier, the rapid adoption of technology presents ample new research topics.

Some of the questions he intends to explore include:

• To what extent are machines capable of replicating work currently done by humans?
• What is the current nature of the interaction between humans and machines, and what should it be?
• Under what circumstances do they work better together, in partnership, rather than having a machine displace a person?

As one example, Meier’s class, Future of Work: Strategy & Leadership, takes an in-depth look at the interactions and partnerships between computers and humans in Morgan Stanley’s wealth management division. The case study examines how the role of financial advisor has changed over time.

In the past, an advisor would evaluate a client’s risk appetite and develop personalized investing recommendations. Now, Meier says, robo-advisors can generate investment strategies aligned to people’s preferences, giving them the confidence to take control of their own finances. In response, the advisor’s role has shifted from relying on computers that create custom plans for clients to relationship building and providing service.

“In the human-machine interaction, the humans are very important, but they’re doing different jobs than they did before,” Meier says. “Whatever needs trust or empathy, a machine is not as good at that, at least not yet. Those conversations, those human interactions, remain very important.” How to prepare for these changing roles will be another important focus for the lab, as will the new skills that people will need to work effectively alongside algorithms, artificial intelligence, and the new technologies still to emerge. Even if a job remains untouched by automation, doing that job remotely has enormous implications for workers, employers, and basic societal structures.

Millions of square feet of office space still sit empty three years after the start of the pandemic. Meier and others at the lab will explore how this simple geographic shift will continue to transform the economic landscape. In February, the lab hosted a panel discussion looking at changes in the workplace and their effects on the real estate market. Experts from academia, industry, and government discussed declining commercial real estate values and how cities can cope with the resulting tax revenue shortfalls. For employees, remote work offers numerous advantages: time and money saved by not commuting, better flexibility with childcare, and fewer disability-related employment obstacles. And members of groups impacted by negative bias and discrimination in the workplace may prefer to work remotely. But Meier points out there are many questions still to be answered in this distributed workforce model.

“How do you make a career when you’re not in the office? How do you network? How do you negotiate wages over Zoom?” Meier says. “For our students, there’s hopefully some very practical career advice that will come from all the people involved with the lab.” Overall, Meier remains optimistic about the future of work life and says he’s excited by the opportunity the lab presents to help navigate the very real human challenges ahead. “With our Digital Future Initiative, we’re talking about new technology,” he says. “My lab focuses on how that interacts with a very, very old technology: the human brain.”

The study of data-driven algorithmic decision-making is at the heart of the new Algorithmic Economy Lab.

W hen a classic action movie appears on your Netflix home screen or a new mystery series rises to the top of your Amazon account as something you might like, you know it’s an algorithm at work. But those are just the transparent ones. Increasingly, algorithms are everywhere, for they are the digital DNA of modern life. They aren’t just making media suggestions. They’re also enabling every online search, screening job candidates, powering customer service chatbots, and deciding who qualifies for a bank loan. “Algorithms and data-driven decision-making are being used more frequently to power all kinds of decisions within organizations,” says Omar Besbes, the Vikram S. Pandit Professor of Business. The study of data-driven algorithmic decision-making is at the heart of a new CBS think tank helmed by Besbes, the Algorithmic Economy Lab, which is part of the School’s Digital Future Initiative.

Given the widespread adoption of algorithms across all types of industries, it’s imperative that we research and refine this still-evolving field, Besbes says. “There are a variety of questions that arise about the technology that supports real-time decision-making with data-driven algorithms,” he adds. “But there are also questions about the value that can be captured through more sophisticated algorithms—and the sometimes unintended consequences that can emerge as a result.”

The new lab will delve into these and other unanswered questions by focusing on research, teaching, and engagement with the business community. One key area of investigation will be the issues that may arise from the proliferation of algorithms, and why it’s important for us to understand how they interact. For instance, if two competing firms use similar but different algorithms, what are the implications? Will the outcomes be more accurate? Or might the results influence each other and lead to less accurate outcomes? If one firm’s algorithmic trading orders are triggered by a specific set of circumstances, such as having a preset buy order for a target price-earnings ratio, how might the market be influenced by another firm’s preset order? With the potential for complementary or competing algorithms triggering trades, what are the unintended consequences and potential risk exposure for the firms?

