The danger of the technology testing hole

A common response to technology is to test it. The problem with testing technology is that it is just a test. A false implementation. It is not designed for reality and can lead to false results. For example, I remember one UK bank testing new technologies in one branch, to see if they could be rolled out to all branches afterwards. The test involved Video Tellers, Biometric ATMs and many other innovative ideas. The bank felt that some of the ideas were ok, but dismissed the biometric ATM as it was too intrusive for customers. I went back to the bank some years later and talked about biometric ATMs and they said: “oh no, we tried them and they don’t work”.

Now what’s interesting here is that the first biometric ATM they tried was based on an iris scan technology that yes, was too intrusive for customers who felt it involved too much hassle. However, the second biometric ATM was now based upon palm prints, which work well. The challenge though is to get the bank’s decision maker to understand that you’re talking two different things.

Equally, banks test technologies all the time, and often it is before the technology has reached prime time. As a result, by the time the technology is ripe, the bank believes it isn’t the right technology because they tested it three, four or five years before.

These tests therefore can create negative effects in internalising the advantages that such technologies can deliver. It is why some banks lag behind in technology adoption, because they believe they are innovators, always trying out new technologies, but they are actually laggards, rejecting new technologies and avoiding revisiting them because of false test results on technologies tested too early.

It is pretty hard to change this position, as it is a core part of some financial cultures: to test and pilot. I actually heard one banker say during a conference that they had more pilots than American Airlines. Yep. But it is a major barrier to change if the bank tries and rejects technologies, when the technologies are before their time.

The reason this comes to mind now is that I fear it may well be the path that blockchain takes. I’ve seen many banks get excited about distributed ledger technology (DLT), which is different to but related with blockchain, and so they’ve tested the idea. Then they say they’ve tried DLT and blockchain technologies and it’s not for them, even though this technology is still way off prime time. For example, if you know of any financial institution that’s using Ethereum smart contracts, tell them it’s way early. Ethereum had to reboot in 2016 due to the DAO hack and at the time Vitalik Buterin, the visionary young creator of the technology, said: “this is just an experiment right now”. You cannot base the mission-critical systems of a bank on an experiment and yet some are trying to do just that … and rejecting the idea after testing it.

This is where the critical path occurs, and where the banks rejecting Ethereum will miss out. You see, at some point soon the technology will be ready for prime time. Maybe not now, but within a year or two, and some will say ah, we tried that and it doesn’t work, whilst others have a different view and say keep checking in with Ethereum to see how it’s doing.

It is the latter culture that wins, as they don’t test and reject, but they test and retest and retest until it works. This is the core difference between financial technology leaders and financial technology laggards. A leader never tests and rejects a technology. They test and see if it’s something that can be internalised and, if the answer is no, they go back to the drawing board and start again. They create a continuum of testing loops that is always open and never closed. That way, yes, you sure can have more pilots than an airline, but at least you’re flying.

 

Postscript

After I wrote this, Dan Mullineaux tweeted that it sounded like the five monkey problem. I hadn't heard of it so, in case you aren't familiar, here's the details:

 

An experimenter puts 5 monkeys in a large cage. High up at the top of the cage, well beyond the reach of the monkeys, is a bunch of bananas. Underneath the bananas is a ladder.

The monkeys immediately spot the bananas and one begins to climb the ladder. As he does, however, the experimenter sprays him with a stream of cold water. Then, he proceeds to spray each of the other monkeys.

The monkey on the ladder scrambles off. And all 5 sit for a time on the floor, wet, cold, and bewildered. Soon, though, the temptation of the bananas is too great, and another monkey begins to climb the ladder. Again, the experimenter sprays the ambitious monkey with cold water and all the other monkeys as well. When a third monkey tries to climb the ladder, the other monkeys, wanting to avoid the cold spray, pull him off the ladder and beat him.

Now one monkey is removed and a new monkey is introduced to the cage. Spotting the bananas, he naively begins to climb the ladder. The other monkeys pull him off and beat him.

Here’s where it gets interesting. The experimenter removes a second one of the original monkeys from the cage and replaces him with a new monkey. Again, the new monkey begins to climb the ladder and, again, the other monkeys pull him off and beat him - including the monkey who had never been sprayed.

 

The original 1966 research paper is published here:

https://www.scribd.com/doc/73492989/Stephenson-1966-Cultural-Acquisition-of-a-Specific-Learned-Response-Among-Rhesus-Monkeys