Promoting a mindset of algorithms as a system helps unearth these essential questions, says Besbes. Another critical area to explore is trust in the way algorithms are used. Besbes notes that customers are more willing to use services where trust and transparency are central. The lab will therefore explore how to avoid biases, ensure privacy and transparency, and increase trust in an algorithmic economy. Preparing students to successfully parse data—and manage teams and companies that rely heavily on algorithms—requires a parallel shift in the classroom. Even a decade ago, companies appreciated that data analytics was critical, but the focus was on hiring data scientists, Besbes says. Over time, there has been a growing understanding that data scientists may lack the institutional knowledge to ask the right questions, while those who ask the right questions may not always have the technical abilities to answer them.

The CBS curriculum teaches students to understand data science and have the business acumen to help a company solve the problem at hand, Besbes says. “There’s a sweet spot where individuals are digitally and technically literate but not necessarily specialists—and they can challenge data scientists,” Besbes says. “Columbia Business School’s graduates are uniquely positioned to play that role because with their business acumen, they’re able to ask the right questions. They also have the sufficient technical and digital literacy to be able to challenge and guide the analysis.”

The New Media and Technology Lab will examine how today's rapidly evolving technology is leading to a new era in media.

In January, when lush stills from the 1982 futuristic movie Tron surfaced online, they were purported to be from an unreleased version filmed by Alejandro Jodorowksy in 1976, six years before the Disney blockbuster hit screens. But in a surprising twist, it turns out the filmmaker never made such a movie. Instead, the images were generated as a test of an artificial intelligence platform called Midjourney, which brings photo-realistic visuals to life from descriptive commands.

Breakthroughs such as Midjourney’s Tron visuals are just one example of how today’s rapidly evolving technology is leading to a new era in media. Such breakthroughs are among the topics Miklos Sarvary, the Carson Family Professor of Business in the Marketing Division at Columbia Business School, and Jonathan Knee, the Michael T. Fries Professor of Professional Practice, will explore in heading the new Media and Technology Lab.

Building on the School’s 15-year-old Media and Technology Program, the lab will focus on the overlap between the evolution of media and entertainment and the technological breakthroughs that continue to shape it. Through expanded resources and cross-disciplinary collaboration, it will fund and disseminate advanced research on how technology has transformed the media sector and how to address new challenges that emerge. It will also support regular seminars that include the presentation and discussion of papers by notable researchers from across the United States and the world.

Given the proliferation of technology, this is a moment to be analytical and thoughtful about separating the excitement about new technology from the prospects of what such advances might mean to business, Sarvary says. As such, CBS is uniquely positioned to bring its rich history of fundamental analysis to technology companies, he notes.

One key task for the new program is to consider signs of viability and watch what happens, Sarvary says. The goal is to learn or predict which of these emerging technologies will become the next big things or dominant platforms of the future and which will fail to gain traction. The lab’s analytical approach will hold new technologies to the same standards that apply in reviewing all aspects of a business. Assessing whether there are benefits from economies of scale, or network effects resulting from bringing a new technology to market, can help separate passing fads from developments with lasting promise. The lab will bring the results of its research into the classroom, offering new perspectives on evaluating the business impact of new technologies. And as always at CBS, investment fundamentals will remain at the heart of any analysis.

“There is a set of technologies to assess, and Columbia Business School has a tradition of understanding what makes businesses profitable for the long term,” Sarvary says. He notes this approach builds on the school’s reputation for being the birthplace of value investing, which established “the foundation that allows you to assess whether a business is going to be profitable in the long term or not.” One course that illustrates this is Media Platforms and Content, in which students analyze both established and new companies representing different types of media firms, ranging from TV to video games to social networks. This year, visiting speakers included Strauss Zelnick, founder and managing partner at ZMC and CEO of Take-Two Interactive Software, and Bob Cohn, president of The Economist. Over the years, CBS has hosted group fireside chats that have included executives such as Charlie Collier, who was CEO of Fox Entertainment at the time, and Reed Hastings, then-CEO of Netflix.

It’s those rich connections between New York City’s business community and the School that add unparalleled value to the CBS experience. Frequent events, from large-scale debates to intimate lunch gatherings, have led to student internships with Amazon, The Walt Disney Company, Google, Spotify, TikTok, and others. “Executives at the forefront of this field come to campus to meet students and be a part of the discussion,” Sarvary says. “The idea is to really create connections and for people to learn in ways that go beyond the cases and the lectures.”